Posted by Art_MD on 8/12/08 7:38am
Msg #259751

When does vesting change take effect

Did a signing which was a FHA refi.
Couple were told that she couldn't be on title unless also on note. Apparently using her credit would have caused a higher interest rate. so..
Was a quit claim deed taking her off title.
Husband doing loan in his name only.
They would do a quit claim deed to get her back on title after DOT was recorded. They will do this ASAP after recording.

Then she asked.. If my husband dies before the new DOT is recorded, is the house mine, or do I have to go thru probate??

Not being a lawyer, I plead ignorance. Truth being, I had no idea what the answer is.

Out of curiosity, what is the answer??

Art

Reply by sue_pa on 8/12/08 8:03am
Msg #259753

I've been seeing this for the past year. I personally think these people are crazy if their intent is to own their home jointly.

Minus a Will devising everything to her, all sorts of situations could occur. An unrevoked Will bequesting his estate to a prior wife, the library, whoever would take effect. In PA, the marital share for the spouse of an intestate decedent is only 1/3. A happily married couple w/children could end up with the spouse owning 1/3 of the home and the toddlers owning 2/3.

I did one earlier in the week and the LO actually told the borrowers I would have a blank QC Deed form with me, help them fill it out and tell them when and how to get it recorded down the road.

One of the correct ways to handle this would be having a deed at closing removing the spouse and another putting the spouse back on - holding the second deed until xxx amount of time has passed - in theory day 4.

I'm guessing most of the spouses don't get put back on the deed - some might but I'm guessing most title companies probably won't do it because they are finished with the transaction - certainly they won't bear the costs. The homeowners would have to make an appointment with a lawyer, pay his fees and pay the recording fees. I'm guessing that people who don't check out the ramifications first won't make this effort after the fact.

Reply by Ilene C. Seidel on 8/12/08 8:06am
Msg #259755

If the will doesn't designate she is to receive the property it will go to probate. Need something in writing she gets it all otherwise according to Md law she will get half.

Reply by Kevin/Ct on 8/12/08 8:07am
Msg #259756

In Connecticut vesting of title takes effect upon execution and delivery of the deed.
In answer to her question the house would not be hers if her husband died between the time she quit claimed title to her husband and a new deed was executed and delivered to her. She would have to go through probate of his estate either a testate or intestate succession.

The lender should be consulted before the husband executes and delivers a new deed conveying an interest in the property back to her because most mortgages contain an acceleration clause by which the entire amount of the mortgage becomes do if the borrower sells or conveys an interest in the title to the property.

Reply by dickb/wi on 8/12/08 2:01pm
Msg #259800

same thing in wi kevin.......we go a little further in...

that the spouse is responsible for 1/2 of the note even tho not named on it......if for some reason they wouldn't have the spouse sign the mortgage [and i have had lenders and title cos that wern't aware ] they would only be able to forclose the 1/2 of the home and they would have a problem trying to sell the other spouses homestead interest........we are a marital property state and any time you use income to pay for anything it becomes marital property even if it wasn't before.......all income is marital property regardless of its source....

Reply by PAW on 8/12/08 2:13pm
Msg #259805

That's the difference between states

Some states have marital/spousal rights built-in. Others, like MD, do not. In MD, dower and curtesy have both been abolished; community property is not recognized; and homestead laws are also not applicable. (Source: Stewart Underwriting manual) Thus, the lender, protecting their interest, wants all the title holders to also be liable for the loan.

Reply by Pierces Notary Services on 8/12/08 8:43am
Msg #259758

I just did one of these this past Friday - wife didn't even know she was signing QC deed until sitting at the table - call the LO and he told her they made a mistake and to sign the QC Deed and they will send out a grant deed on Monday to her to sign to put her back on.

Reply by CopperheadVA on 8/12/08 8:46am
Msg #259759

<< wife didn't even know she was signing QC deed until sitting at the table >>

I have experienced this several times also. Very frustrating!

Reply by sue_pa on 8/12/08 8:50am
Msg #259760

...LO and he told her they made a mistake and to sign the QC Deed and they will send out a grant deed on Monday to her to sign to put her back on....

