Government Lien in County - Possible Foreclosure if Discovered/Avoidance?

Question

My lender just discovered a lien filed in 2019 against my husband in the county where I reside.  When I applied to consolidate my first and second mortgages with a new mortgage through a new lender, I applied alone but they wanted my husband on the loan/title of the property.  The title company obviously didn't do their due diligence if they had me sign a quitclaim deed over to myself and my husband to add him to the title in December of 2022.

Now that the lender discovered a judgment/lien against my husband and any personal property in the county, which he was unaware of, they are saying he lied on the application that they completed and sent over via docusign to add him to the loan.  All he did was sign the document per their request.

The lender's attorneys froze all my accounts (savings/checking/heloc - a total of approximately $350k in all) and sent me a letter stating I am in defauilt as of April 6, 2023.

I hired an attorney that says I can't file another quitclaim deed with myself and my husband putting the property back into my name alone, as it was before, that the lien would attach to the property no matter what.  Yes, it was filed in the county, but nothing was filed against the property. In the property records, there is only a deed of trust for the first and second mortgage.

I'm wondering if we can both sign a quitclaim deed over to a land trust directly, or if we can sign one back to me and then I can sign a land trust assigning an LLC established in Wyoming for privacy purposes as the trustee (and perhaps another LLC as the beneficiary of the trust).  I own other LLCs in Colorado but they have my name on them. I can establish another LLC in Wyoming if need be.  My attorney says no, but why can't it be that simple, to take him off of the title with a simple quitclaim deed that I can file in minutes rather than destroy my credit and take all my money?

Any thoughts or suggestions would be appreciated ;-)

Wayne Brooks · Answer

@Suzanne B. Assuming the lien is legitimate, actually against your husband And valid…..yes, it attached to your house the moment you recorded the QCD with his name on it.  Trying to QCD back or title in any other trust/name does nothing to change this.

Linda Weygant · Answer

I'd just work on clearing up the lien and tell the bank that.  Tell them neither of you was aware of it.  Ask for some period of time to work it out (30 -90 days would not be an unreasonable request).  Then get to work on figuring out who filed it, for what and when.  Either dispute the debt or pay it.

Kevin Sobilo · Answer

@Suzanne B., sounds like when you quit claimed the property the general lien against your husband attached to the property BEFORE the new mortgage. So, you are in default for the mortgage because you guaranteed them 1st lien position and they do not have first lien position.

Pay off the judgement lien OR negotiate the judgement lien. If this is a primary residence, the judgement lien may not be able to foreclose on a primary residence depending on your state's laws. So, they may still negotiate a lower payoff. Once that lien is satisfied your new mortgage will be in 1st position and then all should be right with the world.

I would also investigate what protections title insurance might provide in a situation like this. Did you get new title policy as part of this refi?

Also, investigate how your husband didn't know about this? Was it a default judgement? Was he properly served? If not, can be still appeal?

Tom Gimer · Answer

Colorado does not recognize TbyE... by statute. So unfortunately the judgment attached to the property regardless of the tenancy stated (or even if no tenancy was stated).

Jerry W. · Answer

@Suzanne B. there is a lot going on and the laws of the state you reside in will control.  I cannot tell what state you are so these are generalizations.  First a judgement recorded in the county normally acts as a lien on all property in the county.  Once the lien is attached transferring title will not remove it and will probably make it worse.  It varies from state to state but if a lawyer drafted the Quitclaim deed it should have said tenants by the entireties as the form of ownership.  I would consider it malpractice to not make a deed to a husband and wife as tenants by the entireties.  What this means is that unless both of you owe the debt they cannot attach the property under normal conditions.  In my state that would not be a breach of of the mortgage.  Some states recognize tenants by the entireties but limit the dollar amount that is exempt.  Have your attorney look at it.  Banks normally have a clause that allows them to attach all accounts you have with them in case of default, some even for anticipated default at their discretion.  That does not mean that the bank might not be acting in good faith and could possibly be liable for that.  I would check into the ownership by the tenants by the entireties as soon as possible.

Patricia Steiner · Answer

Stop!  Quit Claiming to avoid liability is the stuff that gets labeled fraud very quickly.  You could go from having the lien to contend with to something far worse coming your way.  Fix/negotiate/fight/settle the lien.  That is your course of action as I'm sure your attorney told you.  Your husband incurred the lien so instead of trying to circumvent it, have him go after it full force.  Again, I've seen the quit claiming events to avoid everything from liens to foreclosures and they very quickly get pegged as a fraud event.  Don't make things even more exciting than they are now.

Suzanne B. · Answer

@Jerry W.Forgive my confusion. We quitclaimed it to my LLC as trustee of our trust, and that may make it worse? Should we record another quitclaim back to both of us as tenants by the entireties?  We reside in Colorado.  Thank you Jerry!

Government Lien in County - Possible Foreclosure if Discovered/Avoidance?

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