notsosure

"Pretend Mortgage"

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y story is a bit different from the norm.

In 2002 I gave my daughter (then age17) a small house in SC . It had no mortgage on it at the time.

In 2003 she (my daughter ) began to act like a teenager. "My friend" who is a real estate broker, suggested that we put a pretend mortgage the home with my friend being the mortgage holder, to protect the property (so she could not sell it)

She had a mortgage drawn up with no payments just a balloon payment in 2018 for close to three times the value of the property.

In 2005 "my friend" and I had a falling out. We have not spoken since.

No insurance has been on the house and taxes became delinquent.

We just received a letter from her saying she wants to call in the loan There was no paper work other than the mortgage.

Can my daughter get out of the "pretend mortgage"

What a mess!!

Thank you in advance

notsosure

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y story is a bit different from the norm.

In 2002 I gave my daughter (then age17) a small house in SC . It had no mortgage on it at the time.

In 2003 she (my daughter ) began to act like a teenager. "My friend" who is a real estate broker, suggested that we put a pretend mortgage the home with my friend being the mortgage holder, to protect the property (so she could not sell it)

She had a mortgage drawn up with no payments just a balloon payment in 2018 for close to three times the value of the property.

In 2005 "my friend" and I had a falling out. We have not spoken since.

No insurance has been on the house and taxes became delinquent.

We just received a letter from her saying she wants to call in the loan There was no paper work other than the mortgage.

Can my daughter get out of the "pretend mortgage"

What a mess!!

Thank you in advance

notsosure

It sound's like your so called friend you had a falling out with hit you with a scam. There are other ways that can could of done to prevent your daughter from selling/refinancing the home.

In the beginning - all you would of have done was add your daughters name to the title. Not removing your name. You'd call up a title company - for $25 to $75, they could of added her name to the title.

Having two people on a title to a home is smart because if one passes, the home doesn't go to the state as community property, and you don't have to spent $1000's in probate fees.

You are missing some information - you said your daughter had a mortgage drawn up. How much money did she receive? What did she do with that money?

Your Pretend Mortgage (similar to a Reverse Mortgage) is held through a private lender (your ex friend). The terms are no payments until 2018, where you have to pay three times the value of the property.

You say he now wants to call it.

My advice to you - due to the low value of the property, right now it would be better to pay him back, negotiating on a lower settlement. Because he is calling the note before it is due.

I would start - since the value has fallen, just give him back the original amount you borrowed from him.

I am sure your daughter knows about the mess she has caused. These are bad loans!!!!

..:)

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OP, was there any actual money ever borrowed? Or was this just a paper transaction?

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OP, was there any actual money ever borrowed? Or was this just a paper transaction?

Oh no, no money changed hands just paper work.I have been searching the net today and I think this would be invalid for "total failure of consideration?" Does anyone know how I would go about having this canceled?

Thank you both,

notsosure

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You are missing some information - you said your daughter had a mortgage drawn up.  How much money did she receive?  What did she do with that money?

No my friend had the mortgage drawn up and my daughter recieved no money. It was just for "pretend" Also it was I that made the mess :oops: Now I need to figure out how to clean it up :roll:

..:)

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Okay, let's clarify. Here is how this should have been done.

2002: You "gave" house to your daughter. You filed a required federal gift tax return (no tax to pay but must file it), paid any real estate transfer tax (usually parent to child gifts are exempt) and the title is now in her name at the courthouse. Did all of this occur?

2003: A mortgage was issued on the home. To have a legitimate claim on the home, mortgages must be filed at the courthouse. If title is in her name, how could anyone but your daughter (the legal owner) take out a mortgage on the home? This is fraud. You cannot give someone a claim on something you do not own. You would have had to claim ownership to the home to grant a mortgage lien. Did you claim to be the owner when executing the mortgage paperwork? Was there a mortgage recorded?

These events don't seem to add up. You may have had the best of intents but there are checks and balances in the system to make sure this type of thing cannot happen. :?

