If I’m on title to property but not on the note, what would be the consequences if I let the bank foreclose?

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If I’m on title to property but not on the note, what would be the consequences if I let the bank foreclose?

I own a property in TX. I am on the title but not on the note. The tenants that were in the property thrashed the property and the costs to repair are extensive. I am electing to let the property go back to the bank. Since I am on the title and not on the note are there any repercussions to me in terms of credit or legal records that would hurt my chances of purchasing an owner occupied home? or any short or long term consequences?

Asked on August 5, 2011 California


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

Before you decide whether or not to stop making payments on the promissory note that is presumably secured by a trust deed on the property, look into what insurance you have if any for the property. If you have an insurance policy for it, tender a claim to your insurance representative for the damage caused by the former tenants. There may be coverage to allow the property to be repaired.

If there is no insurance for the property, but you are on legal title to the property where there is a presumed trust deed on it securing a promissory note held by the bank, did you receive legal title to the property before the bank's trust deed (mortgage) was recorded on the property or after?

If after, then a foreclosure on the property would eliminate your interest on it. If before, most likely a foreclosure would not eliminate your interest in the property since you did not sign the note and presumably the recorded trust deed (mortgage).

Should the bank foreclosure on the property where you did not sign the note and trust deed (mortgage), where you end up losing title to the home, your credit rating should not be damaged. The same holds true regarding a short sale.

You should consult with a real estate attorney about the current situation.

Good luck.


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