Quit-claiming to remove my husband from the deed for USDA loan?

[Sweetpea3829]

Hi everyone...ok, very long story short...my husband and I have a property with a mortgage that was IIB in 2007. We've paid through up until August at which point we stopped paying (that's the long part of the story).

We're relocating to NY and want to be rid of this property for good. We qualify for a USDA loan but they will not allow us to close on a USDA mortgage until our names are off the deed for this property here. They are fully aware of the status of the mortgage, that it was IIB and that we let it go into default. But...we still qualify because we have excellent credit otherwise and the circumstance of our bankruptcy was not quite within our control.

The servicer of the loan for this house here will not let us do a DIL until we have listed the property for three months. We know it won't sell...and a short sale will take forever. So we're looking at three months to attempt to sell and then however long it will take for the DIL if they even approve it. We cannot just let the foreclosure happen because that precludes us from a USDA loan for the next three years.

So I was reading here about folks talking about quit-claiming their property directly to the lender and others saying that wouldn't work because the lender has to agree to the quit-claim. Good point!

But...what if we quit-claim my husband OFF the title for this property? His name will be free and clear and he then should be able to go and purchase a property in NY under USDA?

Thoughts? Opinions?

Quit-claiming is new to me...I only *just* read about it on this forum and on google and I see that it's used quite often in divorce cases. But I'm assuming we could just quit-claim him off anyways, yes?

[debee]

Quit-claiming will get your name off title, but not off the mortgage or deed-of-trust. The only way to get your name off that is via foreclosure, sale, or DIL.

eta: A quit claim will transfer ownership at the level of the county recorder's office, but the lender will still have to foreclose (if there's no sale, short-sale or dil) in order to get clean title and take possession of the property.

[Sweetpea3829]

It's ok if his name is still on the mortgage as that's been discharged and USDA doesn't care much about that. But they DO care that our names are on the title. I guess for USDA, you can't own a home when you close on the new home.

I'm not sure if removing his name from the title at County level would be sufficient enough for USDA's purpose. If his name would stay on the deed-of-trust, would USDA see that when vetting him for a USDA loan? Or would they see his name only at the county level?

[DebtEnder]

USDA direct loans don't have a major issue with previous foreclosure. What sort of USDA loan are you doing , as people have posted here about getting USDA loans mere months after BK7 and foreclosure.

[debee]

It's ok if his name is still on the mortgage as that's been discharged and USDA doesn't care much about that. But they DO care that our names are on the title.

The mortgage loan has been discharged, but not the lien. The mortgage or deed-of-trust is the lien. His name is still on that and stays on that until foreclosure, sale, short sale or DIL. Title at the county level is the record of ownership interest. If that's all they care about (I'm not familiar with USDA) then you can quit-claim to get yourselves off that. I would just clarify that with them before doing it.

[Sweetpea3829]

It's a USDA Direct...the problem is that we never foreclosed on the property here. Since 2007 and up until this past August...we paid through. We stopped paying for a variety of reasons but we are still collecting rental income from the property. As the property was discharged in the BK7 but not yet foreclosed, it is considered "unresolved." USDA will not let us close until this property is resolved, either by sale, DIL or foreclosure. And they were clear that if it went in foreclosure, we'd have to wait three years for approval.

So we're talking with our real estate agent to list it for sale...but the process of selling it will be long and arduous and we're not going to be in this state in two weeks.

Ideally...we'd love to have our cake and eat it too...ie we'd love to collect rent from this place for however long it takes to foreclose, but in the meantime, purchase a single family home in our new state. We realize that's not likely going to happen.

Nevertheless...we want to buy as soon as we can...renting is not going to be easy (we have four kids that are 5 and under...and a large breed dog).

Moreover...we really would just like to sever all ties to this place. The heartache and headache...no thanks. If we can quit-claim my husband off the deed in a manner that is sufficient for USDA's requirements, than that seems like a really viable option to me. I'm just not sure it will work.

[Sweetpea3829]

Debee...so when USDA tells me they will not close on a loan for us until our names are off the title for this house, do you think they are referencing the deed of trust? Or do you suspect the quit-claim will be sufficient for them? I've sent an email to the senior loan servicer that I've been working with to get her thoughts...but bottom line...she's not the underwriter and that's who makes the final decisions, kwim? What I'd give to be able to speak directly to the underwriter.

[debee]

Debee...so when USDA tells me they will not close on a loan for us until our names are off the title for this house, do you think they are referencing the deed of trust? Or do you suspect the quit-claim will be sufficient for them? I've sent an email to the senior loan servicer that I've been working with to get her thoughts...but bottom line...she's not the underwriter and that's who makes the final decisions, kwim? What I'd give to be able to speak directly to the underwriter.

From what you said in your previous post - "USDA wants the matter resolved via sale, short sale, foreclosure or DIL" - they want your name off the mortgage/deed of trust. Based on that, quit claim won't do anything to help you at all. Sorry.

[Sweetpea3829]

Good point...I'm going to present it to them anyways. They're pretty flexible and maybe they'll be satisfied if his name is off the title at county level. Let's say we were getting a divorce and I was keeping the property...

Sure we could quit-claim him off the title, but if that doesn't remove his name from the deed of trust, then he'd never be able to purchase through USDA, kwim?

I hope they'll accept it...lol, we really don't want to rent for too long. The sooner we can get into a home, the sooner we can put the entirety of the ugliness of the BK7 from 2007 completely behind us.

[debee]

Come back and post what they say. It will help someone down the road who finds themselves in your shoes. Good luck and keep us posted!

[AngelinaCat]

Hello Sweetpea3829:

I deleted your duplicate post regarding this question. Posting duplicates in other forums is not allowed as per Forum Rules, because it causes too much confusion when trying to follow and respond to the threads. In case you did not read the rules, they are located at the very top of every forum you go to. But in case you haven't seen that, here is a direct link to it.:

http://www.bkforum.com/announcement.php?f=17

Please take a few minutes to review these rules.

Thanks,
AC

[Sweetpea3829]

Sorry AC! I wanted to make sure it was seen. Have so much information flowing through my head I wasn't even paying attention to the forum rules.