Can lenders revoke a mortgage refinance if a relative takes her name off the title? When a co-borrower removes her their name from the title during the refinancing process, it can cause complications for the homeowner trying to get the loan.
Q: Both my daughter and I are named on her mortgage loan and title to her property. My daughter is going to refinance the loan in her name only. I have filled out a quitclaim deed form to transfer ownership to her. Now my daughter is telling me that if I record the quitclaim deed before she closes on her refinancing that she might not get the loan. How will it affect the loan by me signing and having the quit claim deed recorded?
A: The issue you have is an issue of timing. Lenders have certain rules in place that cover what happens if the title to a home changes shortly before a loan closing. Many lenders look back a year or two to see when the last transfer of title occurred.
In your case, you and your daughter are owners of the home. When the lender ordered a title report on the home, the home showed you and your daughter as owners of the home without any issues. If you record the deed now, the title report would be in error and for your lender’s purposes, they would show a sale of the property shortly before the loan closing. The lender might have to send the loan back into underwriting to clear the condition of a sale so close to closing. For this reason, your daughter’s lender is saying don’t do it.
Having said that, the lender doesn’t mean you can’t do it. The best way these things usually get done is at settlement or at the loan closing. When your daughter goes to close on her loan, she will be on the loan without you. At that time, the lender will need and expect to have you off the title to the home. If you deliver your quitclaim deed to the settlement agent and have them record it as part of her loan closing, the recording will go hand-in-hand with the refinancing. We have not seen lenders have an issue with doing it this way.
We know that you are trying to help your daughter out by trying to anticipate what you will need to do, but you should talk to your daughter’s lender or daughter and find out who the closing agent is for the loan. You can then discuss with the closing agent when you should deliver the quitclaim deed to them for recording and coordinate the documentation they will need from you while they coordinate with your daughter’s lender the documentation they get from them. We think you will find that the closing agent or the lender will be happy to assist you in order to get your daughter’s home refinanced.
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