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Anyway for son to remove himself as cosigner from past due mortgage (Family issues)

chyamor 75 14 June 16, 2016 at 08:34 AM
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Buddy of mine asked for some help so I figured I'd see if the board has any suggestions .....

1) Son is the co signer of a mortgage or 2nd mortgage which is gone past due for 6+ months now.
2) Father/son have had a falling out due to some family issues, now do not talk to each other
3) Son is willing to get legal separation (Any idea cost involved?) Would that even work?
4) Total loan amount is about 150k, Son contacted lenders with no luck since payments have been missed.
5) Son cant afford to pay both his rent and mortgage payment, tried settling with bank with no luck.

Anything he can do or start looking into to get the ball rolling? I know many (including me) will say dont become a co signer..... but little to late for that.

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#2
Have father, son, or both pay off the mortgage to the satisfaction of the debtor
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#3
This can be found very easily via Google.

Essentially, the father would need to finance the house in his name, but, looking at the situation, that won't be possible (I am sure the father would never get approved for this). Other option, as mentioned above is to pay it off.

Chalk it up as a very painful lesson learned and let the house hit FC. Realistically, it makes more sense to let them FC on the house. Your son's credit is already screwed by late payments, but he already has a place to live. There really isn't a ton of more damage that will be done by going this route. (only difference is 7 year FC recording on credit report)

To me, essentially paying 150K to save a FC from your credit report is a terrible choice.
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#4
Quote from tennis8363 View Post :
Chalk it up as a very painful lesson learned and let the house hit FC. Realistically, it makes more sense to let them FC on the house. Your son's credit is already screwed by late payments, but he already has a place to live. There really isn't a ton of more damage that will be done by going this route. (only difference is 7 year FC recording on credit report)
this.
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Quote from w3kn View Post :
What a shitty thread.
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#5
Is he (son) going have a hard time down the road when he wants to buy a house most likely correct? He tried opening up a CC and was denied due to those late payments so already having a negative impact on credit.

Would doing a settlement with the bank be his best interest? How much are banks willing to give in and take a hair cut to get portion of money back?
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#6
Quote from chyamor View Post :
Is he (son) going have a hard time down the road when he wants to buy a house most likely correct? He tried opening up a CC and was denied due to those late payments so already having a negative impact on credit.

Would doing a settlement with the bank be his best interest? How much are banks willing to give in and take a hair cut to get portion of money back?
Yes, he will have a hard time buying a house. His credit has already taken a big initial hit with the late payments.

Don't waste your time with a settlement (also, keep in mind, this is a mortgage, not a credit card debt). As I mentioned above, it is a better business decision to stop paying and let them FC.
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#7
Quote from chyamor View Post :
Is he (son) going have a hard time down the road when he wants to buy a house most likely correct? He tried opening up a CC and was denied due to those late payments so already having a negative impact on credit.

Would doing a settlement with the bank be his best interest? How much are banks willing to give in and take a hair cut to get portion of money back?
This is exactly what the co-signer position is for -- to pay off the debt should the original signer not be capable of doing so. Often people believe co-signer is just to get the primary borrower a loan but with that comes the responsibility of paying the debt as well.

There are ONLY two ways this goes.

1) Let house go to foreclosure, both borrowers take MASSIVE credit hits (already have done some pretty bad damage with late payments)

2) Someone has to finance the home to remove them from the burden. You CANNOT remove yourself from a loan liability without satisfying the condition of loan criteria as whole. He could sell the house to someone who covers the owed amount...

Basically, the son made a poor financial decision to co-sign on a loan he could not afford, especially for someone who probably wasn't likely to fully meet the liability anyway. He cannot separate himself from this without the consequences coming to him full effect (foreclosure).

The option to foreclose versus make payments isn't to be made lightly. Tennis8363 recommended abandoning it and not "paying 150K to save a FC" as that would be a terrible choice. I disagree, it COULD be a terrible choice, and more precisely it's probably an INFEASIBLE choice for the son. It can often be a very good idea for someone to pay down on the house if it has the value and ability to resell. That's a whole other ballgame to the people at hand though. IE: Relative with money could buy the house to cover the debt and resell for a profit. This would remove the foreclosure from the two and potentially make money but would definitely move the inhabitants to another dwelling (likely apartment). Again this not a likely scenario for the pair.
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#8
Thanks for the feedback so far.

One last question before the weekend. What if they get the bank to settle for say 50k? would it then be a wise choice? I've done some online searching and this would then get marked as a "Settled" on credit report thus pretty much saying the borrower wasn't able to fully pay back. What kind of impact will a "Settled" flag have on FICO? It also stays on the credit report for 5-7 years I've read but It has to be better than a FC credit hit no?
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#9
Quote from chyamor View Post :
What kind of impact will a "Settled" flag have on FICO? It also stays on the credit report for 5-7 years I've read but It has to be better than a FC credit hit no?
A settled debt is better than a FC both in terms of the impact on credit score and how they are viewed by lenders, but a settled debt can still have a significant impact on his credit score [about.com].
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As the username says ...
#10
Forgot my password and no longer have access to the email so created a new account. Thanks for all the feedback so far.

Update: Buddy is getting a home appraisal and then plans on meeting with lender to show home equity is barley worth the 1st mortgage. If he was to foreclose the 2nd mortgage lender would be completely out of cash. Hoping the lender agrees to settle for 20-40k

Any tips or suggestions for going down this path?
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Quote from chyamor1 View Post :
Forgot my password and no longer have access to the email so created a new account. Thanks for all the feedback so far.

Update: Buddy is getting a home appraisal and then plans on meeting with lender to show home equity is barley worth the 1st mortgage. If he was to foreclose the 2nd mortgage lender would be completely out of cash. Hoping the lender agrees to settle for 20-40k

Any tips or suggestions for going down this path?
Are you trying to work with the 1st or 2nd Mortgage lender? Are they different entities? Lenders do not care about anyone below them (and usually above them) in the trust chain. They care about their loan and that's it. Isn't your buddy the cosigner? He is totally screwed. One of the lenders will foreclose and that will force the other to also foreclose. You're buddy will be on the hook for any deficiency once the house is sold at a foreclosure auction unless you are in a state that does not allow the bank to collect the deficiency after a foreclosure sale (most do).

He cannot get out of this obligation accept for filing bankruptcy.
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E finita la cuccagna

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A pack of matches can be had for free at a gas station...just sayin.

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#13
forclosure ..once the home is sold if the second is not paid the bank will sue for the second remainder. then you need to decide to file bankruptcy. but both will need to file. if one files the Co signer will get an order to pay from the court. sucks but that's life. I know. it happen to me. BK is different for everyone but relieved me of the obligation.
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