Expert: Diann Tonnesen - 8/7/2007

Question
HI DIANN, MY WIFE'S SON WANTS TO PURCHASE OUR HOME.WE LIVE IN OKLAHOMA.THE MORTGAGE COMPANY HE WANTS TO USE WANTS MY WIFE TO FILE A QUICK CLAIM DEED TO HER SON'S NAME THEN FOR HIM TO RE-FINANCE & PAY THE ORIGINAL LOAN.ALL THIS TO GET THE EXTRA MONEY HE NEEDS & TO PAY ABOUT $150 A MONTH LESS ON MORTGAGE INSURANCE.HE HAS POOR CREDIT.WE WANT TO KNOW SINCE THIS IS NOT SELLING ARE WE CLEAR FROM THE HOUSE & HIS NEW RE-FI???

Answer
Hi David,

Sorry to take so long to answer your question, but I did not get the original email from All Experts for some reason! Anyway, there are a couple of issues that need to be addressed here as what this lender is suggesting is really not "legal" and could have some implications for you.

First, do you and your wife still have a mortgage on this home? If so, quit claiming the house over to her son could possibly cause your existing mortgage lender to call their loan "due on sale" and they could start foreclosure proceedings against you. This can occur whenever there is a change in title that was not preauthorized by the existing mortgage lender. As long as the payments are kept up and the refinance occurs quickly this is probably not a big concern, but if the refinance was delayed or did not happen, this could put your equity in serious jeopardy AND you would still be responsible for the underlying mortgage.

Secondly, if for some reason the mortgage company her son is using cannot complete the mortgage after the home has been quit claimed over to him, he would be in possession of the home legally and you may have no recourse against him to get the home back. Credit requirements are tightening daily, and programs for sub prime credit are disappearing like crazy. Even though her son's lender may believe they have a loan for him right now, especially if he has poor credit that program may not be available even tomorrow.

If the home is quit claimed over to her son AND if the refinance goes through quickly without causing a default from the existing lender, then you would be clear from the home and the refinance. Hope this answers your question and helps you figure out the right path to take.