Maryland Lawyer Answers Common Divorce and Mortgage Questions
Do I still have to pay my mortgage after divorce?
Yes, if you have a mortgage you must continue to make payments after your divorce. This is one of the most common divorce and mortgage questions because many people mistakenly believe divorcing their partner negates their obligation to pay their mortgage.
Whatever the circumstance – whether the ex-spouse moves out of the house, keeps the house, stays in the house, or is supposed to pay everything, the mortgage must be paid.
The contract with the ex-spouse is not a contract with the lender. Your obligation to pay your mortgage is a contractual obligation with your lender. Unless your lender releases you of that obligation, you have to make sure that that mortgage is paid every month.
Regardless of who agrees to pay or is currently paying the mortgage for you, if it’s not paid, your credit is going to take a hit. Your lender is going to report your late or non-payments to the three big credit reporting bureaus, which will absolutely and adversely impact your credit rating. You will not be able to borrow money; if you are able, you’ll have significantly higher interest rates.
Transferring & Refinancing a Mortgage Post-Divorce
Can a joint mortgage be transferred to one person?
From a legal standpoint, yes, it is possible to transfer a joint mortgage to one person. However, from a practical standpoint, it is not.
Think of a mortgage or obligation to pay as a sort of noose. Lenders like to put as many necks (borrowers) as possible in the noose and pull it tight.
They know if something goes wrong, such as if the loan is not paid, the house is foreclosed upon, and they don’t get any money from the foreclosure, they will have recourse against the borrowers to obtain the deficiency. That is the difference between whatever they get out of the foreclosure proceeds and the unpaid loan balance, including all the costs of the foreclosure.
Knowing this, very few lenders will loosen the noose and free a borrower. Some have a process for borrowers to apply for relief or a partial release of one of the borrowers.
Although this is technically an option, it’s not practical, as the process takes so long that it’s hardly ever worth the trouble. The relief process always includes a reappraisal of the property and a reevaluation (re-underwriting) by the lender expressing whether or not the new loan and the security presented by that property would be good for them. From a practical standpoint, it just doesn’t happen.
How can I get my ex off the mortgage without refinancing?
Every situation is different, but this would most likely be a waste of your time, effort, and money. From a practical standpoint, it’s unlikely that your ex will be released from a mortgage in lieu of refinancing.
Other than in extreme situations where an astronomically wealthy person wants to take their ex off the mortgage, there will have to be a refinance.
Now, here’s something to consider: shortsightedness in the preparation of the Marital Settlement Agreement often causes these problems over mortgage releasing and refinancing.
For example, a Marital Settlement Agreement says that ex-spouse A stays in the home and pays the mortgage. The agreement also says that by a certain date, ex-spouse A has to refinance or otherwise get their ex-spouse off that mortgage.
The reality is that they will not get that ex-spouse off that mortgage. The lender will not agree, so they have no other option other than to refinance.
But when they go to refinance, they run into another issue – they don’t qualify for the loan. Either there’s not enough money, equity in the home, or income to meet underwriting guidelines to qualify for a large enough loan to pay off the existing loan, give their ex-spouse whatever their share is of the house value that was agreed upon, and pay the settlement expenses.
They’re stuck, and their ex-spouse wants the refinancing done. What happens next? The court appoints a person called a “trustee” and orders that trustee to sell the house. Maybe the house sells at a higher price, or maybe it sells at a foreclosure auction.
No matter what, a lot of money will be lost, and that outcome isn’t beneficial for anyone.
To prevent these issues, couples should deal with any shortsightedness in the Marital Separation Agreement ahead of time. Don’t assume that your lawyer knows everything about real estate; they are probably experts at the family law aspects, but real estate issues can materialize later and are horrible to deal with. However, Mr. Coover is well-versed in family law and real estate law.
Make sure you understand all the implications and intricacies of your agreement and you’ll be much better prepared.
What happens if my ex doesn’t pay the mortgage?
Unfortunately, this is another of the frequently asked divorce and mortgage questions. A common stipulation under the Marital Settlement Agreement is that one of the parties stays and the other party leaves.
Let’s imagine this scenario: the wife stays in the house for a while with the kids, and the husband is obligated to contribute or pay all or a portion of the expense of the mortgage for an extended period of time.
However, the wife receives a letter from the lender that the loan is in default – her husband didn’t follow through and failed to pay. What can the wife do in that situation?
If she’s on the mortgage and signed the lender’s promissory note, she’s jointly and severally liable, regardless of whether her husband is obligated to pay.
Because the lender wasn’t a party to that agreement, the lender can foreclose on that property. However, the reality is that the lender doesn’t really want to foreclose; in fact, they’ll likely do everything they can to prevent foreclosure.
But the fact remains: the lender has to turn a nonperforming loan – a liability – into an asset within certain time constraints.
In a situation where the spouse leaves the home but doesn’t pay, the spouse who stayed has resources in the form of a breach of contract – a breach of the Marital Settlement Agreement. It is also possible to obtain a court order for the spouse to pay the mortgage. If they fail to do so, they will be held in contempt of court, which can have serious repercussions.
Of course, neither party should threaten a court order, but this action can have tremendous leverage in convincing the non-paying spouse to follow the contract and pay.
In addition to ordering the other spouse to pay the mortgage, a circuit court judge can award attorney’s fees to the spouse who stayed and was not supposed to pay.
What happens if a house goes into foreclosure during a divorce?
Foreclosure during divorce is really no different than foreclosure during any other time.
Although some lenders may initiate the foreclosure process by filing with the court, the reality is that most lenders don’t want to sell the house at a foreclosure sale. In fact, lenders would rather have somebody live in a house and not pay the mortgage for a while than force them out or force them into foreclosure.
Chances are, the property wouldn’t sell for anything near what it’s worth, so to keep the home from being bought for nothing, the lender will buy it themselves at the foreclosure sale.
When a property is purchased this way, it’s known as “real estate owned” or “bank-owned.” That house is now a liability for the bank and not a secure one. That’s because a vacant house is a risk. These houses often burn down, or, more frequently, flood due to burst and frozen pipes.
All in all, follow this piece of advice: “Don’t ignore it.” Get professional answers for your divorce and mortgage questions right away. If your ex refuses to pay the mortgage, call Mr. Coover, an experienced Howard County family lawyer who will know how to proceed.
If you receive papers that your house is being foreclosed on, don’t ignore it. In these situations, you should be proactive and take the necessary steps to get your ex to pay what they agreed and keep your home.
Howard County Divorce and Family Law Attorney
Divorce is already tricky, but any of the above situations can make a stressful situation that much more difficult.
You shouldn’t work through these issues on your own. If your ex is trying to break their contract and avoid paying the mortgage, you need legal assistance to get them to comply. Don’t try to make a difficult situation simpler by yourself – most exes and lenders are all too eager to give you as little as possible.
For legal advice and representation, call Attorney Fred Coover at Coover Law Firm, your trusted Howard County divorce lawyer. He’ll answer all your divorce and mortgage questions and ensure the process goes smoothly. Call (410) 553-5042 today to schedule a consultation.