If a borrower of an active mortgage is at pre-foreclosure and they decide to transfer the deed to another individual, what are the consequences for borrower and if any for the new individual that acquired the deed? And would this even be possible?
I know when the borrower transfers the deed it triggers the Due-on-Sale Clause. Would that even matter to the borrower at this point? Or are there more ￼ consequences?
The person who has the mortgage is still responsible. The bank can still foreclose on the property if the existing mortgage has not been satisfied.
The note is still secured by the asset. For the recipient to maintain the asset they would need to bring the mortgage current otherwise the bank would go through with the forclosure and take possession of the property. I'm not a lawyer so could speak to the technical aspects of it.
Anyone can transfer their interest in real property to anyone else. The personal guarantor of a note remains legally liable for the liability regardless however without legal title to the property securing the note he is in a weakened position. As an example of his weakened position once he transfers ownership he can no longer negotiate a deed in lieu of foreclosure with the lender, which may be his way out of further liability, or at least may be a way to limit further liability. While the purchaser of said property won’t incur liability for the existing indebtness unless specified contractually between buyer and seller, he will as property owner be liable for occurrences after the ownership transfer.