What recourse does my sister have on a mortgage?

September 23, 2010 10:20 AM

In 2006 my sister Emy took on a condo loan for her then-future mother-in-law, Mabel, who could not qualify. Things have not worked out as well as she planned. What recourse does she have?

In 2006 my sister Emy took on a condo loan for her then-future mother-in-law, Mabel, who could not qualify. This was not a co-signature: Emy's is the only name on the loan, which I believe was for $80,000. Recently Mabel has fallen into arrears, and the condo is worth perhaps 60% of what was paid for it. So far the lenders are working directly with Mabel, whom they know as Emy, but it seems only a matter of time until they locate the real Emy, whose SSN is of course in their possession. Emy's husband is disgusted by what he views as his mother's taking advantage of Emy's gullibility and amenable to the idea of evicting his mother, but with the condo underwater this would be an expensive solution, although it would have the benefit of ending the situation and potential credit report damage. Emy and her family live in a different town and own their home outright, and are not interested in moving to Houston where this condo is located.

Does Emy have any recourse to get out from under this loan? I wondered whether she could win in court based on coercion or fraud.

posted by vilcxjo_BLANKA to work & money (15 answers total)

First of all I'm sorry to hear about this and I hope this can be resolved with as little damage to everyone involved as possible.

Emy's husband is disgusted by what he views as his mother's taking advantage of Emy's gullibility and amenable to the idea of evicting his mother, but with the condo underwater this would be an expensive solution, although it would have the benefit of ending the situation and potential credit report damage.

I'm not sure what you mean by evicting his mother ending the potential credit report damage. If Mabel was making the payments and stopped, it's Emy's credit that is already damaged. By signing up for the loan, Emy was telling the bank that she was going to be personally responsible for all of the payments, so she's the one who they will go after to get that money. If Emy starts making payments again or pays off the loan as part of a sale that will protect her from further credit dings, but the whole question of eviction and what Mabel's rights are in this case (did she sign a lease?) depend on local laws in her area.

Does Emy have any recourse to get out from under this loan? I wondered whether she could win in court based on coercion or fraud.

Coercion or fraud on the part of who exactly? It sounds like Emy decided to take out a loan for $80,000 and used it to buy a condo for Mabel to live in. That was probably not a very smart financial decision, but I doubt there is really any way for her to claim she was defrauded or coerced unless there is a lot more going on that you didn't mention. People get burned all the time on agreements like this, even if they just cosign.
posted by burnmp3s at 10:34 AM on September 23, 2010 [1 favorite]

Did Emy sign those documents herself?

If yes, this is her debt. And her condo.

Either way, Emy needs a lawyer.
posted by bilabial at 10:34 AM on September 23, 2010

If there's a fraud, it was Emy's, no? The bank has been dealing with a person who they think is Emy but is actually Mabel? I don't think there's coercion or malpheasance, just poor decision-making all-around.

nthing, Emy is the owner of an underwater, in arrears condo. Very frustrating. The fact that they own their own home outright apart from this mess is an indicator they can probably pay. If it were me, and I had the financial wherewithal, I'd be trying to get a short sale approved by the lender ASAP and ditch this place. Mabel needs to get into a rental she can afford.

The family component is a bummer, but the family needs to face up to the fact that this is a mess that must be un-messed. Perhaps Mabel has some other kinds of assets to make good? If not, it's a hard family lesson: do not get loans for other people, EVER.
posted by artlung at 10:41 AM on September 23, 2010

It sounds like it's Emy's house. Get the MiL out and then sell it. Based on the evidence of my neighborhood Houston's real estate market isn't too bad right now. Homes in the $150-250k seem to be shifting at or slightly above 2006 levels. I don't know if a condo at $80k, if that's the full value, would be the same, but Houston didn't take as big of a hit to property prices as other areas. If it can't sell, the rental market also seems fairly strong.
posted by IanMorr at 10:45 AM on September 23, 2010

Could she rent the condo? Without knowing if there's a condo association & rules, if Emy could rent the condo for awhile that would help. Rent would cover most/all of the monthly payments while the market recovers. And maybe she'll get a tenant that would be interested in buying it after a year or two.

But yeah, sorry MiL, you have to go.
posted by sbutler at 11:27 AM on September 23, 2010

Fraud would apply if Mabel forged Emy's signature and used her SSN without Emy's consent, coercion if she'd held a gun to Emy's head while she signed.

What you have here sounds like an "identity loan" gone bad, which could have repercussions on top of the ones you've described -- if, say, Mabel signed for the loan in Emy's name, with Emy's consent, and has been signing checks in Emy's name ever since.

In short, lawyer.
posted by holgate at 11:31 AM on September 23, 2010 [1 favorite]

I wondered whether she could win in court based on coercion or fraud.

I read through this and wondered what kind of legal trouble Emy might potentially get into for her part in this. This isn't identity theft: Emy willingly lent her identity to her MIL in order to get her MIL a loan she wasn't qualified to get. This isn't a family agreement gone sour (Emy takes out a loan and pays the bank, MIL is supposed to pay Emy but doesn't), it's a bigger mess than that. Emy is a victim, but so is the bank--and the bank is more clearly an innocent victim in this case than Emy is.

