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Home loans and divorce
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Old 08-05-2018, 03:02 PM
bankworking bankworking is offline
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Join Date: Feb 2009
Posts: 669
Default Home loans and divorce

I have had a rash of customers trying to get a home equity loan while in process of a divorce. For a couple, it is in order to pay the spouse for their half of the equity in the home. Or to refinance a mortgage in both names into just one.

But for whatever reason, the customers seem to fail to realize that maybe they should talk to their attorney before rushing in and just doing it.

Case in point:

SC and Spouse are getting a divorce.

SC is getting the house and is going to be required to (try) to refinance the mortgage into his name. (A divorce decree can require you to make the attempt, but no bank has to agree that you have the credit worthy of giving the new mortgage to... but that is a different issue.)

SC decided to apply for amount needed to take over mortgage plus $cash out for extra stuff. Gets pre-approved. I, personally, go over the whole fact that Spouse will need to sign at closing to agree to the loan even though she's not on it, and the whole, our home equity loans do NOT involve changes to the deed, so you want her off the deed that is a separate issue to be dealt with by your attorneys or a title company.

We get all the way to closing.

SC: I have to have Spouse sign? But she's not on the loan.

Yes, well she is on the deed with you. (though in my state that doesn't matter, she'd need to sign anyway, but being on the deed makes it doubly the case).

SC: I don't want her to know how much the loan is for.

Too bad. She currently co-owns the property. She has to agree to the mortgage. The mortgage includes the amount being mortgaged against the house, go figure.

SC: Okay, okay, she's agreed to sign, but we can't be in the same room together.

That is not a problem. Separate signings are practically the standard for divorce cases.

So, we get to signing date and Spouse comes in first... and decides she doesn't want to sign before her attorney looks over everything. This is understandable (though there IS a 3-day right to cancel specifically to allow you time to run the documents by an attorney even after signing). But we will need to reschedule the closing appointment.

So, send copy of the pertinent documents with Spouse, and Spouse's attorney looks them over, calls for clarification that she is definitely NOT being asked to sign anything that would make her liable for the loan (you're an attorney, can't you read the documents in hand... but sure, I can reassure you of that. We need her to allow the house to be used as security. She is NOT signing the loan). Finally, Spouse's attorney agrees that everything seems in order, and she can sign, so we re-schedule the closing appointment.

Get a call from SC's attorney stating he knew nothing about this loan and that we should NOT proceed. Call SC to figure out what's going on (I have no permission to talk to SCs attorney)

SC: Oh yeah, my attorney told me that I shouldn't be doing a refinance right now, so I'm going to have to cancel.

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  #2  
Old 08-06-2018, 12:01 AM
Pixelated Pixelated is offline
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Join Date: Oct 2016
Location: Bookholm
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And, of course, when SC's lawyer does decide to okay a refinance, it'll need to be done yesterday ...
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