Yea, right. If it was a 'mistake' why was she signing it instead of ignoring it. Let's guess if a deed showed up yesterday. To further acknowledge the LO didn't know what he was talking about, he called it a 'grant deed' - not a term commonly used in PA - we use warranty deeds and he'd have to ask them what type warrant they wanted. If they took her off by QC, why don't they just put her back on that way?

Another case of LOs saying what the borrowers want to hear and the borrowers hearing what they want.

Reply by Pat/IL on 8/12/08 9:57am
Msg #259769

In addition to the perils already pointed out in this thread, I would add that the borrowers should not be left to their own devices when conveying title - even amonst themselves. Nor should they rely on their LO for advice in this area.

In many states, failure to specify a tenancy on the deed will automatically create a Tenancy In Common. Tenants In Common hold separate interests without right of survivorship. In the case of Art's borrowers, even if the property were conveyed back to the husband and wife, and one spouse were to later expire, there still might be a need for probate. The surviving spouse would retain his/her interest, but the (intestate) decedent's interest would be subject to the same heirship succession as if the deed were never filed. Note, laws vary by state, I don't know how it works in MD, or how the rules differ in community property states.

It is crazy that so many industry professionals are so casual about their customers' little piece of the American Dream. If I were to favor one new law, it would be to require attorney representation in any transaction where property is being conveyed - even among family.

Reply by Doris_CO on 8/12/08 10:38am
Msg #259774

I don't understand why they don't just put the loan in husbands name only and wife is the non-borrowing spouse? Her credit score doesn't affect the loan and her name doesn't come off the deed. It would seem a whole lot easier then all this QC stuff.

Reply by MW/VA on 8/12/08 11:01am
Msg #259779

That's what confuses me, too. We can't give legal advise. Most loans I've done with only one on loan & both on title (nbs). Apparently some lenders or tc's won't do it that way. Is is that they don't know? I also don't understand how they can come off title for the loan & then go back on later. I wouldn't do that if it were me.

Reply by CopperheadVA on 8/12/08 11:13am
Msg #259780

<< I don't understand why they don't just put the loan in husbands name only and wife is the non-borrowing spouse? >>

I was told by a TC that FHA does not allow anyone to be on title to the property unless they are also on the Note.

Reply by Dawn/PA on 8/12/08 11:32am
Msg #259785

I have been told that as well, but have done many FHA loans with a NBS. I really believe it is a title company/lender policy.

Reply by MW/VA on 8/12/08 12:27pm
Msg #259791

Yes, I remember hearing that also.

Reply by NancyOR on 8/12/08 2:10pm
Msg #259803

In Oregon, if the vesting isn't exactly the same on the Deed of Trust as is the vesting to the property, it affects the way the County indexes the names. And, if there is a default, for instance, and legal notices must be given, NOT having a person who has an interest in the property on the Deed of Trust may create an improper or incomplete notice and impair the foreclosure.

And technically, if they do it themselves after the fact it is a default of the D ofT.

Reply by PAW on 8/12/08 2:25pm
Msg #259808

Not the same issue. All parties with an interest in the property, i.e. "on title", should sign the DOT/mortgage. This is not the same as signing the Note. The Note obligates the signer to repay the funds. The DOT/mortgage obligates the signer to relinquish the property if the obligated parties default on the loan, through whatever process is valid in that state.

Reply by MikeC/NY on 8/12/08 7:55pm
Msg #259846

It varies by state

I know that here in NY, the names on the deed and mortgage must (or at least should) match, but it's OK if only one spouse signs the note. We wouldn't have to jump through all those hoops. I've seen a number of situations where the credit ratings require that only one spouse sign the note, and they've all been handled the same way - borrowing spouse signs the note, both sign the mortgage.

If the husband dies before the new deed is recorded, I think it will go to probate in most states unless the property was in a trust. An existing will could be challenged by the surviving spouse; if the person dies intestate, state law applies as far as probate is concerned. NY law generally gives 1/2 to the surviving spouse and the other 1/2 to the surviving children in that case, but even that can be challenged.

I think the bottom line, no matter what state you're in, is that people shouldn't be making these sorts of decisions off-the-cuff. If they have to ask "what happens if...?" at that late date, it's clear that they haven't thought it through. Refer them to a lawyer...

