Divorce and Mortgages... - Posted by Jennifer(NH)

Posted by JPiper on March 03, 1999 at 10:06:39:

Competent divorce attorneys allow this to happen all the time…it seems to be the rule rather than the exception. See my post above for what could have been done.

Your attempt to buy the note is a good solution if you can get the lender to play ball. The problem is how you get the money necessary to purchase the loan. You might be able to attract some private investors, agreeing to repay them quickly with the proceeds from a sale of the property after your foreclosure, or from the proceeds of a new loan once you own the property after a foreclosure. Obviously you would need to create a financial incentive for the private investor…something to make it worth his while.

Chances are high if this is a first mortgage you won’t be able to buy at a discount. It’s even possible they won’t sell at any price…institutions sometimes make stupid decisions.

I’d check the divorce agreement. Sometimes language is in there making the owner spouse responsible for the loan. You might be able to sue under this clause…but if the spouse has no money or assets in particular, this is probably a waste of time and money.

Good luck with your situation.

JPiper

Divorce and Mortgages… - Posted by Jennifer(NH)

Posted by Jennifer(NH) on March 02, 1999 at 11:10:16:

About 6 months ago I posted a question regarding how to help a divorced friend save her credit as she had deeded her interest in their house to her ex-husband while her name remained on the mortgage and the exhusband stopped making payments and the house was in foreclosure. JPiper offered some wonderful advice on what she should have done prior to the divorce. I was wondering if anyone remembers and has a copy of that old post or remembers what exactly what the advice was again.

The two things I remember are…

1.) To have the ex-spouse remaining in the house refinance the house into their own name thus getting the other spouse off the mortgage.
2.) If the ex-spouse’s name, the one not living in the house, remains on the mortgage then that spouse records a performance mortgage protecting their interest. That way if the spouse in the house fails to keep the mortgage up to date, the other spouse can bring the first mortgage up to date and foreclose on the ex-spouse thus protecting their interest and credit.

Thanks Jennifer

Re: Divorce and Mortgages… - Posted by JPiper

Posted by JPiper on March 03, 1999 at 09:55:52:

Hi Jennifer:

Sorry, I don’t keep a copy of my posts?.but I vaguely remember the post?.and you’ve got the basic gist of it.

What I see a lot of in divorces is that one spouse quit claims their ownership interest in the family house to the other spouse, as a part of the divorce settlement. Meanwhile BOTH spouses remain on the loan. Chances are high that the spouse holding ownership of the property is unable to get new financing, or obtain a release of liability from the lender.

Later, the spouse holding the property runs into financial difficulties, or becomes unwilling to make payments, etc. The spouse who had quit claimed his/her ownership now has no way to protect himself/herself. Delinquent payments show on both credit reports. The non-owner spouse cannot make the payments for the owner spouse to stop delinquency because they have no way of assuring repayment, and by definition have no ownership interest. This would be like me paying your house payment. A foreclosure will impact both as well.

Prior to the divorce what could have been done, if the attorneys were knowledgeable, is that the attorneys COULD have prepared either 1) a note secured by a deed of trust to be given to the non-owner spouse in return for executing the deed or 2) a performance mortgage/deed of trust. Now if the owner-spouse doesn’t make the payments, the non-owner spouse is able to 1) step forward and make the payment thus protecting his/her credit and stopping foreclosure 2) initiate a foreclosure action which would require either repayment of the advanced money by the owner spouse, or the non-owner spouse could recover the house through the foreclosure.

For obvious reasons this needs to be done during the divorce process, and before the non-owner spouse quit claims. If not, there is little incentive for the owner-spouse to consider the non-owner spouse’s wishes or needs. However, perhaps a good negotiator/communicator could make a few payments in return for such a document.

This is a relatively simple idea?.and yet it’s one that I rarely see employed by attorneys. Makes you wonder huh?

JPiper

Re: Divorce and Mortgages… - Posted by Carmen

Posted by Carmen on March 03, 1999 at 07:28:50:

I, too, would be very interested in this information - Jennifer, if you do get answers, would you mind sharing? My husband is in exactly that position (his name is off the deed, but he is still on the mortgage, and she periodically stops paying). She is also very hostile, cannot qualify for a refi even if she wanted to, and will do the exact opposite of anything we tell her, even if it hurts her. She has already stated that she would rather let the bank foreclose on the house than sell it, and we still have 20 years on the note! We have spoken to lawyer after lawyer, with no help. We are trying to buy the note right now, as we saw no other alternative, but if that doesn’t work, we’ve got to think of something to protect his credit. It’s too late for the “should haves” - I just can’t believe any competent divorce attorney would allow this situation to happen to their clients!

Re: Divorce and Mortgages… - Posted by Josephine(CA)

Posted by Josephine(CA) on March 14, 1999 at 19:41:18:

wish I knew this before my divorce.

The lesson costs me $27,000 and bruises on my credit report, even the house was saved from foreclosure. It was sold through a short sale.