Posted on: 25th Feb, 2009 08:03 am
My wife and I cosigned on a home for our son in the state of Iowa. (We do not live in Iowa). Some time later, he obtained an equity loan (at the SAME small-town bank) without our knowledge, permission, or signature using the house as part of the collateral. Is this legal?
absolutely. if you and your wife were owners of the house in question, you'd have a say in what takes place. as non-owners and even as cosigners on the original mortgage, you have no input.
since your son is the owner of the home, he has full responsibility for paying the mortgage, the taxes, keeping the home in good repair, and making decisions as regards borrowing, etc. if he qualified for the home equity loan he took, so much the better. i would assume he did since it was granted.
if he neglects to pay the home equity loan, and you have to step in and make payments on the first mortgage, the net effect is that you're in the same boat you were in to begin with. you guaranteed payment on that first mortgage when you signed the note, and you are still on the hook for that. you have no need to concern yourselves with the second mortgage, as it is his responsibility solely.
since your son is the owner of the home, he has full responsibility for paying the mortgage, the taxes, keeping the home in good repair, and making decisions as regards borrowing, etc. if he qualified for the home equity loan he took, so much the better. i would assume he did since it was granted.
if he neglects to pay the home equity loan, and you have to step in and make payments on the first mortgage, the net effect is that you're in the same boat you were in to begin with. you guaranteed payment on that first mortgage when you signed the note, and you are still on the hook for that. you have no need to concern yourselves with the second mortgage, as it is his responsibility solely.
I neglected to say that both my wife and I are also listed on the Deed of Trust. Does this make any difference?
you are owners? well, that changes things. one owner cannot mortgage property without another owner's authorization.
what kind of lender did he go to? jim bob's bank and trust?
what kind of lender did he go to? jim bob's bank and trust?
You have no idea how grateful I am for your answers. Jim Bob's Bank and Trust ... you are Exactly right ... the problem now is that this 2nd note (apparently written in May of 06 has a baloon of around $20,000 that will be due in May of 09. The son will have no way to pay this balloon (and the bank has tied it to the original loan). What can we do? I'm sure they'll go after the house.
it would seem logical to engage in conversation with jim bob and billie jo to see what they were thinking when they arranged this loan without your consent.
i think if i were in your shoes i would try to renegotiate the terms of that balloon note so as to soften the blow come may - maybe they can simply turn it into an installment loan that would be affordable.
i also think i would make it plain that as owners/original borrowers you find it absolutely ridiculous and illegal for them to have granted the loan without your involvement. perhaps a threat to file suit? i don't know about that - it's kind of harsh - but then again, they did an underhanded thing by granting this loan without proper authority.
do you have a lawyer you can bring into the mix that will provide adequate assistance?
i think if i were in your shoes i would try to renegotiate the terms of that balloon note so as to soften the blow come may - maybe they can simply turn it into an installment loan that would be affordable.
i also think i would make it plain that as owners/original borrowers you find it absolutely ridiculous and illegal for them to have granted the loan without your involvement. perhaps a threat to file suit? i don't know about that - it's kind of harsh - but then again, they did an underhanded thing by granting this loan without proper authority.
do you have a lawyer you can bring into the mix that will provide adequate assistance?