There are a lot of bad ideas and disinformation floating around in regards to transferring title to a property to stop foreclosure. It seems like such a simple solution on its face: transfer the property to someone else's name and the bank will suddenly find itself foreclosing on a property that is no longer owned by the original homeowners paying the mortgage. Some sources even recommend this tactic to foreclosure victims for the purpose of saving the home or avoiding the damaging effects of foreclosure on one's credit. But this solution will not result in any beneficial situation for homeowners and can actually put them in a worse situation.

When a homeowner in foreclosure transfers ownership of the property, they lose control of the house. They give the legal rights to the property away, and can not sell the house, refinance it, or even give the lender a deed in lieu of foreclosure. Many of the options to avoid foreclosure are unavailable once the foreclosure victims no longer own the house, unless they get permission from the new owner for whatever plan they decide to work on. Retaining ownership of the property for as long as it is in foreclosure is a vital part of retaining control of what happens during the foreclosure process.

Even though a homeowner can transfer ownership of the property, though, there is no way to transfer responsibility for paying the mortgage. Homeowners who do this will find that they no longer control a property that they still have a loan on, and that the loan is still in default and that the lender is still suing them to take the property. Transferring ownership does not affect the responsibility to find a solution to foreclosure, as it does not affect the homeowners who promised to pay back the mortgage loan. Some mortgages will allow a third party to assume the loan, but this still requires approval by the mortgage company and will not stop foreclosure unless the new party becomes current on the loan by paying the defaulted amount.

Transferring ownership would also not affect the bank's ability to sue for a deficiency judgment. Mortgage companies will sue the debtor on the loan, rather than the owners of the property, so they will come after the parties signed on the mortgage in the unlikely event of a deficiency judgment. However, it is important to keep in mind that banks rarely sue for deficiency judgments, because they know that homeowners in foreclosure do not have a lot of extra cash to pay another judgment. In fact, suing former homeowners often costs the bank too much in terms of time and court fees, and they have already experienced a loss on the sheriff sale of the property (which creates the deficiency in the first place). It is simply not worth their time to attempt pursuing more money they will not be able to collect.

One final danger of transferring ownership of a property in foreclosure arises when foreclosure scam operators persuade unsuspecting homeowners to transfer the title. They convince homeowners that transferring ownership will stop the foreclosure, and the former foreclosure victims will be able to start making payments to the scammer, until they have repaired their credit and can refinance. Too often, though, these schemes result in homeowners paying "rent" to the scam operator while the bank is still pursuing the foreclosure, wasting thousands of dollars on a solution that they thought was legitimate. The foreclosure scam will collect the payments until the homeowners are evicted, never using the money for any purpose beyond their own personal uses, and move on to another family facing the loss of their homes.

It is almost never a good idea to transfer ownership of a property while facing foreclosure. Unless the property is being outright sold, either through a conventional sale or a short sale, homeowners need to retain the most control of the property that they possibly can. Signing over the deed to anyone precludes a number of solutions that may be used to stop foreclosure, and transferring ownership can make homeowners easy victims to predators. Gaining as much foreclosure advice as possible will help homeowners understand when, if ever, to consider transferring ownership of their property and if they are becoming the potential victim of a foreclosure scam. As a general rule, though, foreclosure victims need as much control as possible in order to come up with the best solution to save their homes.

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