Edited by jq26

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Okay, let's clarify. Here is how this should have been done.
2002: You "gave" house to your daughter. You filed a required federal gift tax return (no tax to pay but must file it), paid any real estate transfer tax (usually parent to child gifts are exempt) and the title is now in her name at the courthouse. Did all of this occur?

YES ALL OF THIS HAPPENED!!

2003: A mortgage was issued on the home. To have a legitimate claim on the home, mortgages must be filed at the courthouse. If title is in her name, how could anyone but your daughter (the legal owner) take out a mortgage on the home? This is fraud. You cannot give someone a claim on something you do not own. You would have had to claim ownership to the home to grant a mortgage lien. Did you claim to be the owner when executing the mortgage paperwork? Was there a mortgage recorded?

OK the the "friend " had an attorney draw a mortgage saying that my daughter (owner of the property) in consideration of *******$$$ and friend as mortgagee (lender). No I did not claim to be the owner. And yes the mortgage was recorded.

These events don't seem to add up. You may have had the best of intents but there are checks and balances in the system to make sure this type of thing cannot happen. :?

Looking back on it now it seems so stupid :oops: well it was stupid, however I was under an extreme amount of pressure at the time,my father was in ICU for six weeks, I was in a custody battle over my son,my daughter shaved head LOL I thought she had lost her mind :roll:and I was trying to keep my cleaning business going (I had 10 people working and only me to supervise) When my 'friend" suggested that my daughters boyfriend would try to scam her out of the house and that a mortgage would protect it I said yea lets do it. My daughter singed it because I told her to. I would have never dreamed that my 'friend" of 26 years would not have good intentions. Even now after so much more the just the mortgage I am still in disbelief.

So here we are today.I have done a crash course on contract law and I spoke with an attorney and from what I understand since no money changed hands the mortgage is total failure of consideration. This give a right to rescission, and restitution.

Gezzzzzzzzz what a mess :( any advise would be greatly appreciated.

notsosure at all

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I have done a crash course on contract law and I spoke with an attorney and from what I understand since no money changed hands the mortgage is total failure of consideration.

That's what I would think of the situation.

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That's what I would think of the situation.

OK Great !! Now can anyone tell me how to go about rescinding the contract? And would right of restitution be possible. My daughter (and myself) could sure use a little extra this year.

I am starting to CRASH from my crash course.

Thanks

notsosure

Edited by notsosure
spelling error

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The lawyer created this documentation? All parties lied about money changing hands with the daughter? Just strange.

The problem with your theory about consideration: no money exchanged hands but yet the filed mortgage documentation states that *****$$$$ changed hands....problem #2 is that some states have statutes that revoke the common law concept of consideration and state that anything signed by the parties is valid regardless of consideration.

Honestly, this could get ugly. It is your word against the signed documentation and your friend. I'd make it right and see a RE attorney. This may require some finesse.

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jq is right about seeing a good real estate attorney. NOT the attorney that drew up the 'pretend mortgage'.

Your friend has an added issue: she is a licensed broker and at a minimum has an ethics violation by participating in this activity. I don't know SC licensing requirements/laws, but this wrinkle could work in your favor. Make sure to mention it to the attorney. She could be in a world of hurt both financially and professionally for doing this sort of thing. Its a very serious violation.

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OK Great !! Now can anyone tell me how to go about rescinding the contract? And would right of restitution be possible. My daughter (and myself) could sure use a little extra this year.

I am starting to CRASH from my crash course.

Thanks

notsosure

Do not get carried away. All I said is that is what I would think. Not that you were correct.

