Q: Our home in New Hampshire has two equity loans against it. There are four names on the title to the house and each loan. The owners of the home are my father-in-law and mother-in-law, my wife and me.
The bank gave us these two loans on just my and my wife’s signature, and my mother-in-law and father-in-law had no idea this happened until just recently.
Was the bank correct in allowing this to happen without all four signatures on the loans? My father-in-law is very angry that he was not made aware of this situation. What action can my in-laws take against us or the bank?
A: Let’s get this straight: You obtained the loans and the bank gave you these loans without having your mother-in-law and father-in-law signing the documents? What were you thinking? Did you take out the loans and sign your in-laws names to the documents?
Aside from the ethical implications, if you fail to make the payments on the equity loans, you may have put your in-laws in financial jeopardy. The good news for your in-laws is that under some circumstances, the bank’s loan may be invalid if the parties to the loan failed to sign the required loan documents, so the bank may be unable to foreclose against their ownership interest in the property.
But your ownership interest would be at risk.
Even if your in-laws did not sign the documents, your liability would not be diminished. You are entirely responsible for the amount you borrowed.
Bad Blood Could Result From Home Equity Loan
Your father-in-law is right to be angry. If you took out loans on the property in your in-laws’ names, some would consider that to be fraud.
It’s interesting that you’re the one asking these questions as opposed to your father-in-law. Are you asking because you think that your father-in-law may come after you?
If you forged your in-laws signatures to the loans, your in-laws certainly have a right to go after you for the fraud. If the lender knew your in-laws were not signing the documents you certainly would have placed your in-laws in a compromised position when you lose your interest in the home and the lender becomes the co-owner with your in-laws.
You should try to figure out a way to apologize to your in-laws, pay off these home equity debts and clear the title to the property.