Joint Tenant but not on the note.

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Latest post 11-11-2012 5:37 PM by Taxagent. 12 replies.
  • 11-09-2012 2:59 PM

    • Jrbritt
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    Joint Tenant but not on the note.

    Grandma owned her has as JTWROS with just one of her kids.  The child was on the deed/mortgage but not the note.  When Grandma dies, that will be a default and the bank will take the home.  

    My question is - what if there is some equity in the house?  Will that go to grandma's estate or will it go the the one child that was a joint owner?  

  • 11-09-2012 3:10 PM In reply to

    Re: Joint Tenant but not on the note.

    "When Grandma dies, that will be a default and the bank will take the home."

    Her death itself isn't a loan default as such, and I wouldn't presume at all that the bank will take the home.  (We cannot know that the surviving owner won't make the payments, and federal law won't allow the lender to force the kid to refinance for instance.) 

    You say "deed/mortgage" as though they're one in the same.  I presume you're saying this person wasn't a co-borrower on the mortgage loan. 

    "My question is - what if there is some equity in the house? Will that go to grandma's estate or will it go the the one child that was a joint owner?"

    If things are as you say, ownership of the property and therefore the equity goes to the joint owner who survives.  The equity would only "go to grandma's estate" if the property were held in her name alone (assuming estate debt didn't necessitate the place being sold and the equity used to pay that debt above and beyond the mortgage).

  • 11-09-2012 3:11 PM In reply to

    • Drew
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    Re: Joint Tenant but not on the note.

    The kid gets the home if Grandma goes first--by operation of title --trumps will or estate issues.

    I'm not sure what you mean about  child is on  mortgage but not on note  ---but generally if the child is on the  mortgage as one of the people accountable to pay then child also gets the full remaining duty to pay --or risk losing the place.  There could be some quirks wherein the  lender did not properly get child on note or the debt secured by the whole house but take deed,note,mortage to counsel for a more accurate guess.



  • 11-09-2012 3:17 PM In reply to

    Re: Joint Tenant but not on the note.

    Jrbritt:
    Grandma owned her has as JTWROS with just one of her kids.  The child was on the deed/mortgage but not the note.

    I don't understand that.

    "Mortgage" and "note" pretty much mean the same thing: an obligation to pay the loan.

    Now if you meant that Grandma and one of her children are joint owners on the deed but the child is not obligated on the loan, that's something different.

    Jrbritt:
    When Grandma dies, that will be a default and the bank will take the home.  

    Not necessarily.

    Even if death of the borrower is an "event of default" listed in the contract, the mortgage company would much rather continue getting its payments on time than foreclose on the house. The exception to that is if Grandma had a reverse mortgage. Then the options would be that the lender gets the house or the heirs pay off the loan.

    Jrbritt:
    what if there is some equity in the house?  Will that go to grandma's estate or will it go the the one child that was a joint owner?  

    JTWROS mean that the ownership of the house automatically goes to the child who was joint owner. It bypasses the estate.

    There's no paperwork involved and, frankly, there's no need to notify the mortgage company as long as the child is willing and able to continue making payments although it would be a good idea for the child to refinance as soon as reasonably possible.

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  • 11-09-2012 3:41 PM In reply to

    Re: Joint Tenant but not on the note.

    adjuster jack:

    Jrbritt:
    Grandma owned her has as JTWROS with just one of her kids.  The child was on the deed/mortgage but not the note.

    I don't understand that.

    "Mortgage" and "note" pretty much mean the same thing: an obligation to pay the loan.

    The mortgage and the note are not the same thing. The note is the obligation to repay the loan. The mortgage is the security for the loan, i.e. a lien. It is possible, though not common, that one joint owner would agree to the mortgage lien in favor of the lender but not execute the loan note. In such a case, if the grandmother was the only one who signed the note, then only the grandmother and her estate are personally liable for the loan. But since the child executed the mortgage, the lender would still have the remedy to foreclose the mortgage to get paid because there is a lien on the child's interest in the property. However, if the foreclosure didn't pay off the loan, the lender could not sue for any deficiency against the child because he/she was not personally liable for the loan. 

  • 11-09-2012 3:44 PM In reply to

    Re: Joint Tenant but not on the note.

    For sake of simplicity, I'll presume poster just confuses "deed/mortgage" and that this is a typical scenario where a parent (i) has a mortgage, but (ii) later decides to transfer ownership interest from herself to herself and the kid, JTWROS ("add the kid") vs. the kid already being a joint owner and signing on a deed of trust/mortgage but not a promissory or deed of trust note.  (If this is a very rare occurrence where the kid WAS a joint owner before mom got a mortgage and the lender made the huge mistake of not requiring the kid to sign off/acknowledge the mortgage, then the kid may have a viable argument when granny dies and her ownership interest disappears that there's no obligation to pay off the mortgage and the bank has no recourse.  It's very rare, but a smart lawyer can pursue that.)

  • 11-09-2012 3:54 PM In reply to

    • Drew
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    Re: Joint Tenant but not on the note.

    Equally if not more rare but not impossible---Granny's estate gets left with the bills and one grandchild gets the home free of any debt and all the other heirs get mad.



  • 11-09-2012 4:03 PM In reply to

    Re: Joint Tenant but not on the note.