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The lawyer created this documentation? All parties lied about money changing hands with the daughter? Just strange.
The problem with your theory about consideration: no money exchanged hands but yet the filed mortgage documentation states that *****$$$$ changed hands....problem #2 is that some states have statutes that revoke the common law concept of consideration and state that anything signed by the parties is valid regardless of consideration. [/quote

Well I am glad to know that South Carolina does NOT have statutes that revoke the common law concept of consideration and state that anything signed by the parties is valid regardless of consideration.This was confirmed to me when I spoke to a good Real Estate attorney:roll:

Honestly, this could get ugly. It is your word against the signed documentation and your friend. I'd make it right and see a RE attorney. This may require some finesse.

Are you saying in your opinion she would not have to prove that she gave $$$$$? That sounds even stranger to me:confused:

Edited by notsosure

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jq is right about seeing a good real estate attorney. NOT the attorney that drew up the 'pretend mortgage'.

I spoke with one the other day and he said "according to the facts that I gave him it should not be a problem,and that my "my friend" would find it hard to find an attorney to represent her in a foreclosure"

Your friend has an added issue: she is a licensed broker and at a minimum has an ethics violation by participating in this activity. I don't know SC licensing requirements/laws, but this wrinkle could work in your favor. Make sure to mention it to the attorney. She could be in a world of hurt both financially and professionally for doing this sort of thing. Its a very serious violation.

Yea she sure does have "an added issue" I feel sure she will satisfy the note after she receives my daughters letter spelling out what she may do if it is not satisfied;)

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I agree. This is just a bizarre situation where the potential "creditor" (ie your friend) has unclean hands.

What I was saying about the $ changing hands- your daughter and your friend signed documents stating that money did change hands. That in itself is evidence that money changed hands.

But to be sure- I don't think most attorneys would represent her with such a shady deal going down.

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I agree. This is just a bizarre situation where the potential "creditor" (ie your friend) has unclean hands.

What I was saying about the $ changing hands- your daughter and your friend signed documents stating that money did change hands. That in itself is evidence that money changed hands.

But to be sure- I don't think most attorneys would represent her with such a shady deal going downn.a

Yea I think you a right "unclean hands" seems to fit in here also. From what I have learned I also agree that she will have a problem getting an attorney.

I have also found the the statue of limitations on fraud is six years which would be last year, however I have read that that the statue does not start until fraud is realized? "Fraud in the indusement" I think would also apply.

We sent her a letter Friday demand she satify the mortgage. But if she does not can you guys guide me on filing a complait. Right now I just do not have four thousand dollars :shock: yep that is what I was quoted right after telling meit would be simple.

Thank you all

notsosure

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Was your daughter still a minor when you made her sign the papers?

No she had just turned 18. As I said before I would have never thought my friend would not have good intention's. I guess I should of thought.

notsosure

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If a mortgage was made and recorded, were there TILA disclosure docs drawn up?

No there was no TILA docs. I was actually wondering if TLIA would apply? If yes she broke alot of rules:shock:

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OK now that everyone understands this ridiculous situation I am in, I received

Lis Pendens today attached to a ADR...

oops i tried to put the link here but do not have enough posts yet:oops: if you want it I guess I could send it in a PM?

Not only am I exempt because it is a foreclosure issue I am not in a county where it is mandated :roll:

So I have a few questions...

#1 does the Lis Pendens mean I can not start a suit against her? This is what i was thinking of doing.

#2 Or would it be best to wait until she starts foreclosure?

The statues of limitations on fraud in South Carolina is six years form what I understand that means from the time it is realized.

#3 How do I show when I realized it?

I have decided not to retain an attorney just yet, $4000,00 is a lot of money and I think the law is more on my side then hers. She must have been advised of this also or she would have just started foreclosure, wouldn't you think?

thank you all for sorting this bazaar mess!

notsosure

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The Lis Pendens is the formal notice to you of the start of the foreclosure process. Look up your states statutes for details of foreclosure in your state.

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right but does that mean that I can not start a complaint against her? Or should I wait for her to file a complaint?

thank you

notsosure

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You can start a complaint against her, but if I were you I would start by checking with your Clerk of Courts to see the complaint/FC she has started against you.

Were you served the LP already?

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