Can a person be prosecuted for taking out a mortgage on a home if they already owed on the land but did not disclose it?

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Can a person be prosecuted for taking out a mortgage on a home if they already owed on the land but did not disclose it?

My grandparents refinanced their modular home and the land it is on with a commercial lender. They do, however, owe a private individual for the land, which they did not disclose to the commercial lender. If, due to financial hardship, they abandon the place, can they be prosecuted for this when it is repossessed? Or is it a matter of who has the deed, i.e., if the land deed is in hand, or turned over to the mortgage company, and they just continue to pay the landowner for it, would that preclude legal action? They filed bankruptcy 2 years ago (twice now in 10 years), if that matters.

Asked on March 9, 2011 under Bankruptcy Law, Georgia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

1) Bankruptcy in the past does not affect current obligations; if either or both mortgages were not dealt with then, the previous bankruptcy does not matter.

2) If they knowingly did not disclose the existence  of the prior mortgage to get the newer one, and then default on the newer one, it's possible they could be referred to the authorities for criminal prosecution on the theory they committed a form of fraud.

3) In any event, they could be sued by either mortgage holder for whatever they owe that person/company and don't pay, and which the mortgage holder can't collect. So if, for example, the bank can't foreclose on the property and sell it due to the previous mortgage being in place, the bank could potentially go after your grandparents for the full unpaid value of the mortgage.

4) It's not clear they could simply turn the land over to the bank if there's another mortgage on it. (And note: lenders are not required to accept the deed in lieu of payment anyway--it's a voluntary choice to do that.)

This is a complicated, messy situation. Your grandparents need to consult with a real estate attorney.


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