I believe there is some confusion as to the responsibility or liability between spouses or co-owners in regards to a short sale. I am prefacing this by saying I AM NOT AN ATTORNEY AND DO NOT CONSTRUE THIS AS LEGAL ADVICE.
There are 3 forms that matter when you buy and / or re-finance a home.
1.) The Deed: It says who the owners of the property are. PERIOD. It does not have any other meaning other than to record and memorialize the rightful owners of a property.
2.) The Mortgage or Deed of Trust: This is the “security instrument” which gives the lender a claim against your house if you fail to live up to the terms of the mortgage note. It recites the legal rights and obligations of both you and the lender and gives the lender the right to take the property by foreclosure if you default on the loan. The mortgage or deed of trust will be recorded, providing public notice of the lender’s claim (lien) on the property. It notifies the public and all owners on the Deed of the mortgage note. Whether or not you are on the “note” you will be on the Mortgage Deed as you need to “give them the permission or right” to foreclose if the note holder does not pay.
3.) The Mortgage Note: The mortgage note is legal evidence of your indebtedness and your formal promise to repay the debt. It sets out the amount and terms of the loan and also recites the penalties and steps the lender can take if you fail your payments on time. This the person that is legally obligated to pay the debt and the person the lender will chase down for the money.
I am explaining these differences for a reason.
The bank ONLY has a loan with the person on the NOTE not on the Mortgage Deed. They need the permission of ALL people on a Deed to allow any one person the right to encumber the property with a Mortgage. Being on a Mortgage Deed means that you will get notified when the person on the Note defaults and it notifies you so that if you want to maintain owning your property and not have them foreclose it you have the chance to do so. It does not obligate you to the debt.
The short sale lender issues the 1099C form that gets submitted to the IRS. They issue it to the Mortgage Note Holder as they were the one that owes the money NOT the others on the Mortgage Deed as they did not sign for the debt they only allowed the debt to happen to their property.
Below are a couple of website links for additional reading on the ownership / indebtedness difference.
I STRONGLY ADVISE A CONSULTATION WITH AN ATTORNEY AND / OR A CPA TO SEEK VERIFICATION AND CLARIFICATION ON WHAT I AM SENDING YOU!!!!!!!!!!!!! Most attorneys allow for a free consultation in which they can be asked how a short sale with affect a person on the deed and not on the note.
I hope the definitions have helped.
Your Bristol and Plymouth County Realtor
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