What is my daughter's recourse if she does not want to sign the loan modification? 4 Answers as of October 28, 2011

Well, she still owes the debt. If he loses it to foreclosure it will be reported on her credit. It is in her best interests to help him get the loan modification so he does not lose the house.

She doesnt have to sign a loan modification if she is okay with the property being foreclosed. However, having the loan modification approved may actually help her credit if her husband is able to make the future payments on time, because her name is still on the loan.

If she does not sign then he does not get the loan modification and will end up losing the house probably. There is really no additional risk in her signing the loan modification agreement since she is already on the loan and there is no deficiency in California upon foreclosure by trustee's sale so no additional risk to her. She does not need to sign but there is no reason I can see for her not to sign. It will just be harming him and I see no benefit to her so their relationship will get worse and if they have kids then that not good for the family. Again, I see no reason why she should not help him out and sign it. She should probably see a lawyer and go through it with all the details because there might be other facts that I don't have so this is certainly not advice.

Your daughter should have required that she be removed from liability on the loan during the divorce proceeding. If she was taken off title to the house then the judgment should also have required that the house be refinanced or sold. She should discuss this with her family law lawyer. She is currently liable for the loan, and since it is not her residence (I presume) she will not be able to claim the shelter of the anti-deficiency law should the house be foreclosed and the lender not realize the full amount of the loan when it is resold. This situation will continue if she signs the loan modification, but I assume that the house is more likely to be foreclosed if the loan modification does not go through than if it does. Should foreclosure occur and a deficiency be asserted against her by the lender, her option is to file bankruptcy to discharge the deficiency.