Title vs. Loan - Who wins? (interest rate, real estate, credit, fees)
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I had an interesting conversation with one of my coworkers - Bill - a few nights ago and he is in a situation where I don't know enough about to comment on so if anyone has any good responses, I can direct him here.
Several years ago, Bill and his wife purchased their home. But because they had bad (or not enough credit I'm not sure), he asked his business partner to stand on the loan. He made the down payment and purchased the home and has paid on time and has never had any problems at all. Eight or so years pass by and his friend (the guy on the loan) dies, but Bill continues to pay the mortgage on his home. The business partner's wife finds out and thinks it is her husband's home and now wants to sell the home despite Bill's explanation and documentation.
Bill and his wife are on the title of the property and have paid the mortgage for over eight years now. The business partner's wife is saying that it's her husband's home and even if Bill was telling the truth, he's a strawbuyer and doing something illegal and she's pressuring him into selling the home.
Anyone have any recommendations on what Bill and his wife can do to save their home? Or is he in trouble of losing his home? Something doesn't seem right here and it sounds really wrong if Bill loses his home. I understand the straw buyer argument, but if that's our system or how things really work, then it really sucks! Bill was overly emotional about it and I understand why.
I have asked him to contact a real estate attorney, but he is hesitant because they worry about the legal fees. Please comment if you have seen situations like this before and can help and I will direct him here. Thanks in advance.
Was the loan that Bill's late business partner did a non-owner occupied loan, or owned occupied loan? If it was owner occupied, then both Bill and his late partner were doing something illegal, and Bill could get into trouble (although after 8 years of paying the mortgage on time they may just increase the interest rate to what it should have been all along and allow the mortgage to continue being paid). If it was done as non-owner occupied, then it doesn't sound like anything illegal was done while obtaining the mortgage and so Bill wouldn't have anything to worry about regarding being a straw-buyer. However it appears that title was changed after the mortgage was made, as when the mortgage was made the business partner was more than likely on title of the home. If the late business partner did not get permission from the lender to add Bill & his wife to title, and remove his name, then the lender may have the right to call the mortgage due & payable immediately (this is called a "due on sale" Or "acceleration" clause). But if the mortgage is still being paid on time there is a small chance of that happening, as the lenders primary concern is that the mortgage continues to be paid on time.
The business partners surviving wife has zero interest in this property since she doesn't legally own it/not on title, and technically may not even owe on the mortgage if the mortgage was solely in her late husbands name. The surviving wife may notify the lender that her husband has died in a malicious attempt to accelerate the mortgage due date, but again since the mortgage is being paid the lender may not care much. If I was Bill and the mortgage was properly done from the get go, I'd look into trying to refinance the existing mortgage with the same lender (this would be easier than trying to explain the entire situation to a new lender), if Bill & his wife qualify then they'd be able to get the business partners surviving wife off their backs.
I agree with Shane EXCEPT I would not attempt to contact the lender without legal representation in place for a couple of reasons.
Firstly the staff at most loan servicing companies are extremely beat up with all the distressed loans and they will likely be under the impression not that your pal wants to make everything right but that he is trying to get on the principle reducation / strategic default bandwagon.
Secondly odds are some one from the lender's legal deptartment will need to review this, and in my experience having ones' own attorney initiate that conversation ALWAYS takes the hot air our of the overly important in-house lawyer's sails, which tends to speed things along...
Thirdly, if in fact your pal's business partner did not properly execute this loan as non-owner occupied OR the "widow" of the business partner already has an scum sucker type attorney working for her you are gonna need a strong advocate in your corner from Day One...
My gut says there is close to zero chance that the widow gets anywhere, but in the wrong court she could make a bigger mess that will throw your pal into an expensive legal fight. Similarly in this situation the lender is probably just thrilled that the mortage is current, but if the wrong kind of attorney from the lender sees this as a rare opportunity to actually make some money for the bank in a time when they have been losing like a drunk at the craps tables who knows how far they could take this...
Am I missing smething in that it reads lie the business partner co-sing the loan to me. Sounds like that to me and it would only come into play if the other did not make good on the loan.I maybe missing somethig tho that is what stamding the laon looks like because of bad credit.
If it was co-signed with Bill, then there is really no issue in my opinion... but the verbiage of "straw buyer" and "stand on the loan" makes me think that the business associate did the loan solely in his name.
Thanks guys. I don't know the exact situation and I'm only writing what I understand of the situation. Bill is in his 50's and has a cable and network repair and installation business with his late friend. He bought the home well before the market crisis and all the crazy business with the loans. The way I see it is that he had the money for the down payment and can make the payments without any problems, but didn't have enough credit or no credit and had the partner stood solely on the loan. After the transaction closed, the title was changed to Bill and his wife and he's made payments since. He has not been late or missed any payments.
From the sound of it, the partner's wife sounds pretty ruthless and she's just trying to scare Bill and his wife. I don't think she has any interest in the property honestly.
The only thing that matters here is whose name(s) are on the title, not on the loan. If one of the borrowers dies, it is up to the loan company to call in the loan, and if they don't, then no problem. If they do, then Bill simply refinancces without the deceased partner on the loan. If the deceased parter's name is NOT on the title, then the estate of the deceased has no claim to the property.
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