Reply by BrendaTx on 8/12/08 8:20pm
Msg #259849

Re: When does vesting change take effect - Texas:

My source says (verbatim, except for the citing of case law left out because who really wants to read those or look the sources up themselves on this board?)

"Title to transferred property vests in the Grantee upon execution and delivery of a deed. A deed does not have to be recorded to convey title. An unrecorded instrument relating to real property is binding on the parties and their heirs."




=========================================
I'm not a lawyer and I could easily be making this up or using a fake source.

A quitclaim deed in Texas "quits claim" to property and doesn't really convey property. From my perspective, this is the dumbest hoop jumping I've ever seen.

Reply by Pat/IL on 8/12/08 9:50pm
Msg #259870

Re: When does vesting change take effect - Texas:

"Title to transferred property vests in the Grantee upon execution and delivery of a deed. A deed does not have to be recorded to convey title. An unrecorded instrument relating to real property is binding on the parties and their heirs."

Each state, as far as I know, uses one of three types of recording statute: 1) Race (to the courthouse) 2) Notice, or 3) Race-Notice. I did a Google search to find that Texas is a Race-Notice state. That means that, while title may be conveyed upon "delivery", it may also be reconveyed by the same grantor to a bona fide purchaser, absent of notice (recording) if the subsequent purchaser records his/her deed first (race).

Some states consider delivery to be the date and time of recording. It frightens me to get into an argument with a Texan about Texas, especially a Texan who has consulted with another Texan. Texas seems to beat its own path.

I CAN say, in Illinois, a quit claim deed does indeed convey any interest the grantor may have. It just doesn't warrant that the grantor holds any interest. But, whatever interest the grantor has is relinquished to the grantee.

Disclaimer: I am not a Texan and I am only engaging in message board banter. I will probably regret messing with Brenda, but I am going to click on the post button anyway.

Reply by DianeCipa on 8/12/08 10:42pm
Msg #259884

fha rule and colluding to defraud a lender

Here's a link to the FHA site:

http://faq.fha.gov/cgi-bin/answers_hud.cfg/php/enduser/std_adp.php?p_faqid=2150&p_created=1170960157&p_sid=mV3bmabj&p_accessibility=0&p_lva=&p_sp=cF9zcmNoPTEmcF9zb3J0X2J5PSZwX2dyaWRzb3J0PSZwX3Jvd19jbnQ9MTkmcF9wcm9kcz0mcF9jYXRzPTAmcF9wdj0mcF9jdj0mcF9wYWdlPTEmcF9zZWFyY2hfdGV4dD1zcG91c2U*&p_li=&p_topview=1

The lender has the right to interpret FHA guidelines as they see fit and we must follow their lead so long as the lien is valid. That means that a FHA lender who does not want a non-borrower spouse in title gets to make THAT decision and the title company gets to decide based on state law who needs to sign the security instrument to validate the lien.

Once those decisions are made woe be to the LO or NSA who instructs the borrower or otherwise enables the borrower to change the vesting post closing. Unless you are an attorney and you carefully read the security instrument and are SURE that the mortgagor is not violating the terms, you have no business getting involved with another deed.

Reply by BrendaTx on 8/13/08 5:55am
Msg #259890

Re: When does vesting change take effect - Texas:

**I CAN say, in Illinois, a quit claim deed does indeed convey any interest the grantor may have.**

Pat, I don't argue with an IL-er either!

We're probably saying the same thing, only you've said it better.



The quitclaim deed in Texas is not used very often in transactions involving attorneys because there are better ways to convey the title cleanly. Two different lawyers have told me over the years that it "quits claim" on any interest that the Grantor *MAY* (emphasis on "may" have on the property in favor of another rightful property owner but doesn't guarantee any interest in the property ever existed; a warranty deed conveys the interest in the property without any question from a Grantor to a Grantee.

The quitclaim deed has its uses, but they are different from a title conveyance perspective in comparison to a warranty deed which is clear that a Grantor warrants the conveyance of title to a Grantee which may or may not already be on title.

The race to the courthouse is important in Texas if another deed is about to be filed. The one that is filed first is the winner, but if no other deed is being recorded ahead of the other the conveyance is still made upon delivery of the deed to the Grantee. If another one is delivered to another Grantee before or after the other, the first one recorded supposedly wins.

Brenda, another board banterer