A friendly break-up, but co-owned property is upside down
My girlfriend and I bought a house together in Los Angeles, on top of the market 3 years ago. It is heavily mortgaged.
We recently split up and she moved out. With the market being what it is, the mortgage is $150,000 higher than today’s market value and we can’t sell it.
My ex-girlfriend wants to quit claim her share of the house to me, and walk away, but I don’t believe the lender will take her name off the loan just because she wants out (why would they?), and I’m in no position to re-finance on my own.
It would be a shame having to resort to a short sale when I could remain here on my own.
What to do?
Re: A friendly break-up, but co-owned property is upside down
The lender will not release her from liability on the loan. However, if you can continue to make the payments, you can take a quitclaim deed from her, continue making the payments and the property will be yours. Loans don’t have anything to do with who owns the property or who is on title to the property.
Roy Hoffman
Law Offices of Roy A. Hoffman
13800 Heacock Street, Suite C126
Moreno Valley, CA 92553-6264
Re: A friendly break-up, but co-owned property is upside down
You’re both liable on the mortgage if you both signed. Nothing is going to change that. IF it was a purchase money loan, then foreclosure would allow you both to walk away without being sued for that $150k+ deficiency. IF it was a refinance or if it is a 2nd TD, then you could both be sued for deficiency.
Terry A. Nelson
Nelson & Lawless
18685 Main St., #175
Huntington Beach, CA 92648
Re: A friendly break-up, but co-owned property is upside down
Well, there is a little connection between who’s “one the loan” as borrower(s) and whos’ on title as owner(s). While I don’t disagree with Mr. Hoffman, I should point out that many loans have “due on sale” clauses that can be triggered, sometimes, by as little as one co-owner selling (or quitclaiming for no money consideration) to the other. I recommend that you pull out your loan papers, see what it has in the way of a due-on-sale provision, and then talk to the lender if there seems to be a problem. Often they will waive the clause in a case like yours, but sometimes they will charge a fee. Also I should add the usual warning about cash-out and non-purchase-money second loans; defaulting on them by doing a short-sale or similar deal with the holder of the first can result in a suit by the holder of such “sold out” second against both or either co-borrower.
Bryan Whipple
Bryan R. R. Whipple, Attorney at Law
P O Box 318
Tomales, CA 94971-0318