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CitiMortgage, Inc. v. Rosado

C-161-12 (N.J. Super. Ch. Div. 2011) (Unpublished)

FRAUD; DEEDS — A deed will be invalidated as fraudulent if the court finds “badges of fraud,” such a transfer to an obvious, trusted insider, for no consideration where payments were never made by the transferee under an “alleged” mortgage and where the transferee remains in possession of the property.

A couple borrowed money in the husband’s name to refinance their home, solely owned by him. The loan was secured by a mortgage. When the husband learned that the mortgage was not recorded, he was advised to transfer the property to a family member, take back a mortgage, and record the mortgage. He testified that when he learned this information he felt as though he “won the lottery.” The husband transferred the property to his son. The son did not sign a note, did not live on the property, and his parents did not pay him rent.

The lender sought to invalidate the deed and the take-back mortgage. The Court found that the father’s conveyance to his son illustrated several badges of fraud. For one, the couple continued to live at the property. Their son, an obvious trusted insider, did not pay consideration and never made mortgage payments to his father under the alleged mortgage. The property was transferred only after the father learned that the earlier mortgage had not been recorded. For those reasons, the Court concluded that the father had transferred the property to his son with an actual intent to hinder, delay or avoid the lender’s foreclosure proceeding and to defraud the lender. To it, no other inference could be drawn from the facts except that the transfer was designed to frustrate the lender. Thus, the Court invalidated the deed to the son and invalidated the take-back mortgage.

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