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Category: Consumer Protection Law
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Experience:  20 years experience in consumer advocacy, debt collection violations, contracts, construction
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my friend is married and have good credit, the realtor said

Customer Question

my friend is married and have good credit, the realtor said he can be the sole person for the loan and hold title to the house. he is applying for a loan.

the house is meant to be for me because it is my money to make down payment (20%)

my friend and I plan to make monthly payments on that house

my question, after the closing, can my friend simple execute a warranty deed from him as the sole owner to him and I as 50/50 co-owner together

must he need the lender approval

anything else should I do to protect my 50% ownership and the right to possess

the reason I cannot be name on the loan and borrow a loan because my credit is not qualify at all
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  Law Pro replied 1 year ago.
Hi! My name is XXXXX XXXXX I'll be the attorney assisting you.

Regretfully, he would need the approval of the lender to do such because of the loan's acceleration clause (a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions).

When a lender invokes an acceleration clause, the borrower must immediately pay the unpaid balance of the loan’s principal, as well as any interest that accumulated before the lender invoked the acceleration clause.

Loans have acceleration clauses that trigger if the borrower sells or transfers the mortgaged property. These clauses are intended to protect the lender’s security interest in the mortgaged property. Accordingly, some of these “due-on-sale” and “due-on-transfer” clauses only allow acceleration if the sale or transfer would impair the lender’s security interest, or if the borrower fails to get the lender’s consent in advance.


But a transfer of any interest of the buyer/borrower automatically infringes upon the lender's security interest in the property thereby allowing them to invoke the accelleration clause.

That a lender does not have someone sitting at the Recorder's Office waiting to see if the borrower transferred an interest in the property. However, if something were to happen down the road and they looked up the property to verify anything - it would show that the owner transferred an interest in the property without their approval - then the lender could invoke the accelleration clause.

So, yes that can be done, but you would do so at your risk.

It would be much better if you obtained the consent in writing of the lender before you did such - otherwise . . . .?


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Customer: replied 1 year ago.

will ownership of the person whom the property transferred to be protected if the accrerelation invoke


 


i mean can the third party keep the house or 50% ownership


 


if they invoke the accerelation and the original ownership fail to pay, what happen to the third innocent party


 


what is the chance that lender approve such transfer

Expert:  Law Pro replied 1 year ago.

will ownership of the person whom the property transferred to be protected if the accrerelation invoke

 

No, not if the entire loan balance can't be paid off. If the borrower can't get the funds to pay off the entire loan - all owners will be at risk of losing the property to a foreclosure action.


 


i mean can the third party keep the house or 50% ownership


 

Only if they, along with the other owners, pay off the loan and divert a foreclosure action.

if they invoke the accerelation and the original ownership fail to pay, what happen to the third innocent party


 

They aren't really "innocent" - they are purposefully trying to obtain ownership of the property indirectly by not getting the loan directly themself because they can't qualify individually.

 

They would lose the property if they and the original owners couldn't pay off the loan balance - the lender would foreclose.

 

 


what is the chance that lender approve such transfer

 

Not likely.

 

Sorry.

 

The chances of them finding out aren't to great. But if there ever would be reason for them to double check on the title to the property for some reason - they would find out immediately. So, although you can do it - you take a risk.

 

You would be better off buying a property with seller financing. I realize that the number of properties aren't there that you might wish to buy. However, you could buy a property that way, clean up the credit, and potentially refinance down the road.

 

I am sorry that I don’t have better news, but please understand that I do have an ethical and professional obligation to provide customers with legally correct answers, even when an answer is not favorable to the customer.

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Experience: 20 years experience in consumer advocacy, debt collection violations, contracts, construction
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