 JEllis32
Joined: 09 Oct 2009
Posts: 1
1.47 Dollars($)
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 Posted: Fri Oct 09, 2009 6:18 pm Post subject: Many questions - borrower removal |
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| BEWARE! - Totally complicated, not for the weak minded! My friend cosigned (or so he thought) on a mortgage for his cousin. Cousin's daughter (not on mortgage) has been paying on time every month for 7 years. My friend was told in 2002 that he could request to be removed as a cosigner after the borrowers (collectively) made a certain number of on time payments. Last month I began gathering info from his mortgage company in an attempt to present his case to be removed as a cosigner. At this point, I found out that he is actually listed as the PRIMARY. I requested an original copy of the application and mortgage note. The application states he is a cosigner; the mortgage note states he's the primary. I understand that coborrowers are equally responsible for the repayment of the loan. However, I am wondering now if this is going to present a problem when he goes to request to be removed from the loan entirely? If it's an error on the mortgage company's part, are they then obligated to remove him as a primary and list him as a cosigner? I assume removing a cosigner is easier than removing a primary, correct? There are 2 other borrowers on the loan (his cousin and his cousin's husband) both of whom WANT to remain on the loan (at the time the loan was obtained, my friend was needed for income purposes only because the other 2 people hadn't been employed long enough to provide sufficient income). I contacted the mortgage company who stated that my friend's mortgage DOES allow an assumption to be made. Is an assumption the same as novation? I've seen so many posts about cosigners whining and complaining that they have the best reason in the world to be removed from a loan so I'm not even going to bother to list my friends reasoning because really, they're all the same! But I will mention that refinancing is not an option at this point. A few other questions I have though... Are assumptions or novations costly? If a borrower is removed from a loan, how does that loan closure appear on a credit report? When (if ever) does a quit-claim deed need to be signed (before or after removal of a borrower)? I would appreciate any and all responses - please be kind when responding, not everyone's expertise is in the mortgage field. Thank you for your time. |
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jenkin7
Joined: 04 Jun 2007
Posts: 4283
Location: Hawaii
675.89 Dollars($)
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| Posted: Sat Oct 10, 2009 12:00 am Post subject: |
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Hi JEllis,
You are right in saying that a co-signer is as much responsible for a mortgage as the primary borrower. It could be a mistake on the part of the mortgage company. But that does not make the mortgage company liable to remove your friend from the loan. They can always argue that your friend should have noticed it before he signed on the mortgage agreement. Anyway, whether he is a primary borrower or just a co-signer, the mortgage company would not generally want to take his name off the mortgage, unless someone takes over the full responsibility of the loan.
An assumption clause allows a new borrower to take over the liability of the loan from an existing borrower. In effect, it is almost same as a novation agreement. Now it is not certain whether the lender would allow your friend to be removed from the mortgage through a novation or a simple assumption. In this market, no lender would want to take a co-borrower off the loan in this financial environment. What most lenders would want is, the borrower(s) refinance the loan in his/their names removing the co-signer or the other co-borrower from the mortgage note and pay off the existing mortgage.
Novations and assumptions are certainly not as costly as refinances. This is one of the reasons, why lenders mostly prefer refinance to assumption or novation. Once the co-borrower is released from the debt liability, he can request the lender to report that to the credit bureaus or he himself can approach the bureaus with documents to ask them to remove the liability from his credit report. A quitclaim deed is required only when the co-borrower wants to give up his interest in the property. If your friend’s name is listed on the property title, he will be required to sign a quit claim deed and transfer his property interest to the other borrowers. However, once the other borrowers refinance the loan in their names, the property transfer issue will be taken care of. |
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