I co-signed on my mom’s mortgage to help her get a loan, and the house went into foreclosure (see details)…?

Deal Score0

I co-signed on my mom’s mortgage to help her get a loan. I was naive going into this — completely new to the process, and believed it when I was told by the broker that I could be taken off the loan at any time (I’m filing a complaint with the Attorney General for that).

Well… mom couldn’t afford to pay back the loan, the foreclosure process has begun, and now she’s talking about filing for Chapter 7 bankruptcy.

By her filing for chapter 7, I would be the only person left standing to pay for a house that I don’t even live in.

I’ve already spoken with two attorneys — one said they’d try to get my name off the loan and I never heard back. The other said I should sue her to force a short sale, and said the bank probably won’t go after me for the difference.

I’m really getting the shaft on a deal that was supposed to help my credit. What can I do to come out of this as squeaky clean as possible, without regard to mom?

NOTE: I apologize to those of you who like to be the one to provide the moral or lesson to each story, but I’m ok in that department. I already know the moral of the story.
BTW: I live in Illinois.

7 Comments
  1. Reply
    Curtis S
    April 30, 2011 at 1:09 am

    I would contact the mortgage holder and take over full and complete home ownership and then try to sell the home.

    As co-signer or co-maker of a loan, the loan is really yours, not your mother’s, and therefore you can absolutely expect the mortgage holder to come after you, despite what your attorney has told you.

    By doing so, it does not matter what your mother does, as the mortgage is yours.

    Having said that, it is entirely possible that by selling the home, you may still have a shortfall if the amount you owe is more than what you have sold your home for, and your mortgage holder will need to compensated for this.

    Have the discussion with the mortgage holder. They may be surprisingly flexible in these uncertain times.

  2. Reply
    Gem
    April 30, 2011 at 1:42 am

    First, I am so sorry you find yourself in this position. Guess this is why there is an old saying about never lending money to friends or family. Don’t beat yourself up to bad, many of us have walked the same path.

    Anyway, here is reality, sorry for the bluntness, but the truth is easier to take quickly.

    Every missed payment and late fee dings your credit, your credit is already on the verge of crap.

    When it forecloses or files, it will hit your credit report as a foreclosure or default.

    This will screw you for years to come.

    Now, what you can do.

    Face facts, you signed it, your mother is being a stupid witch (sorry) and you are stuck.

    You can file bankruptcy, which if can be avoided may be best.

    Or, you can contact the loan holder, find out how much money they will take to make this go away. Many 2nd mortgage companies are agreeing to pennies on the dollar just to get SOMETHING. Then, do what you have to do to get this money and pay it off. Yesterday. BUT, don’t send them a dime until you get assurances in writing that they will remove any default and mark the account as paid as agreed–on your credit.

    If you cannot negotiate a reduced term to get this paid off, find out what you can do to re-establish the debt and start paying it off monthly.

    Your mom should pay you back, I really doubt that is going to happen.

    Sorry again, family that screws you is the worst.

  3. Reply
    HEATHER
    April 30, 2011 at 2:07 am

    Can she declare bankruptcy and still save the house? If so, that would give you some time to work out a short sale with the lender.
    You aren’t going to come out “sqeaky clean” on this either way. Your credit will reflect the same late payments hers does.

  4. Reply
    mama_sayed
    April 30, 2011 at 3:00 am

    As co-signer, you are as responsible as your mom for repaying the loan. If the house goes short sale, you will be expected to pay the difference. Your name should have been removed before the default reached this point.

  5. Reply
    Christopher N
    April 30, 2011 at 3:12 am

    Yeah. Go with what Curtis said. I just wanted to add that in a legal transaction you cannot listen to what people say, you have to have it in writing to enforce it. So I don’t think that the AG is going to help you at all, unless you got it in writing.
    But, like Curtis said open up an amicable dialogue with the lending bank. Start calling the rep every day if you have to, just be sure to keep it courteous and friendly. THE BEST ROUTE TO GO.

  6. Reply
    loanmasterone
    April 30, 2011 at 3:57 am

    I don’t know why you are filing a complaint with the Attorney General for what was on the mortgage loan docs that you signed.

    The reason the attorney did not get back to you about taking your name off the mortgage because there is only two ways that I know of that you can accomplish this.

    #1 Your mother refinance the mortgage loan into her name alone.

    #2 You mother sell the house to someone else and they get a new mortgage loan thus paying off the mortgage loan you and your mother signed for.

    When you signed the loan docs they indicated with no uncertain terms that you were equally liable for the monthly mortgage payments as your mother. You now know that you should have read them before signing.

    Your mother going through bankruptcy might cause her to lose the property and a bankruptcy will appear on her credit report. On your credit report will appear a Foreclosure.

    Apparently you had a reason for going into this transaction as you wanted to improve your credit score by being on your mother’s mortgage, with her paying the mortgage.

    I don’t know the relationship you are having with your mother, but the both of you are in the same boat. Whatever action she decide to take will adversely affect your credit report.

    The lender will not take you off the mortgage or give you any more breaks than they afford your mother. You would be wasting your money in an attempt to sue your mother in order to force her to do something that is a request of the lender. The lender do not have to accept a short sale request. You would be out of money for an attorney and be in the same predicament you are currently in.

    You and she should sit down and see if the both of you can successfully come to a conclusion as to how best to solve the problem. There are several options

    #1 Loan modification (Lower the monthly payments, Add the unpaid monthly payments to the end of the current mortgage, make a second mortgage of the unpaid monthly payments.

    #2 Short Sale Request

    #3 Selling the property yourselves or through a real estate agent

    #4 Deed in lieu of foreclosure

    Since both of you are on the mortgage, I am sure that both of you are on the deed. Therefore neither of you can do anything without the other.

    Both of you can agree to assist each other or go down in flames together.

    I hope this has been of some use to you, good luck.

    “FIGHT ON”

  7. Reply
    Kiarra
    July 7, 2011 at 8:02 am

    I’m very curious to find out what happens as I am in the EXACT same boat. My parents were divorcing, my Mom asked me to sign with intentions on refinancing to get my name off, I was 20 and naive as well and shortly after she defaulted on the loan. Maybe we can work together? It’s been 5 years since that promise.

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