    Well, yes, there is that (under scenario I describe anyway ... the bank would still be able to go after granny's estate for debt; however, if a typical estate, home would be largest asset they could go after and the lender'd be left holding the bag).

  • 11-09-2012 4:09 PM In reply to

    Re: Joint Tenant but not on the note.

    Jrbritt:
    Grandma owned her has as JTWROS with just one of her kids.  The child was on the deed/mortgage but not the note.  When Grandma dies, that will be a default and the bank will take the home.

    First, you've mixed tenses here.  You said "Grandma owned the home" -- i.e., used to own it but no longer does.  But your post seems to imply that "Grandma" is still alive.  Did you mean to say that she "owns" the home with one of her children?  I'll assume for now that you did.

    Second, I'm not sure why you think "the bank will take the home."  While "Grandma's" death might well accelerate the full unpaid balance on the mortgage/note, it's relatively unlikely that the bank is going to rush to foreclose.  Of course, if the other joint owner fails to secure new financing (either through the same bank or a different lender) in a reasonable time after "Grandma's" death, then the bank may change it's mind about that.

     

    Jrbritt:
    what if there is some equity in the house?

    Then, by definition, the fair market value will exceed the amount of the mortgage and any other liens against the property.

     

    Jrbritt:
    Will that go to grandma's estate or will it go the the one child that was a joint owner?

    It's not going to "go to" anyone.  Because of the JTWROS ownership form, title will pass to the child upon "Grandma's" death.  If the child sells the house, he/she will be entitled to whatever portion of the proceeds remain after the mortgage/note gets paid.  The estate will have no interest in the property.

  • 11-09-2012 8:02 PM In reply to

    • Drew
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    Re: Joint Tenant but not on the note.

    IF the will so directs its possible that Granny's estate pays the balance of the note and the grandchild gets the place free and clear  --and the other heirs take the hit.....not common but granny could word it that way



  • 11-11-2012 1:06 PM In reply to

    • Jrbritt
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    Re: Joint Tenant but not on the note.

    Thanks for the replies...I guess I should be more clear....

    Grandma is still alive but she is very old so the children are trying to figure out what lies ahead.

    There are three kids - Grandma is on the deed with Kid A as a joint tenant with rights of survivorship.

    However, Kid A never signed a note with the bank obligating her on the loan.  She did sign the mortgage, meaning she agreed to pledge her interest in the property for the note - but she is not liable on the loan itself.

    Kid A doesn't want the house in the event Grandma dies.  She will happily give it to the bank.  But there is a small amount of equity in the home, so Kid A is curious as to whether that equity goes to her since she is the joint owner and would be the sole owner when Grandma dies - or will that equity go to Grandma's estate since Grandma was the only one on the note at the bank.

    I hope this clears it up.  I was confused in the beginning because I did not know a bank would just make a note with Grandma and not both owners.  However, I checked all the documents and this is the case.

    Kid A is on the deed as JTWROS

    Kid A is on the mortgage pledging her interest for Grandma's note.

    But Kid A didn't sign a note, only the Grandma. So Kid A isn't liable for the $$$, except to the extent of her interest in the home.

    Thanks for all the replies.

     

     

  • 11-11-2012 5:34 PM In reply to

    Re: Joint Tenant but not on the note.

    Jrbritt:

    There are three kids - Grandma is on the deed with Kid A as a joint tenant with rights of survivorship.

    However, Kid A never signed a note with the bank obligating her on the loan.  She did sign the mortgage, meaning she agreed to pledge her interest in the property for the note - but she is not liable on the loan itself.

    Then you have the situation I described earlier (which, while uncommon, caan occur). In this case, when the grandmother dies, Kid A becomes the sole owner of the home and the grandmother's interest disappears. Because Kid A did not execute the note, Kid A is not personally liable for the loan. But Kid A did execute the mortgage, granting the lender a lien on the property. Thus, the lender could foreclose on that lien to get paid, but if that was not enough to pay the loan off, then the lender cannot go after Kid A for the rest. It could go after Grandmother's estate to collect on the note, however.

    Jrbritt:
    But there is a small amount of equity in the home, so Kid A is curious as to whether that equity goes to her since she is the joint owner and would be the sole owner when Grandma dies - or will that equity go to Grandma's estate since Grandma was the only one on the note at the bank.

    Kid A gets the equity, if there is any, when Grandmother dies, since Kid A is the sole owner of the property. The loan would need to be paid to get the property clear of the lender's mortgage lien, however.

  • 11-11-2012 5:37 PM In reply to

    Re: Joint Tenant but not on the note.

    Chancey1:
    For sake of simplicity, I'll presume poster just confuses "deed/mortgage" and that this is a typical scenario where a parent (i) has a mortgage, but (ii) later decides to transfer ownership interest from herself to herself and the kid, JTWROS ("add the kid") vs. the kid already being a joint owner and signing on a deed of trust/mortgage but not a promissory or deed of trust note. 

    As you can see from the follow-up post, your assumption was wrong. This is why I go with what is stated in the post until/unless the OP clarifies that the initial post was wrong. However, at least here you clearly stated the assumption, so that least avoided confusion over what your answer was based upon. 

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