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On homes and real estate: Co-signer of loan surprised

Q. I am the co-borrower on an owner-financed property. I recently found out the mortgage bill was not being paid when I received a summons to court. I never received anything in the mail — no phone calls, nothing. They sent the contact only to the borrower. Now they want to take me to court and sue me, but they never notified me about anything.

A. I’m afraid they just did.

You once signed a promise to be personally responsible for that debt (the whole debt, by the way). And you still are. You should certainly have checked on whether payments were being made. I doubt if the mortgage documents say the lender was required to keep you informed about the status of the loan along the way.

Q. My friend and his wife divorced six years ago. He quitclaim-deeded the marital home to her. The mortgage was not refinanced. Just the same, he was told when he purchased his present home a year ago that he was not responsible for the mortgage on the martial home. He had no trouble getting a new mortgage.

His credit report does not list the old mortgage on the previous marital home. Yet, his ex-wife has not refinanced the home into her name.

He states emphatically that a number of people tell him he isn’t responsible for that mortgage. I don’t believe them. I believe that unless a mortgage was refinanced under her name alone, he would still be left having to pay for the home if she didn’t pay.

A. I agree with you that unless the lender has released your friend, he is still responsible for that loan. That’s true even if he signed over his share of the ownership. But refinancing is not the only way he can be free of liability.

Perhaps the old mortgage was paid off. Or perhaps his ex-wife obtained a release for him by proving she could keep that mortgage and carry the payments all on her own. Sometimes that is enough to persuade the lender to take his name off. Either of those explanations might shed some light on why the debt doesn’t show up in his credit report.

To settle the matter, he could search the public records in the county where the property is located to see if his responsibility for that old mortgage was satisfied.

Q. I wanted to put a bid in on a condo that needs $7,000 worth of roof work. The bank will not accept an offer without a preapproved mortgage. My FICO credit score is top-notch.

My Realtor said to apply for a FHA 203C loan and wrap the repair cost into the mortgage. The mortgage company said FHA will absolutely not write a 203C on a condo, and the mortgage company will not write any mortgage on a condo that needs repair!

‘So now what?’ I asked her, and she said, ‘Go look for another property.’

A. Before giving up, you might consult a couple of mortgage brokers. If any financing is available, they’ll know where to find it.

The FHA loan you’re thinking of is actually 203k, by the way, not 203C. If you could get it, you could borrow enough to purchase the property and also to make needed repairs.

Q. I am a licensed broker, and I’m writing in response to your column in which you were asked, “How do I find out about foreclosures?”

I believe the questioner was asking how to purchase a home after the foreclosure, not how to purchase a home at a foreclosure auction. Post-foreclosure, the best source for finding a previously foreclosed property is a Realtor who will have access to the properties on a Multiple Listing Service, which includes lender-owned properties and those owned by HUD and Fannie Mae. A Realtor will be able to guide the purchaser through the process. In fact, HUD requires buyers to contact a real estate agent in order to bid online for their properties.

A. I may have been wrong in assuming the question was about how to buy at a public foreclosure auction. Yes, if no one else bids, the lender, the FHA or the VA may well end up owning the property and then have to get rid of it. I agree. It’s helpful to use a real estate agent, both in finding the property and in negotiating to buy it.

I’ve never understood why bank-owned properties are described as REO (real-estate owned), but it would be useful to know that’s what one was looking for.

Ÿ Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

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