BFF property to rescue!

[Alan Dolling]

Hi there, this is an off topic subject, and need the input/feedback of the  brilliant minds of this community.  My bff had defaulted mortgage payments (90days) now and can not take out cash out refi because of the current “bunkcruptcy” status of credit due to previous divorce and currently also bff lost a job, but looking to get hired again.  Property’s 1st and 2nd liens total $380K and property current value is at $1.1M (North California).  Homeowner was advised by one of the lender that can take out HELoan but must have someone with solid credit score sign up for it, and that could be us. Question for this community is how can we, our credit be protected if bff “hypothetically” can not continue paying mortgage, and might default again? Highly unlikely knowing bff, but just in case that scenario happens, what can we do to prevent our credit go down the mud as well?  
I also have an idea that would it be a good idea to convince bff if we do the “subject to” for now? We will assume the loan through “subject to” then once it’s on our name we will do refinance and then once bff’s financial status is solid, we will sell back the property to bff, is this legal? We hope so, but we don’t know.  May be some of you or any of you had experienced on this, so would appreciate your input.  
If you have better suggestion/s, to help bff Mom and son won’t lost the only asset they have please help us. Let us know all and options we have to save this property for them.    We are eager to help this single Mom and son, but we would like to do it with caution as well because we also have family/children to protect,  by keeping our finances in order.  
Thank you and Happy Holidays! 

[Greg Scott]

While your heart is in the right place, this sounds like the recipe for destruction of a friendship. 

If you hope to salvage this friendship and not get caught in quicksand yourself, I would make the deal as clean and simple as possible. 

I'd recommend making it a loan, secured by the house in 3rd position, with no monthly payments and a 5 year balloon.  (Hopefully you have a good chunk of cash to loan.) Five years should be plenty of time for your friend to get his feet underneath him and either pay you back, refinance all mortgages, or get another loan to retire yours.  Doing things this way will not destroy your credit. Since you are not expecting any payments, you won't get angry at your friend if he doesn't.  However, if your friend fails to pay you off in 5 years, he wasn't your friend anyway and you will eventually get your money back, even if it is only when he sells.