Q: My brother cosigned on my mortgage application two years ago because my husband was unemployed and my income was slightly below the level required for the mortgage. The formula used to determine my eligibility for the loan indicated my income was 2 percent short of qualifying for the loan. On the advice of my real estate agent, my brother agreed to cosign the loan, so that his income would help us qualify.

Since this happened, my brother has married and would like to buy a home of his own. However, his mortgage lender has indicated that since he is obligated on my loan, he cannot qualify. My husband is working now, and our income has risen considerably in the past two years. I have written to our lender, and they are refusing to free my brother of the legal responsibilities of our note. Is there any way out of this dilemma?

A: Lenders have traditionally and consistently taken the position that once a person signs his name to a promissory note, that person will continue to be legally obligated until the note is paid in full. This position by mortgage lenders often creates difficult situations, such as your brother is now facing.

Indeed, this situation often arises when a husband and wife are getting a divorce and the house is going to one of the parties. Although the lender may have no objection to the transfer, he still will take the position that both husband and wife continue to be legally obligated under the original note.

From the lender's point of view, there is merit in this position. The lender relied on the original application for a mortgage loan, which in your case was supplemented by your brother's income. Indeed, it was your brother's income that clinched the loan approval. The lender looks not only to the security of the property, but the ability of all of the borrowers to make the monthly payments. Despite the fact that your brother has never participated in making the monthly payments, he is potentially liable--in the event you and your husband are unable to continue to make the monthly mortgage payments.

When a person cosigns a note--whether this involves a mortgage loan--or any other consumer transaction, for that matter--he should be totally aware of the consequences of his signature. If the lender is not paid, the lender has the absolute legal right to look to the cosigner for payment. In fact, the lender has the right even to sue the cosigner and obtain a judgment in the event of non-payment.

From the consumer's point of view, however, the position taken by your lender currently makes no sense. You have indicated that for the last two years you have been current on your monthly payments.

In additional, your income has gone up considerably. I suspect also that your house has appreciated somewhat in the last two years.

Under these circumstances, you should make an effort to convince your lender to give you a break and remove your brother from the liability. Don't deal with a junior level loan officer at your mortgage company, but go directly to the president or senior loan officer. Make an appointment and discuss this matter with them directly.

I cannot guarantee that your lender will be sympathetic. They may feel (for their own reasons) that they must adhere to their traditional concepts.

If the lender insists on keeping your brother on the loan, there is one other possible solution. Send a letter to your brother's potential lender, explaining the situation. Point out that while your brother is legally obligated on your note, it is only a contingent liability. Tell the potential lender all of the facts involved in the transaction including the reason why your brother originally had to join you in your loan. Point out that your income has increased, that you have been current each and every month on your mortage loan, and that your brother has not contributed anything to that transaction.

Such a letter, carefully drafted, may convince your brother's potential mortgage lender that his liability is only contingent--and the chances are small that your brother will be called upon to assist you under his cosignature obigation.

I have seen this technique used successfully in the past, especially where the mortage lender is willing to add a little human understanding to the traditional mortage concepts.