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Recently the Denver Post had an article about a couple that sued to stop the foreclosure proceedings on a home they co-signed since the bank that began the foreclosure was not the bank that was on the deed for the property and there was no paperwork showing this bank had anything to do with the loan.  Here is the link to the article.  http://denver.yourhub.com/CastleRock/Stories/News/Law/Story~488017.aspx

When reading this article I thought about the common practice of banks selling off their loans to investors so who really does hold the note can change almost daily (or was the case a few months ago).  I wonder if this type of lawsuit will be seen more often as people continue to face foreclosure and how will the banking and investment community deal with the lawsuits?  Should be an interesting thing to watch play out in the next few months.

The other thing that struck me about this article is that the people that sued were co-signers for their daughter and son-in-law.  The Father didn't want to co-sign in the first place.  The people have admitted that the mortgage hasn't been paid so whoever holds the note does have the right to foreclose and I am sure once they figure out who owns the note this will take place.

The problem with co-signing for someone even a family member is you don't know what the future holds.  In this case the daughter and son-in-law decided to divorce, but it could have been a job loss, bad financial managment or medical reasons that caused the people to stop paying their mortgage.  So now Mom and Dad are responsible for the house and their credit is now taking a hit showing no payments on a mortgage.

I think that if someone needs a co-signer for a home loan they probably can't afford the house to begin with.  It is always nice to want to help your kids but at the same time you need to protect you financial security and credit history as well.  You are better off giving a lump sum to help with the downpayment then co-signing.  If you don't have access to a lump sum then can you really afford 2 house payments?  That is basically the burden you are taking on or agreeing to take on when you co-sign.  It is something I wouldn't do and I would have a very long conversation with my financial advisor before even considering taking that option.