At least that is what the client was explaining. 5 years ago, her son came to her and asked if his mom could help him buy a home by co-signing. His credit and income was not what it needed to be so, she ended up being the only signer on the loan. She was self employed and the loan officer suggested that they get her approved for a stated income loan. The loan closed and the son moved in. So, what is the problem?
The market and economy collapsed as it has for many homeowners. The son lost his job and could not maintain home. Tried to short sale the home, but an Attorney told them that they were more protected from deficiency if they allowed it to go to foreclosure. First problem, the attorney did not review the actual loan documents and fully interview the actual signer on the loan, the mom. You see, the Mom overstated the income. the Mom never moved into the home. She was just trying to help the son.
Home went to foreclosure and they thought all was well, until a letter came from a company doing a Quality Control review on the loan. It seems that they are aware that she breached of the convenant to occupy the home and the income she stated was more than she actually made. Even though her son occupied the home and they had quit claimed him onto the home, the mom is responsible for the loan. The lender on the loan is moving forward to make the claim that the Breach of the Covenants for occupancy and Misrepresented Income circumvent the exception in Arizona’s Deficiency protection and the $180K in deficiency is going to be pursued.
How could this have been avoided? Obviously, by never doing the mortgage this way at all, but the cats out of the bag. First, if you are facing foreclosure or an inability to pay your mortgage, get advice from legal counsel that will actually review your loan documents and is trained and specializes in mortgage issues. If this client had come to us at the beginning of the default, we could have let them know their risks, encouraged them to secure a short sale and allow us to negotiate a waiver and release from the lender.
If you are facing a point today where you can no longer afford your mortgage or it no longer makes sense and owe more than your home is worth, Call Kevin Hardin today. We will help you understand your legal obligations and rights before you stop paying, walk away, foreclose, short sale or modify your loan and when you get those answers, you will be able to make an informed decision and the Mortgage Mediation Group can then assist you with that plan. www.MortgageMediationGroup.com
On the other hand, if your story sounds like this Mom’s story, then come to a law firm like ours that knows how to protect you and guide you through this. Don’t let the lender bully you. They probably don’t own the loan anyway.