Is a co-signer responsible for a loan if they were misinformed about the loan by the primary signer?

UPDATED: Sep 30, 2022

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Is a co-signer responsible for a loan if they were misinformed about the loan by the primary signer?

Several years ago my brother convinced my parents to take out a mortgage on their home to help him start a business. They agreed and co-signed with my brother. Recently, my brother told my parents that the bank needed them to resign the loan papers due to some minor technicality. My parents resigned trusting him and then learned that he had extended the loan – both the amount and length. What are my parents rights in this situation? Do they have any recourse or are they stuck with this mortgage if my brother does not pay? They are 74 years old and scared to death of losing their home.

Asked on September 6, 2016 under Real Estate Law, Illinois


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

From what you write, it was your brother who lied to (defrauded) your parents, not the bank/lender. If so, then they are bound to the loan: generally, only the bank's wrongdoing would allow them to treat the loan as void for fraud. So your parents appear to be obligated to the loan, based on your question; but if your brother lied to them to get them to sign, he committed fraud and they could sue him for compensation, such as to get from him payments they made on the new loan based on his fraud, or any other losses they incur. The problem is, their recourse is against the one who committed the wrong, which your brother, not the bank.

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