Individual Loan Secured by Joint Property
Question: We are making a loan to an individual. It will be secured by the dwelling that he co-owns with his spouse. I realize we cannot require the spouse to sign the note, but only a security instrument. Can we require the spouse to sign a quit claim deed instead?
Answer: When an individual applicant offers property that is jointly owned, you make take whatever steps are appropriate and necessary to have access to that property should the need arise. However, you cannot take unreasonable steps or impose requirements that are excessive or not appropriate. Requiring a non-applicant spouse to sign a quit claim deed may be an excessive remedy. Depending on state law, a quit claim deed can forfeit the owners rights in the property when all you should be obtaining is security for the loan.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 6, 5/05
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