Partial Payment Doesn’t Cancel Foreclosure
Question: After our parents passed away two years ago, my sister and I became the owners of their home in Sunnyslope worth $280,000. My sister wanted to live in the home, so I deeded the home to her in exchange for her giving me a five-year $140,000 mortgage on the home. In addition to the monthly mortgage payments, my sister was to pay the property taxes and the homeowner’s insurance. My sister has never made one mortgage payment to me, and I have been paying the property taxes and the homeowner’s insurance. I finally hired an attorney to do a foreclosure, and the foreclosure sale is scheduled in three months. My sister doesn’t want to lose the home to foreclosure, and she says that her boyfriend can qualify for a new loan. In addition, while he is qualifying for a new loan, her boyfriend will pay me $10,000 cash now to apply to the back rent payments as a show of good faith. If I accept the $10,000 cash, what happens if the boyfriend can’t qualify a new loan? Will I have to start all over again with the foreclosure process?
Answer: The general rule is that, after a foreclosure sale has been scheduled, the acceptance of a partial payment will not cancel the foreclosure sale. Most mortgage lenders will not accept partial payments, however, because of the risk that the borrower will claim that there was an agreement to cancel the foreclosure sale. Therefore, if you do accept the $10,000 payment, you should confirm in writing with your sister and her boyfriend that you are not cancelling the foreclosure sale.