icelatte

My mother has a balloon mortage which matures the end of Apriil at which time she owes the entire amount of the remainder. She got this mortgage 5 years ago at a very good rate with the expectation of refinancing now.

The house is titled under a trust for both my parents. My father lives outside the country and is currently feuding with my mother. He refuses to talk to her, much less sign any papers for refinancing. He currently isn't even answering the phone for me or my brother.

He never even signed the trust papers but the title company didn't seem to care and titled it under the trust anyway.

Right now, the mortgage co. will allow my mother a 10 day grace period to pay the balance, which she can do if I pay it for her (not optimum solution for me but it's mom, so I'll do it). Another better option is for me to get another line of credit and buy the house from her, but that would obviously still require my father's cooperation.

She plans for file for divorce today but I doubt that will solve anything iin the short run.

Thanks for reading and I would appreciate any ideas, input.

Chak

Scott Lenger

I would get a good family law attorney to sort through the trust issue inconjunction with the divorce. Not sure but you would not want to risk paying off the house with your funds, create a gift tax liability for your mother and then having her husband take half the equity in the divorce settlement.

icelatte

The gift tax liability would be mine so I was going to structure it as a loan to my mother. There are a lot of litigation issue here but the problem is that we have less than a 2 week deadline or else my mother faces foreclosure.

Thanks for the input. Just looking to see if there are other options I haven't thought of.

tigerrat

I'm no expert but have you tried to negotiate an extension on the balloon due date? Seems the last thing a mortgage company would want these days is another foreclosure and would show a little flexibility. Just keep paying the monthly note on time.

2Many Cars

A short term loan to your mother would be an option but not without some risk to you. You need to keep it arms length (charge her interest, have a written note, etc.) so it won't be a gift although you can make a "gift" of some of the interest. It will most probably have to be a personal loan as I'm guessing you won't be able to get a claim on the title to the house and that's where the risk comes in. If the divorce gets messy she is on the hook for the personal loan, not your Dad. That should be recognized and accomodated in the divorce settlement but there is no quarantee it will and if it isn't you'll be stuck trying to collect from your mother who doesn't have much to give you. Does she live in a common property state? If so she is quite probably entitled to half of everything which mitigates that risk a bit.

You really need to talk to the divorce attorney about how to handle the possible loan and trust and take his/her advice. Since your Mom is undoubtably a trustee of the trust she has some options and may be able to grant you a mortgage so you'll have a hard asset behind the loan but she needs to be careful because if your father wants to be a pain in the butt (which it sounds like he does) he could really tie things up for a while. Realistically it's highly unlikely a bank will get near this unless your father suddenly has a change of heart so I'm guessing a loan from you is about her only option. The bank may be willing to let her roll this mortgage a few months but my fear is that this will only get resolved as part of the divorce which will take a lot longer that the bank would be willing to wait. Regardless, talk to a divorce attorney before you do anything as there are a lot of moving parts here that we can't fully address on this forum.

nedsky

I'm a mortgage broker in SC. I can't weigh in on the trust issue, but although it is not an ideal scenario, your mother's house won't revert to the lender in the 10 day period you spoke of- it would have to be foreclosed on which takes at least 6 months here in SC. As Ken said, communication with the lender and interest only payments would in all likelihood forestall that, especially given these circumstances. I'd do that short term concurrent with contacting an attorney for the long term solution.

DC from Cape Cod

If he is a trustee you can't do anything with the property without his signature. You need an attorney NOW.

CP

Need a little more info. before dispensing opinion:
(1) Is there equity left in the house? If she is under-water, it is much easier to let go.
(2) If she is out of the house, does she has a place to stay? If yes, see (1) above.
(3) What is her credit rating? If she has bad credit to begin with, see (1) above.
(4) Who is the primary borrower on the loan? If dad is, then news gets slightly better.

I think the legal issue is much more troublesome than the financial one. Believe it or not, may be a default in this case, if she has little to lose, may be the cleanest way to clear up all the problems (legal and financial) all at once.

Personally speaking, unless she has much to loose in a default, I would NOT pay the loan out (with your help) on a dollar-to-dollar basis. In this day and age, cash trumps all. Even if you eventually want to pay off the bank, I'll get them to lower the principal amount before I pay. Unfortunately, they do nothing until the loan is at least 90 days behind in payments. That part sucks.

Good luck with everything going forward.

CP

DC from Cape Cod

I was under the impression that all current loan documentation treats all borrowers as equals. What exactly is the difference from a legal point of view between whomever signed first/second (I assume you are an attorney) ?

Rinty

Icelatte:

If you decide to proceed with the loan to your mother, you should get your attorney's advice on whether you should have her lender's mortgage transferred to you, rather than having it discharged. In your state, if a mortgage is paid out, you may have the choice of accepting a transfer of it, or a discharge of it.

If you took a transfer, this would have the result of your stepping into the bank's shoes, and taking first position on the title.

This might also simplify your mom's situation with your dad, but of course you would be in the middle.

Good luck.

CP

I am not an attorney.

I do understand that at the end of the day, everyone who signed on the dotted line are liable for the loan. It is just that the prime borrower has his/her SS# going first. The co-borrowers' SS#s are less 'exposed' for credit purposes.

In this case, since the dad might be the tough nut to crack, if his SS is the first on the loan, the bank will go after him with more, or at least equal, fervor.

CP

mhm993

Not a lawyer, and you need one fast.

Some thoughts, having been through trustee litigation:

Does the trust provide a procedure to remove one trustee and have a successor trustee placed? Does the trust empower one trustee to sign on behalf of all, and not require additional signators? Does the trust have a procedure to settle disputes between the trustees? Does the trust provide a way to appoint an additional trustee, overruling your dad's "wishes" by majority vote? If a trust asset will be forfeited or squandered because of the actions or inactions of a trustee, does the trust give a beneficiary the right to assume the asset?

Remember not a lawyer, and stayed at the country inn last week, not the holiday inn.

dcdude

This is ugly.

I wonder if your mom, as an individual, can re-fi and pay off what is owed by the trust?

Something must be wrong with my overly simplistic solution....

95FL993CAB

There is another angle here as well. If your father is not a signatory on the title, but the closing agent/title insurance put both names on the title, it creates a huge headache for the mortgage company.
Additionally, CP has asked the most salient and hard questions which needs to be answered ASAP. In addition to a great family lawyer, you need a great real estate lawyer as well.

icelatte

That's for all of the input. Lots of issues:

There are alot of issues with the deed. I even heard that I'm on it somehow. All good questions regarding the trust functions. I've tried calling my mother's trust lawyer without a call back yet today.

There is some equity in the house, maybe 30% depending on how you price it out in this market. Defaulting is not an option she'd like to consider as she knows I can pay out but I would work with the lender first before paying it off.

I plan on the following actions:

1) Keep calling my father and see if I can get an amicable resolution. Hopefully he'll start picking up his phone again soon.
2) Talk to the estate lawyer who knows the trust and see what the deed really says and what options are available. Right now, 2 title companies the bank has contacted have refused to do anything until my father signs a POA over to my mother.
3) Negotiate with the lender if we're unable to refi.
4) I'll have to convince my mother that paying it out isn't the solution. It's what the bank branch and mortgage servicer are telling her though.

She doesn't meet with the divorce lawyer until next Monday.