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Equity loan with only one co-owner's signature-legal?

Hi,
Have a situation where a married couple is in process of getting a divorce, but have not been to divorce court yet.

One spouse owned the property before the marriage and had a mortgage on it. Subsequently, the other spouse was added to the deed with a [url=http://www.mortgagefit.com/quitclaim-deed.html]Quit Claim Deed[/url], which was notarized and filed at courthouse.
When they filed for divorce, the spouse that originally owned the house went to the bank and got a second equity loan for all of the equity in the house.
The loan was obtained without both signatures even though both are signed on the
deed.
How is this possible?
Are both spouses now responsible for this loan?
If the house is sold, does the equity loan now have to be paid first before the assets are divided?
Or is this an illegal loan?

Thanks,

LoanChallenged

sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

[quote:330a0dbfff]Are both spouses now responsible for this loan? [/quote:330a0dbfff]
If the loan document does not have the other's spouse name on it, then that person is not responsible for the loan. But the person being on the deed, if the spouse fails to pay off the equity loan and the loan is in default, then the other spouse has to clear the equity debt in order to keep the home.

Thanks,

Sara.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:01 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:643a60359e]If the house is sold, does the equity loan now have to be paid first before the assets are divided?[/quote:643a60359e]
If the house is to be sold, any loan against it should be paid off first. Also, your lender will not allow selling the property until and unless the entire debt against it cleared. This is because the lender would like to secure his interest in the property.

Regarding the division of assets, after the loan is paid off, the house can be sold and then the assets divided.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

So, sounds like the loan is legal.
Question: If one person that did not sign, and therefore is not responsible for the loan, how can that person have to then be responsible to clear the loan if the loan goes into default?
This is a contradiction. Seems like one spouse committed the other spouse without signature because of the deed to the equity loan. This just doesn't sound legal to me.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:01 | Post subject:

colin's picture
colin | Joined: June 30, 2006 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,
[quote:361f53e3f4] Question: If one person that did not sign, and therefore is not responsible for the loan, how can that person have to then be responsible to clear the loan if the loan goes into default? [/quote:361f53e3f4]
Actually if the loan goes into default then the lender has the right to foreclose and recover his dues. In that situation the lender gets his dues cleared from the foreclosure sale of the property in which the other person who had not taken the mortgage also has property interest.

If the spouse does not want to lose the home, then he/she has no option but to discuss the situation with the lender and if possible clear the dues to save the house.

Thanks
Colin

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

[quote:8e9c565d2b]If one person that did not sign, and therefore is not responsible for the loan, how can that person have to then be responsible to clear the loan if the loan goes into default? [/quote:8e9c565d2b]
As far as I know, a person can get a loan against the property having a co-owner on the title. In that case, only his signature is required on the loan document. But he needs to inform the co-owner if the loan is secured by the property in which the co-owner has an interest. This is because, in any case of default by the person, the co-owner may also lose his interest in the property in order to clear the debt against it. In this regard, I don't think that the loan is illegal.

Thanks,

Caron.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can a spouse with a co-owner spouse obtain a mortage loan without the other's signature?

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blue's picture
blue | Joined: October 21, 2005 09:17 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Kari,

Welcome to Mortgagefit discussion board.

Yes you can get a mortgage in your own name without your spouse to be on the mortgage. It is not necessary to have both the co-owners of the property to be on the mortgage and any one of them can take out a mortgage loan based on his personal financial status.

Let me know if you need any other details.

Thanks
Blue

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Karibaby,

Without giving prior notification to the co-owner, the owner cannot obtain a mortgage loan against the property.

It's not necessary that a co-owner has to be on the loan but then if the owner or the primary borrower is unable to repay the loan, then the property may have to be handed over to the lender. In that case, the co-owner has to suffer. That is why, it is important to notify the co-owner before taking a loan against the property. Without the co-owner's approval the loan cannot be taken.

Even if you want to get loan without the co-owner's signature, you may get an amount worth the portion of your interest in the property. But in case of default on your part, the lender cannot sell only your portion of the property to retrieve the money. Neither will he be able to sell the portion owned by the co-owner. This will be legally incorrect.

Hence I shall suggest that you talk to your spouse on this regard and come to an agreement on this regard.

Hope you will be benefitted from this information.

God bless you.

Samantha

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

When both spouses have signature on a fixed rate equity loan can one spouse go and change the fixed rate equity loan to a ARM without the other spouse's signature and it be legal

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi lfd,

One spouse can [url=http://www.mortgagefit.com/refinance.html]refinance[/url] the mortgage in his/her name without taking the permission of the other person. However, he/she should inform the other person about the refinance.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

The loan is legal.
However, if the loan ever were to be in default, the lender (fool!) would be hard-pressed to bring an action of foreclosure, essentially because the lien is not completely valid without all parties' signatures (parties to title, that is).

Clearly, someone who has not signed a promissory note is not going to be obligated to make payments on such a loan. At the same time, if a legal action is brought against property that is jointly owned, and only one of the owners is obligated under a note, the foreclosure proceeds against any and all parties to the title, regardless of financial obligation.

This is a really tricky subject, and the best bet for someone who is curious or involved in such a situation is to obtain the counsel of an attorney - one who is schooled and seasoned in real estate matters.

The advice of strangers is often well-meant but misapplied.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:01 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

2. Generally all the owners of a property must sign a mortgage. A mortgagor signs her interest in the property over to the lender or grants the lender a lien on her interest in the property while the mortgage is outstanding. When all the owners haven't signed, it's usually because someone made an error or the person who executed the transaction for the lender was inexperienced. If a mortgagor defaults following a properly executed mortgage, the lender can take possession of the property by foreclosure and sell it. If all the owners didn't sign the mortgage then the lender can take only the interest of the mortgagor who did sign the mortgage and cannot take the interest of the owner who did not. Therefore, the lender could not take possession of the property by foreclosure because it has no claim to the non-mortgagor's interest. In order for a mortgage lien to be 'perfected' on any property, all the owners must sign the note and mortgage

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