Sticky Situations: Bankrupt Mortgage Lender and a $10,000 Engagement Ring

Readers ask Mary questions about unusual financial situations. Levon Avagyan/Shutterstock

Dear Mary: I just read that the company that holds my home mortgage is under investigation by the feds and has a net worth of negative $63 million. This company holds the title to my house. If it goes into bankruptcy, am I at risk of losing my home, even though I’ve never been late on my payments? I don’t want to refinance with another company, because I am locked in at a great rate for the life of the loan and refinancing would cost a lot of money.—Angela

Dear Angela: From what you’ve told me, I don’t think you have a thing to worry about. I do believe you have stated incorrectly that the lender holds title to your home. I am quite certain the title is in your name, with the lender having a lien on the property secured by a note and deed of trust.

That said, the fact that your lender may be going bankrupt should not affect you at all. Your loan would likely be sold off or assumed by another lender subject to the terms and conditions you agreed to when you signed it—terms that will not change. You have a legally binding contract that not only obligates you but also protects you.

I caution you to watch your mail closely and be wary—even suspicious—of anything you receive regarding this matter that does not come from your current lender. It will send you a directive about where to send your payments in the future and who will be servicing your mortgage. These days there are crooks who prey on the vulnerable and take advantage of people who are facing unfamiliar yet public situations. I predict that at the very worst you will receive a letter instructing you to send your payments to a new address.

Should you receive anything more than that, make sure you speak with an attorney or real estate professional you trust.

Dear Mary: My father, age 85, bought a $10,000 engagement ring for a lady he intended to marry but never did because he became sick and then passed away. Up to the very end, he was certain that they were going to get married. I’m sorry to say my siblings and I were not crazy about the woman, especially the more we got to know her. And, no one can replace or take the place of my mom, who passed away two years before he did. Would it be customary for her to keep the ring?—Diane

Dear Diane: That is a very sad story, and I am so sorry. As for the engagement ring, there is no single law or rule; however, in cases where the promise was made (engagement) but did not end in marriage, courts have ruled that the one who paid for the ring was entitled to have it because a promise made was never consummated. However, your situation seems to be different. In a very morbid sense, it was your father who could not keep his promise to marry.

I suppose that in the worst case ever, you could sue for the ring to be returned to his estate. But I cannot even imagine it coming to that—let alone a judge finding for the plaintiff.

This woman’s possession of the ring and the circumstances would more than likely convey ownership to her. She could sell the ring or give it away, both of which would indicate ownership. Taking this to small claims court would be one for reality TV, perhaps.

My advice is to see this as a gift your father gave to his intended and a relationship that brought him great happiness, not one that could have ever replaced your mother. That he died before they could be wed must have been heartbreaking for all of you—including his fiancée.