May be a duh question, but-- the house is titled to a family member, but the loan is in the names of other family members. The titled person is not on the loan.

I don't think I can help them with a short sale when a person who is not the borrower owns the home, can I? Please say no...

The borrowers say "the bank doesn't know this".

That seems to be saying that the "home" was not used as collateral to support the mortgage (which isn't really a mortgage at all; but an un-secured loan).

Are you being asked to help the ones that own the house . . . . or the ones who owe the money ?

I'm surprised something that complicated could be described in so few words. But please let us know how it turns out.

Good Luck !

I was approached by the borrowers who actually have modified the loan but don't like the modification and stopped paying. It sounds like they borrowed against the home for remodeling, too. I can't find a Deed of Trust on the property in the borrower's names. Or for the family members who hold title.

It looks like it was bought for cash orginally, titled to family members, later borrowed on by the borrowers. That's all I can figure out.

So, the titled owner can't exactly sell the property when it's encumbered by a loan he isn't a party to. And the borrowers can't sell a home they don't "own"-- and probably shouldn't have been borrow against it, either. That's how I see it.

Do I dare ask . . . . Who's living in the house? Is anyone?

Sounds like some home improvement lender didn't do his/her due diligence BEFORE loaning money.

Hehehe... Who's living in the house? Why the borrowers, of course!

It also appears, from Lis Pendens recordings that these folks did a lot of remodeling or building on other properties and were remiss in paying vendors. They have been EXTREMELY busy doing various things.

But, bottom line is, you would agree with me that it would be VERY BAD for an agent to get involved in a Short Sale of a property that actually doesn't belong to the borrowers, correct? Say yes.

Gosh, I don't know. I'm a sucker for new things.

I'd be curious to learn about how this situation was allowed to develop and then prevent it from occurring elsewhere.

I've wasted a lot of time learning about things that I never use a second time. I'm not a good person to ask.

Your situation reminds me of a case of Identity Theft and Mortgage Fraud, where the occupants borrowed additional money using the collateral of the actual Owners.

Does someone in your scenario need help . . . . Yes. Will you be compensated for assisting them in sorting it out . . . . No.

If you have a Broker, this is a good one to talk to him/her about before investing any more of your precious time.

But, IF you ARE the Broker . . . . then follow you gut and do what's right.

DO NOT listen to me !

LOL! I'm an AB, so I should know about gigantic red flags flapping.

The operative and instructive phrase from the borrowers was, "The bank doesn't know". The bank doesn't know that the borrowers are not the deeded owners. That some form of loan is collateralized by a property that the borrowers don't own. That they actually cannot sell.

Now, I think that, if the bank doesn't know, probably the bank would like to know that little tidbit of info. And I, as a licensee, probably shouldn't participate in something that's been hidden from the bank.

That's how I sees it, my good friend.

And so would the Owner of Record.

And would you estimate that the amount of the loan(s) has been invested in improving the underlying asset . . . . or was it squandered elsewhere?

The only one you can help is the actual Owner/Relative of the Occupants. Is s/he still on good terms with the Occupants?

And the Occupants/Debtors . . . . what did they expect for an outcome? What was their Exit Strategy? From their point of view, what would have been the "Best Case Scenario ?

By their own actions in not continuing to service the loan, they are bringing the matter to a head (like a big boil). I'm surprised that they haven't just skipped town. Could it be that they're just stupid? Like the Lender?

No, the borrowed money was not invested back into the property. They very well could have bought other property with it. Even though the borrowers don't own the home, apparently there is a big loan on it. However they did that without a Deed of Trust-- which they could not have because they have no deed, period-- I don't have a clue.

More horribly, they "modified" their "loan", which was an interest-only loan originally. They are unhappy with that outcome.

I cannot for the life of me find the recorded instrument for this "loan". What could it have been?

DD, For what it is worth we had a property where Mom and 2 sons were on the deed. Mom lived in the property. Loan only in name of one son. We were told that it was fine as long as everyone on the deed signed it. So, if the Owner of Record is willing to sign the deed over you should be able to sell it.

An interesting twist, the brother who was on the mortgage was the only one that they looked at financials on and they required him to bring $10K to close and sign a $55K note. He wanted the other brother to be put on the note as well but the Mortgage company said they could only put the name of the mortgagor on the note and no one else.

It was a pain but we got it closed. There was a first, second, and an MI company involved.

Good Luck and have fun.

When they say "The bank doesn't know" . . . . that now indicates that they knew that the Bank doesn't know (or didn't know).

And knowing that clearly indicates that the Occupants were complicit in conducting the fraud, taking advantage of the Bank's ignorance, and exploiting this point of weakness. They didn't initiate it but the Bank, being inept, provided that opportunity, and that, in itself, is not a crime . . . . but its stockholders may see it differently.

The prospect of a "short sale" doesn't look too promising here when the Owner of Record cannot be shown to owe anything. S/he bought the property outright with cash, and does not appear to have ever authorized others to borrow against his/her collateral. If any of it was used to improve the underlying asset, then he is just an accidental beneficiary. Or could he be shown to have been a willing victim?

Now, the Occupants cannot very well authorize you to sell that which "they" do not own . . . . and never owned. Probably they just pretended to own it during a time period when lending practices were less rigorous.

"Who" could possibly be your Client ?

If all banks were this stupid, then wouldn't many more tenants take advantage of the free money that is so readily available? Right now, most tenants have to take on the identity of the landlord to pull this off. Your guys didn't even have to go that far.

The gig is up ! I think it's a very good story . . . . but a good story for me to watch unravel from a distance.

Perhaps, if you're at all interested, it may be that the Bank will compensate you as a "Private Investigator" . . . . . almost always a good supplemental license to acquire in the Real Estate business. Look into it as I don't think there's going to be any commission generated from a real estate transaction on this one in the near future.

Im not seeing the big deal here - this is no different then when husband and wife are on title but only one is on the loan, or couple divorces, both are on loan and one has quit claimed the house to the other.
Or gramma dies willing the house to daughter, so daughter is now owner of record, loan is still in grammas name.
You can have owners that are separate from borrowers.
You can go ahead and start quitclaiming your house to whoever you like but it still leaves you responsible for the loan if you took it out.
Your client for selling the house is who is on title. Your client for the short sale is the borrowers. The borrowers need to qualify for the short sale. The owner of record will transfer the property to new owner. They all need to want to make this happen and work with you.
It will become obvious to the bank whats going on but think about it - whats their recourse? To call the note due? On a defaulted likely foreclosing mortgage? Whats the difference?

Very well Put. I very much agree.

I would advise all the parties to seek the advice of a competent attorney in their jurisdiction. For this situation to arise, there was likely some level of fraud committed by the borrowers or their relative(s) that own the property. There's potential for both criminal and civil liability once the bank becomes aware of the situation.

This situation seems toxic. You're taking a huge personal risk being involved in this transaction...

Agreed. Seek the advice of an attorney for these issues.