If your name is not on the mortgage, but you are on the title or deed, your credit is not affected. The credit reporting bureaus only receive credit information on the original borrower. Even though you are not responsible for the mortgage, a foreclosure affects you too. If the bank takes back possession of the property, you lose interest in the home as well.
Mortgage Application
During the mortgage application process, the bank only recognizes the borrower or the person who signed the loan documents as being responsible for the mortgage. Therefore, if you were not part of the mortgage application process as a co-borrower, you have no financial responsibility to pay the mortgage.
Credit Report
Getting a mortgage generates a credit reporting event for the borrower. However, because you are not named as a co-borrower on the mortgage, this does not affect your credit report or credit score. Thus, a foreclosure shows up on the borrower's credit report and not on yours.
Quitclaim Deed
Even if the deed names you as having an interest in the property, you are not obligated to make the mortgage payments. However, a quitclaim deed transfers interest in the property to another party. As the grantor, the borrower must have the deed notarized and filed with county recorder's office. In many cases, a quitclaim deed requires refinancing the property into your name as the remaining owner on the property, making you responsible to pay the mortgage.
Community Property
If you live in one of the nine community property states, whether you signed loan documents or not, a quitclaim deed relinquishes your ownership rights to the property and your responsibility for the mortgage.
Consequence of Default
Even though you are under no financial obligation to make mortgage payments, you are at the mercy of the borrower. If the borrower defaults, the lender has the right to pursue a foreclosure option to recover its losses. Not only does the borrower lose his interest in the property, but you do as well. If a "power of sale" clause exists in the mortgage or deed of trust, the borrower essentially gives the bank permission to sell the home to avoid a judicial foreclosure process.
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