How can my mom protect her house from going into foreclosure?

In a situation where your mom signed a loan for a house for your sister and brother in law and is the only one on the loan she can protect other property that she owns by filing a homestead declaration.

Your mother is a long way from losing her house, but she does have some exposure. If sisters house is foreclosed, mother could be liable for any deficiency.

It is very unlikely but not impossible for one foreclosure to create a lien and a foreclosure on another property. As I understand it there is no foreclosure process started on either home. The best thing to do is to put your sister's home on the market and present it well enough to get a sale that would satisfy the loan or work out a short sale with the bank. The only way your mom would lose her home is if the sister's home was foreclosed on and sold through a foreclosure sale for much less than what was owed and then the bank got a judgment against your mom for the deficiency and put a lien on her home. If they were aggressive enough they could then force a foreclosure on her home but she would still be entitled to her homestead exemption.

I already responded to you that your sister could file a bankruptcy to stop the foreclosure and your mother needs to meet with me to discuss asset protection. I am happy to discuss the issue with you.

The good news is that if your mother is only on the loan secured by the first mortgage and it is the holder of the first mortgage that is foreclosing, then your mother will not have to worry about owing anything to the bank after the foreclosure. In California when a bank forecloses using a Trustee's Sale non-judicial foreclosure (which is the way foreclosures are done in California in 99+% of the cases) then there is no deficiency owed the bank. This is called the "one action rule" and it means the bank cannot try to collect the loss from the property owner who signed the note secured by the first mortgage. However, if your mother is on the note secured by a second or junior mortgage then that would be a problem and she needs to consult with a lawyer to see if she would be liable on the second note if the the holder of the first mortgage forecloses. Most likely your mother is only on the note secured by the first mortgage and it is the bank holding that mortgage that is foreclosing but you need to sure of the facts. Even if your mother would not owe any money to the back after the foreclosure, it is likely that she will get a 1099-C and might have to pay taxes for the amount of the loan was that was not paid. If she gets a 1099-C after the foreclosure (in a few months) then she needs to see a tax specialist (attorney, CPA or IRS enrolled agent) about what can be done so that she does not have to pay income taxes on "debt cancellation" income (which is the amount of the loan that was not paid).

When a person co-signs they are promising to pay for someone the bank believed could not pay. I assume she read the papers and knew the risk. No one should ever co-sign debts they don't plan to pay. Your mom has created a catastrophe that may have no solution. If there is a foreclosure, the bank can get a default judgment against your mom and that judgment will become a lien on her home. If she can work out a deal to make the payments on the other home, that may help. In Georgia a bankruptcy will not, as they will sell her home then too. Other deals may be possible. She needs to immediately retain a lawyer to see if she can cut some deal with the lender. Otherwise, she is seriously at risk of losing her home. This is a ticking time bomb that is an emergency. It may or may not have a solution, but if there is one, delay will eliminate it. She needs a lawyer today and needs to hire one regardless of cost.

There was a similar question recently. Was it you? Your mom should pay her own house first. If they can get your sister's house brought up to date afterwards, then great. Or your Mom could file Ch. 13 to pay arrearage or Ch. 7 so she doesn't get charged with taxes on the arrearage. I can't emphasize enough that, where it looks like a choice must be made, it must be to pay off your mother's house since she's so close to payoff. If this still doesn't answer your querstion,

Your mother is responsible for the loan on your sister's home. If the loan defaults and they home is foreclosed, any deficiency remaining can be collected from the parties on the contract. If the deficiency remains unpaid, and the lender files a lawsuit to collect, the judgment can attached to Mom's house until paid. If unpaid, the lender can eventually execute on the judgment by attempting to sell the home to get paid. In Utah, if a transfer is made to any other party without compensation, the transfer is considered a transfer without adequate value or a "fraudulent transfer" and can be un-transferred with a four year look back period. A Chapter 13 may protect mom's home, but 100% of any deficiency would probably be required to be paid due to the value of her home.