[WSBAPT] Does a Deed of Trust or Foreclosure affect the use of a Quit Claim Deed?

[Eric Reutter]

Hi all,

Potential client owns half-interest in a property that she would like to
transfer via quit claim deed to the other half-owner of the property, the
ex-spouse (pursuant to the terms of a divorce decree).

This seems simple enough, but there may be an added layer of complexity
here.

There is a mortgage on the property. Potential client, however, is not
subject to the mortgage loan, as the loan was always in the ex-spouse's
name. Potential client, however, did sign off on the Deed of Trust issued
to the bank when the mortgage was taken out on the property. To make
matters more interesting, the home is now being foreclosed upon, and
potential client wants to get her name off title and transfer the home
interest before the foreclosure (something she was going to do regardless
pursuant to the divorce decree).

This interesting fact pattern leads to following question:
*Can a grantor whose name is not on the mortgage use a quit claim deed to
transfer her interest in the property, regardless of the fact that she
executed a Deed of Trust and regardless of the fact that the home is being
foreclosed upon?*

My initial thought is that the potential client can go ahead and transfer
via the quit claim deed, since she does not have to worry about the "due on
sale" clause that normally affects properties with mortgages (her name is
not on the loan documents), she is not warranting that the property
interest is not subject to foreclosure (it is a quit claim deed and the
person receiving the interest is the one who is delinquent on the loan),
and since she is required by the divorce decree to transfer the home
interest.

The foreclosure proceedings add a layer of complexity that I want to be
sure I understand, and it has been a while since I dealt with issues of
equitable title vs. legal title, so I wanted to bring this issue to the
listserv.

Any input or thoughts are greatly appreciated!

*Eric Reutter, *Partner
*J.D., LL.M. Taxation*
14205 SE 36th Street, Suite 100
Bellevue, WA 98006
*(425) 298-7110* | *appelgatereutter.com <http://appelgatereutter.com/> *



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