All that's to say, Emy needs a lawyer.
posted by Meg_Murry at 11:33 AM on September 23, 2010

Obviously you need an attorney and that is not me. That said, what is Mabel's reason for not paying? Is she genuinely unable to pay or is she being a jerk? If she is genuinely unable, she might be willing to execute a quitclaim deed to Emy, pay rent and condo assn. dues and then just stick Emy for the shortfall in the monthly payment. She might also be willing to just move out, leaving Emy free to rent to a third party and, ultimately, sell in an improved market.

If Mabel is just being a jerk, walk away and settle in for the hit on Emy's credit rating. This is just tuition in the school of "Don't lend money to people who can't make the payments, even dear old mom."
posted by Old Geezer at 11:37 AM on September 23, 2010 [1 favorite]

Did Emy sign those documents herself?

If yes, this is her debt. And her condo.

Not necessarily, or at least not necessarily hers alone.

The names on the deed and the names on the mortgage doesn't have to be identical. You can add another person to the deed, giving them an interest in the property, while keeping the mortgage to just one person. This doesn't make the person on the deed responsible for the mortgage but it means that you can be the sole person on the hook for the bank note but not able to make decisions about the property w/o the other person's input.

If the deed has both Emy and her MiL's names then she cannot take action purely on her own; she'll need MiL to either cooperate or she'll have to file a partition lawsuit if she wants to attempt to sell the property. How it would impact a foreclosure I wouldn't even begin to guess.

As others have said, what Emy needs is a real estate lawyer familiar with the laws of Texas. It's a state with pretty good consumer laws which, if MiL turns out to not be on the deed but is instead a tenant could make things pretty unpleasant if the situation turns adversarial. It's possible that if Emy just decides to walk away and allow the bank to foreclose that it's their problem to evict, not hers, but again - lawyer.
posted by phearlez at 11:46 AM on September 23, 2010 [2 favorites]

This is a bad situation without a really good solution. From what you describe I wouldn't want to pursue the fraud route as it sounds like your sister is at least as involved as her mother in law. Your sister might be able to sue to try to recoup the mortgage costs that the mother in law agreed to pay... except that it's highly unlikely she would manage to collect enough money to pay the lawyers much less the mortgage payments.

The best that can be done at this point is probably limiting the damage. Start eviction proceedings immediately and then either try to short-sell the condo or rent it out. I'm not sure why you think that evicting the MIL would end the credit situation, though. The only way for that to happen is for your sister to pay the delinquent mortgage payments and to stay current on the future payments. Evicting the MIL is necessary to sell or rent the place, but it doesn't get your sister off the hook for the payments.

On a general note to anyone reading this thread, there are virtually no situations when you should ever, ever, ever co-sign a loan or take out a loan for someone else. Ever. Just don't do it. It will not end well. The only exception I could possibly see is a parent co-signing a loan for a responsible child who simply hasn't developed a sizable credit history of his or her own. But signing a loan for a friend, cousin, aunt, uncle, mother in law, or father in law? ABORT. DANGER WILL ROBINSON. Just say no.
posted by Justinian at 11:50 AM on September 23, 2010 [4 favorites]

As phearlez says I'm assuming the MIL is simply a tenant. Signing a loan for someone else is bad enough, I can't imagine your sister took out the loan and put someone else's name on the deed.
posted by Justinian at 11:52 AM on September 23, 2010

One thing Emy needs to do immediately is inform the bank that the person they have been "working with" is a tenant and not the owner of the property. She's been complicit in Mabel's misrepresentation of her identity and she needs to put a stop to that before she puts herself in more legal trouble than she's probably already in. This needs to be handled by a lawyer.
posted by bgrebs at 12:24 PM on September 23, 2010 [1 favorite]

Evict the current tenant, which shouldn't be a problem as there is no lease, and find a tenant who can cover the mortgage until she can figure out a better strategy to deal with this.

Yeah, it's pretty crappy, but the situation's really crappy and her mil hasn't helped the situation.
posted by TheBones at 12:25 PM on September 23, 2010

IANAL, IANYL, etc., etc.

At closing, did Emy sign a document saying that the house would be her primary residence? She could be in a lot of trouble if she did.
posted by Lucinda at 12:38 PM on September 23, 2010 [1 favorite]

I don't know if anybody will follow this or not, but we just heard the outcome of this sad story. It's not such a sad outcome after all. We loaned Emy $1000 and got a lien on her primary residence, which did not have a mortgage. This is because in Texas the bank can't force you to sell a house to pay a debt if the house has a lien. (Emy works with lawyers, some of whom are real estate lawyers, and they recommended this. I thought it was kind of goofy.) Then, Emy, after some hemming and hawing, went to the mortgage company and established a payment schedule. She and her husband feel they can meet the payment schedule if they continue to keep a tenant in the house. If Mabel, the mother-in-law, doesn't pay the rent Emy and husband will evict her, just like any ordinary tentant. The mother-in-law is apparently in ill favor at Emy and Husband's house, so evicting her might make them happy.

So, it seems like all turned out reasonably well.

Thanks. for your answers.
posted by vilcxjo_BLANKA at 8:24 AM on March 17, 2011 [2 favorites]