More than 30 years ago a gentleman purchased his first home. He did not qualify for the loan so his sister and her brother signed onto the purchase and the new loan. Over a 15 year time period the gentleman paid the mortgage in full and lived in the home mortgage free for 15 years. The sister and her husband never contributed to any house payments. The brother was approached by his sister and her husband saying they wanted either to sell the home or for the brother to cash them out. The initial purchase of the home was in the $50,000 range but at the time of this event the home was valued at just over $900,000. The sister and her husband had signed onto the Title at the time of purchase and never signed off even when the home was paid for. The brother assumed that the home belonged to him and his new wife until he was approached by the sister. Real Estate attorneys got involved and I was requested to make a $610,000 loan to payoff the sister and her husband; which I did.
I felt so bad for the brother and his wife. To go from a 0 mortgage to a $610,000 mortgage and the house was reassessed because the county viewed the transaction as a sale. His payments went up big time. How could this have been avoided? Here is the answer.
DEEDS DO NOT HAVE TO BE RECORDED TO BE VALID.
Had the sister signed off the Deed after the purchase the lender could have foreclosed because of a clause called Alienation Clause (basically a change of Title without the lenders permission) But the intent of the sister was to simply help the brother qualify for a loan and if she had been asked to sign a Deed of the Property back to the brother; notarize it and stick in in a vault; it could have been recorded when the mortgage was paid in full.
This last paragraph is from ISSUES IN THE DELIVERY OF DEEDS UNDER CALIFORNIA LAW.
The key issue in whether or not a deed is effective is whether or not the deed was delivered. Delivery requires the grantor’s intent to presently convey title. In addition to the testimony of the grantor and grantee, the trial court will look to all the evidence in determining the grantor’s intent at the time of an alleged manual delivery. If the trial court finds the grantor intended the deed to take effect at some point in the future, or if the trial court finds the grantor thought the deed would not be effective until some subsequent act was performed, then there was no delivery and the deed is void and ineffective.
Disclaimer: I can observe events from my loan and real estate desk but any situation involving a deed transfer should have the blessings of a real estate attorney. Here is the link to ISSUES IN THE DELIVERY OF DEEDS UNDER CALIFORNIA LAW.
http://www.emw-sandiego-attorney.com/issues-in-the-delivery-of-deeds-under-california-law
Doug Jones nmls 286668
Mortgage Magic
