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I have a two-part question I am hoping you can answer. 1. My…

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Hi- I have a two-part question...
Hi-
I have a two-part question I am hoping you can answer.
1. My father-in-law is co-signing on a home loan for a home my husband and I are purchasing in California. However, because I am not a party to the loan (I no longer work and have insufficient income), the lender is requiring that I quitclaim my ownership in the property (California is a 50/50 state in terms of division of marital assets). The lender suggested that after close of escrow, my father-in-law could quitclaim the property back to me to get him off title and put me on.
After close of escrow, can my father-in-law quitclaim his interest in the property back to me (my husband's already on title)?
If so, is there a legal document that we can sign to protect my father-in-law in the event of death, pending loan default, etc.?
2. My husband and I are using the proceeds from the sale of our last home 6 months ago to purchase this one (we were joint tenants on that property). My father-in-law has no financial interest other than as a co-signer (he has not and will not put any money into the property). I, not my husband, am eligible for California Proposition 60 tax base transfer from our previous residence (I am over 55, but my husband will not turn 55 until 8 months after the purchase). If the property is quitclaimed to me by my father-in-law, am I eligible for the Prop 60 tax base transfer since I will be the owner of record with my husband?
I hope I have provided you with enough info.
Thank you!
Submitted: 2 years ago.Category: Real Estate Law
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Answered in 41 minutes by:
1/23/2016
Real Estate Lawyer: CalAttorney2, Lawyer replied 2 years ago
CalAttorney2
CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10,244
Experience: I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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Dear Customer,

With regards ***** ***** first question - as far as the quit claims between the three of you - it can be easily done (you can change the ownership of the property easily. If the lender is suggesting this, I would assume that this would not trigger any acceleration clauses in the mortgage (some mortgages are written so that if the mortgage borrower transfers an ownership interest, the mortgage becomes due in full immediately - this is an "acceleration clause" - but not all mortgages have them).

With regards ***** ***** second issue - the tax basis - I would be a little more concerned about that. The lender should be able to find a way to include you as a borrower without causing any additional problems. Your father in law is needed only as a "guarantor" you should still be able to be named as a "borrower" on the mortgage (I don't know the details of your financing - so I cannot promise this is the case, but I am worried about the tax base issue - as you are). If you were to go about shifting names on the title. (So if the property has anything other than exactly the same names on it than the names that your current property has) you lose your tax benefits under Prop 13 (http://www.boe.ca.gov/proptaxes/faqs/propositions58.htm) so ideally you and your husband would own the new property, with you, your husband, and your father in law on the mortgage.

You may want to speak to a second lender - just to get another opinion/perspective.

(The BOE has a similar tip sheet on Prop 60/90: http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm)

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Customer reply replied 2 years ago
I looked through the loan disclosures and see no language about an "acceleration clause". The only thing I see is that the lender prohibits anyone else from assuming the loan, but it says nothing about transferring title. Escrow however, required me to sign a "vesting worksheet" for preparation of a quitclaim deed so that I can quitclaim my interest in the property to my husband at close of escrow (my mother-in-law was required to sign the same statement). They said they are required to have only the borrower and co-borrower on title. I asked them if we could have my father-in-law quitclaim the property back to me after COE, and they said they were not allowed to give any advice.Where would I find an "acceleration clause" if one exists?
Real Estate Lawyer: CalAttorney2, Lawyer replied 2 years ago

It would be in the mortgage agreement (the paperwork for the loan contract where the lender agrees to loan the money and the borrower agrees to pay back the money at a specified amount).

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Customer reply replied 2 years ago
Hi again. My husband and I want to be the only ones on title to the property that we are purchasing however, my father-in-law is a co-signer on the loan. Our goal is to refinance after making improvements to the home and increasing the equity but in the meantime, we would like to sign some type of agreement that would protect my father-in-law if he is not on title should the loan ever go into default.I am unsure if these types of agreements are standard, but we would like to offer some type of legal protection to protect his credit. Can you draw up such an agreement? If so, how much would it cost?Thank you,Kim Lefner
Customer reply replied 2 years ago
I forgot to add that our goal s to refinance and remove him from the loan. We're not sure how soon that will take place however, so would like to sign some type of an agreement in the meantime.
Customer reply replied 2 years ago
One more thing I should add. I spoke with our loan officer and he will call escrow on Monday and direct them to add me to the title.
Real Estate Lawyer: CalAttorney2, Lawyer replied 2 years ago

Dear Customer,

Unfortunately, I cannot draft contracts or legal documents for you. This is a "general information" forum where we can provide information and educational information, but we cannot practice law on the site.

You can find local attorneys using the State and local Bar Association directories, or private directories such as www.AVVO.com; www.FindLaw.com; or www.Martindale.com (I personally find www.AVVO.com to be the most user friendly).

I would recommend speaking with a lawyer to go over your proposed contract and deed arrangement (particularly the tax implications) prior to closing escrow. You will want to make sure that you fully understand the terms of all of the agreements associated with buying your home - while your broker has an obligation to be truthful with you, and not to make misrepresentations, an attorney will be the best professional to actually explain the repercussions of all of these documents. This should not be a terribly costly legal service, but can be a very valuable investment - saving you much frustration and expense later on (especially if it helps you avoid undue surprise).

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