Profile picture for SoCal Engr

What are potential negative consequences to a co-signer?

If a person co-signs and...
 
...the person they co-signed for misses payments, or makes late payments, will this affect the co-signer's credit?

...the person they co-signed for cannot make the payments and attempts to short sell, can the lenders come after the co-signer's assets? What about the co-signer's house?

...the co-signer wants/needs to take out a loan, will the full amount of the loan/payments be assessed against the co-signer's credit profile? Even if the loan is current and with no lates?

...the co-signer needs to be taken off the loan, is there any way they can do this without the person they co-signed for refinancing on-their-own?
  • September 06 2013 - US
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Answers (16)

Rosemarie,
I was simply stating facts, not trashing anyone. You are over-reacting.
You came on a mortgage based question and gave confusing/conflicting information. I clarified. 

All The Best!




 
  • September 09 2013
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Russell do you even know what you are talking about.....

I can see you are very professional trashing someone on Zillow...

As for the qualifications of the Mortgage Banker for Chase I would put her qualifications against yours any day! As she explained to me and the Client ..One year ago I could have just had 12 months of payments ..but the Regulations They have to go by have changed recently.

Sometimes brokers are more flexible then the Banks are which is all you had to say! ....That is why when we as realtors come upon this we then refere our clients to Brokers... but don't trash another persons qualifications unless you know the person being spoken about....
I personally would never use you for anything after your tyraid......
  • September 09 2013
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I have always been able to debt a co signed debt out of a borrowers dti as long as they could provide 12 months of cancelled checks showing that someone else has been making the payments. This only works if there are no late payments and the borrower is not on the account of the cancelled checks being provided as proof.
  • September 09 2013
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"The lender was Chase Bank.....and they do take the co-signature as a debt..in their ratio's ....Lucky for my client the party they co-signed for was refinancing and their names were taken off the loan...last week"

This is a completely different situation. If the debt was refinanced, they are no longer co-signers and there is no need to show a payment history. Your statements are not the same. 

"Requirments have changed....per Chase...."

I apologize. I was not sent the memo that Chase is now dictating Freddie & Fannies guidlines.


"So Call a Chase Broker !!!!!!"

Aside from the fact that Chase is a Bank and not a broker, they are also in the habit of hiring Bankers that have no real world knowledge of finance or mortagage lending. The are a massive refi shop.
  • September 09 2013
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Question
1. Yes
2.Yes
3.Yes
4.No
We just asked Chase Bank these exact questions last week ...The above answers are what I received from Chase!
  • September 09 2013
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If all the other loan officers are able to write the loans, and one loan officer with "Chase" is not, then why bother calling Chase?  Just to find someone with little to no experience?
  • September 09 2013
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For all on here that don't believe what I posted before...I have to tell you that I just had this situation with a client....This month....

The lender was Chase Bank.....and they do take the co-signature as a debt..in their ratio's ....Lucky for my client the party they co-signed for was refinancing and their names were taken off the loan...last week.

And no they would not accept proof of  payments for 12 months prior as a lease ...Requirments have changed....per Chase....

We just had to prove they were no longer co-signers in order for my Clients ratios to work.

So Call a Chase Broker !!!!!!
  • September 09 2013
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"I do require proof of payment from a 3rd party to back a payment out of DTI. This is not an overlay." -

Thank you for confirming my suspicion.
  • September 09 2013
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I stay up to date on my guidlines. With that being said, Dodd/Frank made a lot of chages to lending and I dont recall this being one if them. I am Freddie/Fannie direct with only only 11 overlays for all my products and I do require proof of payment from a 3rd party to back a payment out of DTI. This is not an overlay. 
  • September 09 2013
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"Before Dodd/Frank If you could prove that the other party was paying for the debt for 12 months...it would not have hindered your ability to purchase or get a mortgage....This does not apply any more..." -

I would like to hear that from an experienced loan officer or underwriter, not just a Real Estate agent...  It appears to me that if the debt is being paid, that that part of the debt will not be fully factored in to one's debt to income ratio, or that the payment would be considered as similar to "income" as if one was renting out the property.  It seems as if the experienced loan officers often have ways to deal with unusual conditions with the underwriters.

It is interesting that no loan officer has responded to this question yet.  I would be more inclined to accept an interpretation from Clay, Paul or Huskers.

Didn't the original poster recently refi with Huskers?
  • September 09 2013
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Co-signing for ones own children may make sense in some circumstances; but others will find it more beneficial just to "gift" the money to them over a period of years.  Some will want to use a "trust" to keep the money from being mis-spent on something else.  (If the children are going to receive those assets after one dies anyway, there may be substantial reasons to consider giving it earlier).

Obviously one shouldn't take such a risks if they "can't afford it".

Obviously, if they are the "back stop" for loan payments, they need good clear communication with the party they are co-signing for, so that they know ahead of time if payments are not being made, so that they can be that "back-stop".  Setting up auto mortgage payments may help some.
  • September 09 2013
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Profile picture for SoCal Engr
"Before Dodd/Frank If you could prove that the other party was paying for the debt for 12 months...it would not have hindered your ability to purchase or get a mortgage....This does not apply any more..."

Interesting bit of news. I had remembered some discussion about this before, but did not know it had changed.
  • September 09 2013
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No matter what you co-sign for today it will show up on your Credit...So if you want to purchase something it could hurt yourRatio's ....lower your credit score....
When you co-sign with the new regulations (dodd-frank) you are held liable
Before Dodd/Frank If you could prove that the other party was paying for the debt for 12 months...it would not have hindered your ability to purchase or get a mortgage....This does not apply any more...
  • September 08 2013
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Profile picture for sunnyview
There are ONLY negative consequences to cosigning for the cosigner. With no upside, only the foolish, overly trusting or blinded by love types are willing to take that risk.
  • September 08 2013
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1.  Yes, it will. 
2.  If the person attempts to short sell, the co-signer's assets will come into play.  Not necessarily in the form of seizure, but in factoring in short sale approval and a possible deficiency judgment. 
3. Yes, it will affect their credit profile as though they own the home. 
4. No.  They're "stuck" until the loan is refinanced.  

In one big way, this is a VERY bad idea.  If you (or a person) cosigns a loan but does not make sure they are on the title deed, they are obliged to satisfy the mortgage but have no ownership rights. 

Edit: I am not a lawyer.
  • September 08 2013
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Profile picture for iupswack
If the person co-signs then they are co-obligators for the loan.  They are treated just as they would be if they are the only person on the loan. This means that if a payment is missed, it impacts their credit. If they finance with someone else for another property, they will get hit with the full obligations.  Only way to remove someone from a mortgage typically is refinancing.
  • September 06 2013
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