Are banks obligated by law to transfer mortgage loan from one person to another if deed in lieu was exercised between them?

I’d like to sell my home but it’s under water. My mother would like to purchase my home but does not have the income qualification or the down payment to purchase via a mortgage loan. I was told by a friend that deed in lieu can be used to have my mother become a junior lien holder, at which point the bank is obligated to transfer the loan to my mother without any regards to her income qualification. Is this true? If so, is there a specialty paralegal to be consulted when drafting the deed of lieu?

Asked on March 21, 2012 under Real Estate Law, California


M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

I do not believe that that is true.  I believe that what will happen is theat the lender will call in the mortgage and seek to set aside the transfer and name your mother in the foreclosure just in case.  Her rights are subordinate to their rights.  Seek help from an attorney about trying something else with the house, like modification if you are under water given the new egaislation tha has come out - or refinancing with your Mother as a co-signor if she can indeed afford the mortgage and then leaving the hosue to her in your Will.  Good luck.

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