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I cosigned a mortgage for my brother 9 years ago. I was young and he convinced me that it would be good for my credit. Recently my credit dropped 70 points because he was 60 days late on the payment. He has been late before, he is usually on time for 10-12 months and then he has a late month or 2. I called and spoke with the bank when I realized what was happening and he has 1200 worth of fees (late, insufficient funds, etc.)

My question is do I have a case if he refuses to sell the home when he has a history of not being able to pay on time or not having funds available. Personally, I haven't been late on any payments in 6 years.

L. Will
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    When you say "do I have a case," do you mean in a lawsuit? – Ben Miller Jan 29 '17 at 14:07
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    What is the term of the mortgage? Are you really a co-signer, or are you a co-borrower, whose name is on the title? If you're half owner, what is going to happen when the mortgage is paid off? Is he going to buy you out? –  Jan 29 '17 at 15:48
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    This is why you never cosign, and specially cosigning for family. A friend of my wife asked me to cosign a rent a few months ago, and I told her in no uncertain terms, that I would not ever do this even if family was asking. I want to sleep well in the next 20 years. – Rui F Ribeiro Jan 29 '17 at 16:02
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    "Personally, I haven't been late on any payments in 6 years." Yes, you have. You've been late every time a payment wasn't received by the deadline on a loan that you've cosigned for. Did you read what you were signing when you signed it? You are personally responsible for those payments. That's why your credit rating dropped. – Paul Jan 29 '17 at 22:17
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    Mortgages usually have to be renewed every 5 years. Do you know if it's possible to relieve yourself of liability but not agreeing to the next renewal? – corsiKa Jan 30 '17 at 05:05
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    @corsiKa that may vary by region, but in the USA, 30-year fixed-rate mortgages are very common. Once you close, you just make the payments for 30 years and generally the only way something changes or gets updated is if your mortgage is sold to another bank, you refinance, or you make extra payments. – rob Jan 30 '17 at 05:35
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    @corsiKa wouldn't the mortgage then have to be repaid immediately? – user253751 Jan 30 '17 at 10:06
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    @user20574 absolutely - since obviously the house can't be afforded, it would be sold. – corsiKa Jan 30 '17 at 15:21
  • What is the problem with calling the bank, telling them to foreclose, and if there's any more money due after foreclosure sale you will pay that? – Joshua Jan 30 '17 at 17:43
  • @corsiKa Is that advice specific to Canada? I've never heard of a mortgage being "renewed" every 5 years in the USA. I don't even know how to comprehend such a process. Unless of course it's the same thing as refinancing. – MonkeyZeus Jan 30 '17 at 18:14
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    @Joshua the bank isn't just going to foreclose because you told them to. Also, foreclosure would be very bad for the OP's credit rating, at least in the short term (7 years?). In the long term it might help the OP as opposed to getting dinged for a fresh late payment every year. But it would be better to work something out with the brother. – stannius Jan 30 '17 at 19:59
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    Since you are part owner, you can always pay the monthly bill. – CQM Jan 30 '17 at 20:03
  • @CQM I don't believe a cosigner is automatically part owner of the house. – corsiKa Jan 30 '17 at 20:17
  • @stannius: Until the credit rating method is fixed to handle co-signing better co-signing should not be used if you still have to care about your credit rating. Too many cases are just broken (not just this one). – Joshua Jan 30 '17 at 21:07
  • @corsiKa yeah, but they could also pay it. by nature of being co-signer. A lot of the discussion here is about co-signing being the worst possible mistake someone can make, and ignores the idea that many co-signers behave exactly as the contract meticulously specifies. – CQM Jan 30 '17 at 21:07
  • @CQM do you have any data on that? Just curious. Anecdotally from the questions posted here, there seem to be a lot of co-signers who are surprised when their credit score goes down due to late or missed payments, or when the lender demands they pay off the loan. – stannius Jan 30 '17 at 21:40
  • @stannius http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf narrowly tailored to student loans of the private variety, of which 90% were co-signed by 2011. CFPB guidance also suggests ways for the co-signer to get released from a borrowing, and was mainly writing about the inefficiencies in that process. There will be difficulty extrapolating how many pay as agreed even if one unilaterally stops paying. So there has to be some kind of assumption, such as how many people avoid bankruptcy. – CQM Jan 30 '17 at 22:31

2 Answers2

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This is why we tell people not to co-sign unless they are able and willing to risk that money becoming a gift... or are able and willing to treat it as business rather than family.

Unfortunately that advice is a bit late now to help you.

When you cosigned, you promised the bank that you would make any payments he didn't. The bank doesn't care why he didn't, they just want their money on time. Getting him to repay you for covering this is strictly between the two of you, and unless you signed paperwork at the time establishing a contract other than the promise to cover his loan this becomes Extremely Messy.

First step is to make the payments so the loan doesn't continue acquiring fees and hurting your credit rating, and keep it from falling behind again. Then you have to convince him to repay the money you have effectively given him. Depending on your relationship, and financial situations, you may decide to carry him for a while and trust that he'll pay you back when he can, or sic a lawyer on him.

You need to make that decision, recognizing that it may be a matter of how much family drama you are willing to tolerate.

keshlam
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    This answer implies that if he doesn't pay in time, there is nothing you can do about it. This is true from a legal/financial perspective, but I would like to point out the following: If it is a matter of dicipline/priority, simply discussing a procedure where he lets you know each time when he made a payment could make a huge difference already. – Dennis Jaheruddin Jan 29 '17 at 15:40
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    By all means, talk to him before you do anything else. – keshlam Jan 30 '17 at 02:23
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    Actually you should never cosign, ever, ever. Because as you can see from the OP, it's more than just risking giving the equivalent money it as a gift. Your credit can end up trashed and the lender is under no obligation to let you know. And furthermore, even if you do know, you may not be able to extricate yourself from the situation. – stannius Jan 30 '17 at 20:01
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He wasn't wrong that a mortgage would help your credit score, assuming that this was a perfect world and everyone held up their end of the bargain. However, now that he hasn't, you are still legally obligated to pay the loan amount (including his portion of it). As for a lawsuit, it would be hard to prove what he said verbally, however, it doesn't hurt to call a lawyer for a free consultation.

Michael
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