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My mom did a favor for a friend by using her own information on a mortgage loan since her credit was really good. the friend couldn't keep up payments and was eventually foreclosed. what consequences does my mom face other than a bad credit score? will the bank come after her assets or anything like that? thanks.
From the information you have provided, your mother was the person that was on the mortgage loan application. All the information she provided had to have been verified, therefore she could not allow someone else to use her information as the names would not match. Since this is the case the house was in your mother's name as the borrower, with the stipulation that her friend would make the monthly mortgage payments each month. Your mother might have transferred the title deed to her friend, however, the mortgage would have remained in you mother's name. The house was foreclosed on by the bank, with your mother's credit taking a negative hit for several years. The property would go through the foreclosure procedure based on the foreclosure laws of your state. There would be a foreclosure sale near the completion of the foreclosure process, unless your mother is able to bring the back payments, legal fees and late fees current. If the property is not sold at the foreclosure auction then the lender would make an attempt at selling the house at some point in time. Failure to get the amount of the loan balance, your mother would probably get a 1099 indicating she had a gain on the property. She would be required to file this 1099 in the tax season she received it. She would need to check with here tax preparer as to how this would affect her filing status. Normally the lender/bank would not come after a foreclosed on person for a deficiency judgment, as they would have to go through a court. This is a long drawn out procedure, most being sued in this manner would immediately file for bankruptcy protection. Therefore the lender would write off any loss of on their federal taxes and send the person foreclosed on a 1099 for tax purposes. I hope this has been of some benefit to you, good luck. "FIGHT ON"
First, your mom needs to talk with a lawyer NOW!!!!! What she did for the "friend" is called mortgage fraud. She lied on the loan application saying that her income, etc was the friends information. This LIED is a federal crime. 2nd, bad credit is the BEST she can hope for. The bank and (and should) demand that your mom pay the bank's loss. Plus the IRS may be able to tax her as income on the banks loss. TALK WITH A LAWYER.
Repossessed is not really the right word. It was probably never possessed by the bank so they wouldn't "re"possess it. The house was foreclosed. That is a legal process that is handled differently in every state and in some cases varies depending on the mortgage document. Your mother made a very serious commitment to repay the money that was used to buy that home. If there were any lies told (for instance if your Mom said she was going to live in the house and never intended to do so) and the bank investigates and can prove your Mom lied- that could be bank fraud and the punishment would be very similar to a bank robber- prison time. If she did not lie or never gets caught in her lie, the bank has certain rights that are lined out in the document she signed. They can foreclose on the house. They can take certain actions to get any shortage from your Mom's bank accounts or whatever (depends on state law and the document). And they can turn in documents to the IRS showing your Mom received "income" (It is called phantom income by many people). Your Mom would owe income tax to the federal government for any shortage (and that would include all the money the mortgage company should have received in late fees, lawyers fees and other fees) It will probably be two or three years before your Mom knows the full extent of all the damage. SHe may suffer for this for many years after that.
Chances are VERY high that your mother may be held responsible for the full amount of that mortgage loan. There is no way to obtain such a mortgage by merely 'using her information'. Your mother either took out the loan in her own name, minnesota she guaranteed that loan by co-signing. Either situation puts your mother in the responsible position for payment when her 'friend' defaulted. Yes, the lender can come after your mother's other assets to effect payments due.
It was a really stupid thing to do. If people cant afford the deposit, they can afford the repayments. Thats why banks ask for deposits. If your mum was guarantor, they might. But only if they sold the house for a lot less than the loan was. I doubt your mum would have put herself in this position though. And if so, your mum would probably just absorb the money owed into her current debts. Dont worry about it.
At the very least she pays income taxes on the money her friend stole, as legally your mother did the stealing. At the worst, yes, your mother still has to repay a portion of the money. There are many variables to determine exactly what will happen. You are also talking about your mother committing a felony, in this instance fraud, she defrausded a bank out of their money. If they figure that out they could press criminal charges against her.