Legal Ease by
Shane Givens
March 30, 2011
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Mortgages and marriages One recent question involved a divorced woman who was wondering about her mortgage: “Shane, I was just divorced and my husband got the house along with the mortgage payment. In the divorce, it is his responsibility to pay the mortgage. If he doesn't, am I still liable for payment?” I call this “divorcing the mortgage.” This situation comes up frequently in divorces. Most times, a married couple that has a home together also has a promissory note and mortgage on their home. In many if not all of these situations, both husband and wife have signed both the note and the mortgage. (In fact, in Alabama both husband and wife are required to sign the mortgage if it involves their primary marital residence.) Where divorce is involved, usually one party gets primary possession of the marital residence. So, what happens to the note and mortgage that both parties signed? Usually nothing. In order for a person's named to be removed from the mortgage, the party who owns the home after the divorce usually must get it refinanced. More times than not, the divorced owner cannot refinance the house, especially in today's economy. When the divorced homeowner can't refinance, then the non-owner is stuck on the note and mortgage. When I tell people this, they usually reply, “But the court order says he is responsible.” The court, however, has no authority to require that the lender remove someone's name from the note. In fact, it's a safe bet that the lender would have plenty to say if the court attempted to remove someone from the mortgage who willingly signed it (thereby agreeing to be liable for payment) to begin with. One potential way around this problem is to try and incorporate some sort of “indemnity clause” into the divorce agreement or final order. This is a legal agreement where one party agrees (or is required) to compensate the other for losses incurred in certain lawsuits. Applied to the “divorcing the mortgage” situation described above, this would mean the husband would pay back the wife for losses incurred from his inability to remove her name from the mortgage. This option has problems, however, because many times if the husband can't pay the mortgage, he can't pay the wife back if the lender sues her and wins. Another option is to agree to some sort of timeframe in which the husband has to refinance the home. For example, the divorce order or agreement could say that the husband has 90 days to refinance. If he were unable to refinance within that window, then the agreement or order could require that the house be sold and the mortgage satisfied from the sale. However, this option may also pose problems, especially if the house does not sell for enough to satisfy the mortgage. This column is intended for general information purposes only. The answers to most legal problems rely on specific facts of a particular situation; therefore, it is very important to see a lawyer when these situations arise. Please e-mail questions for future columns to givenslaw@tds.net. |