Editor’s note: Robert Bruss passed away on Sept. 26, 2007. This was one of the last real estate columns he wrote. Inman News is publishing Bob’s last work as a final salute to the nation’s most well-known real estate writer.
DEAR BOB: My brother purchased a house with his soon-to-be wife. They went to one of those “subprime” lenders because of his credit problems and self-employment. But the loan officer, a rookie, arranged a mortgage in the girlfriend’s name alone. She is now on the mortgage and the title alone. Two years have passed. They broke up and were never married. He moved out. In today’s market, she can’t sell the house for any reasonable price so they took the house off the market. The problem is they borrowed the $33,000 down payment from my mother. How can we protect mom’s money when the house sells in the future? Can she record a quitclaim deed? Can interest be added? Will mom be able to get half the profits when the house eventually sells? –Joseph D.
DEAR JOSEPH: If I understand you correctly, title to the house is in the name of the former girlfriend alone and the $33,000 down payment was borrowed from your mother on an unsecured basis.
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The ex-girlfriend is in control. Since your brother is not on the title or the mortgage obligation, he has zero control over that house.
If the ex-girlfriend will give your mother a quitclaim deed for a partial interest in the house, that would give mom a co-ownership interest and a share of the resale profit. But the ex-girlfriend would be a fool to do that.
Perhaps your mother can beg the ex-girlfriend to record a $33,000 second mortgage so she will get her money when the house eventually sells. However, it is highly unlikely the homeowner will agree to that.
If mom has proof the $33,000 was a loan and if there is a promissory note with a specific due date, then she can demand payment when that note comes due. Presuming the ex-girlfriend who signed the note refuses or is unable to pay, your mother can then sue and obtain a judgment for the $33,000. Then she can record that judgment lien and foreclose on the house. For full details, mom should consult a local real estate attorney.
SHOULD BORROWER STOP PAYING PRECARIOUS MORTGAGE LENDER?
DEAR BOB: My home loan is with American Home Mortgage (AHM), which is in a precarious financial condition. AHM is holding significant dollars in my escrow account for property tax and homeowners insurance payments. Should I stop paying AHM and pay such items myself? Should I refinance with another lender to avoid potential loss of my escrow funds? –Robert D.
DEAR ROBERT: Escrow impound funds for the payment of property taxes and hazard insurance are supposed to be held by mortgage loan servicers in a separate trust account. I hope AHM is following the law and properly segregating borrower funds.
Do not stop paying into your escrow account because that would be a default on your mortgage.
You can ask AHM to cancel your escrow account so you can pay your property tax and insurance bills directly when they come due. Many mortgage lenders will cancel escrow accounts if their borrowers have an on-time payment record.
But you have to ask. However, if you have a VA, FHA or PMI (private mortgage insurance) home loan, an escrow account is required.
WHICH LIVING-TRUST BOOK IS BETTER?
DEAR BOB: You recently recommended the new book “The Complete Living Trust Kit” by attorney Karen Ann Rolcik. But I recall a year or two ago you recommended “Make Your Own Living Trust, Seventh Edition” by attorney Denis Clifford. Which book is better? –Dean A.
DEAR DEAN: I have reviewed these books which are both excellent. “The Complete Living Trust Kit” is more user-friendly and easier to understand. But the Nolo Press book, “Make Your Own Living Trust, Seventh Edition,” has more legalese and is more technically complete. I suggest you read both books.
The new Robert Bruss special report, “17 No-Down-Payment Formulas for Use in a Buyer’s Market,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).