Holding Title
It Is Not Safe To Take Over Someone Else's Loan
Posted by: Kenny Tan
January 28, 2012
Every once in a while you'd run into a scenario like the one below.
A tenant rents a house from a landlord with an option to purchase the property a few years down the line. The lease may provide that tenant's rent be partially credited toward the down payment for the purchase of the house should the tenant decide to exercise the option. Since the tenant isn't able to qualify for a loan - due to bad credit score perhaps or simply not able to qualify for a conventional loan, tenant and landlord agree to allow the tenant to 'take over" the loan - without the knowledge of the lender. 
You can't just "take over" the loan without the consent of the lender. Many loan agreements contain an acceleration clause which allows the lender to call the loan due whenever there's an unauthorized transfer of title to the property.
Most lenders don't bother to keep track of the title to the property to know if title has been transferred to someone else without their knowledge and consent. Even when the tenant has "taken over" the loan and it is now the tenants' checks that they receive every month, they will accept the payments as long as they know which loan account to credit the payments to. They will continue to send statements to the previous owner whose name remains on the loan.
While you might not have any problems from the mortgage lender unless you're in default of the loan, you may have other kinds of problems.
One of the risks associated with "taking over" someone else's loan with no transfer of title to the property to yourself is that any properties owned by the person from whom you've taken over a loan may have creditors out there who had filed lawsuits that resulted in a judgment.
The creditors may record an abstract of judgment which attaches to the property under the name of the person from whom you'd just taken over the loan on the property.
The result is that while you're making payments on the mortgage thinking that some day you might own the property while you're building up equity on the property, this property is subject to any judgment liens which resulted from the recording of the abstract of judgment.
if the tranfser of title occurs after the recording of the abstract of judgment, then title to the property is subject to the judgment lien.
The next time you decide to "take over" someone else's loan, you might want to consider this problem before you act.
