help with real estate & relatives

[frugalgirl]

My father entered into a home loan agreement with a relative. A legal mortgage agreement was drawn up where the relative would pay my father a monthly principle and interest payment for 2-5 years whereupon the relative would have to get financing from a bank to pay my father a final balloon payment. In the meantime, the economic downturn hit, and relative could not afford the payment so stopped paying the full amount and paid what he could afford - this amount did not even cover the interest portion of the payment. Right now, relative wants to give title of the house over to my father and pay the piddly "rent" payment. Father would never evict relative. Relative is now married and has a little better economic situation. Father wants relative to title the house over to his children (my siblings and I) for estate planning purposes. Siblings and I do not want this "asset". I would rather the relative get a bank loan for whatever payment he can afford and pay my father whatever the amount is that he could borrow. Father will lose money but, since nobody would ever evict the relative and sell this house, at least he'd get something back. How can the relative go about getting this loan? What documents would he have to show about the one he currently has with my father? The original loan was for $175,000 but I think he could afford a 30 year loan payment for a 125,000 mortgage. Getting $125,000 back would be better for my family than having this perpetual unusable asset and the stress that goes along with worrying about it and the responsibility. Can anybody come up with a legal and moral way of the relative being qualified for a bank loan? He really could afford this lower payment spread over 30 years. I don't want his current payment history to prevent him from being able to get the bank loan. Could my father "buy back" the house (not foreclose), show his "rent" payments (although Dad has not been claiming anything related to this situation on his taxes -tiny "rent" payments were in cash - since the relative stopped paying the regular payment), and Dad sell house back to relative? Any other ideas?

[disneysteve]

Father would never evict relative.

Exactly the reason that you should never do business with family.

I don't want his current payment history to prevent him from being able to get the bank loan.

Unless your father has been reporting the payments to the credit bureaus, his failure to pay thus far wouldn't show up against him. It shouldn't affect his ability to get a loan, assuming he otherwise qualifies.

[frugalgirl]

Exactly the reason that you should never do business with family.

...exactly what I begged my father not to do for that very reason....

Unless your father has been reporting the payments to the credit bureaus, his failure to pay thus far wouldn't show up against him. It shouldn't affect his ability to get a loan, assuming he otherwise qualifies.

For this refinance, anyone know what sort of paperwork/payment history, if any, the bank would require from my father?

[snshijuptr]

I think the easiest thing would be for your father to sell the house to the relative. It's not a refinance even if the buyer is currently occupying the residence.

[MonkeyMama]

Father wants relative to title the house over to his children (my siblings and I) for estate planning purposes. Siblings and I do not want this "asset".

Ugh. Ain't that the truth? At least you guys are wise.

I don't have any advice, but just had to comment on that.