mortage assumpting and non approval clause

[sad1]

What is the name of your state (only U.S. law)? PA

My spouse is trying to assume the mortgage we have together. My lawyer is working on an agreement for if he is approved and also if he is not approved. The PLan B is that he must sell the house and take 100% of the loss from the sale if it happens. Does any one have experience in this sort of agreement. the only thing that makes me nervous is what if he doesn't? If a loss is taken on sale- I will still be on the mortgage. Also, what if he defaults? do you think this would cover me? my lawyer seems to think this is a legitimate way to go...but just wondered if anyone has done this before and the results.

 

[nextwife]

Is the lender willing to offer a "Release of Liability" on the mortgage, if assumed? An assumption alone does not provide that.

If the house is upside down, he probably CAN'T sell without either a short sale or cash to bring to closing to make up the difference. IF he can't sell due to being over-mortgaged and can't afford to stay, a foreclosure is the only other option, as some lenders will not allow short sales. Are you willing to cooperate in making up a shortfall so it CAN be sold?

 

[sad1]

yes, I would be relieved of liability with the assumption.

As for the short sale- the whole point of this is that I will not be financially responsible for the house. If he needs cash to make it work, he would be soley responsible for coming up with it on his own through a loan or whatever. that is what my lawyer is trying to do. I am taking no money from him, no support, no retirement- just simply trying to get myself off the house one way or the other.

 

[mistoffolees]

yes, I would be relieved of liability with the assumption.

As for the short sale- the whole point of this is that I will not be financially responsible for the house. If he needs cash to make it work, he would be soley responsible for coming up with it on his own through a loan or whatever. that is what my lawyer is trying to do. I am taking no money from him, no support, no retirement- just simply trying to get myself off the house one way or the other.

The point that nextwife was trying to make is that your stbx can not relieve you of liability. He can sign a thousand papers and the judge can make order that he is responsible, but if he defaults, your name is still on the mortgage and the bank can come after you.

The only way you can be relieved of liability is if he refinances completely in his name. The bank is unlikely to allow him to do that if the mortgage is greater than the home value. You can nicely ask the bank to take your name off, but don't hold your breath.

If he can refinance, great. If he can't, you're stuck for half - no matter what he tells you. Granted, you can sue him to be reimbursed for your half, but you're still going to have to deal with the fact that the bank can come after you.

If you can't refinance and you have a short sale, you can have an agreement that he's responsible for 100% of the shortfall, but the bank will still come after both of you. You can then sue him to recover your half, but you're not off the hook with the bank until THEY say you're off the hook.

 

[LdiJ]

I don't disagree with any of the answers that you have previously recieved. However, I am not sure that you will understand those answers so I am going to explain things from another perspective.

When you signed the paperwork for the house, you became liable for the mortgage. The bank/mortgage holder is not a party to your divorce therefore your "contract" with them remains in full force and effect, no matter what your divorce decree/agreement says.

Therefore, they will be able to legally hold you responsible for that particular loan, until that particular loan is retired.

If your divorce decree/agreement holds your stbx responsible, then that is between you and him. You can sue him if he doesn't honor the agreement/court orders, but that doesn't protect your credit from any dings from the bank/mortgage holder, nor does it protect you from the bank/mortgage holder going after you for the mortgage or any shortfall if the house is sold for less than is owed on the mortgage.

If your stbx really wants the house, then hopefully he will either be able to refinance within a reasonable amount of time (to remove you from the mortgage and you should NOT sign a quit claim deed until he does) or the house should be sold and you should both deal with any fallout from that, now.

The most important thing to understand is that divorce decrees/agreement do not override loan contracts.

 

[sad1]

that is what I was worried about. but shouldnt my lawyer have in place something to protect me? she is working on the agreement now and from what I understand it was assume the mortgage and if he doesnt get approved he must take resposibility for the difference if it is sold. So maybe there needs to be another clause that he must refinance before a sale or something?

the house is not ready to sell at this point. he was going to put work into it and sell it in the spring. I am paying my lawyer to protect me and I was worried there may be a loop hole in this plan. We are hoping he can assume the mortgage but I need to move out before we will have that decision.

maybe I will email her and pose this scenario. thanks. if you have any other suggestions please reply.

 

[mistoffolees]

that is what I was worried about. but shouldnt my lawyer have in place something to protect me? she is working on the agreement now and from what I understand it was assume the mortgage and if he doesnt get approved he must take resposibility for the difference if it is sold. So maybe there needs to be another clause that he must refinance before a sale or something?

the house is not ready to sell at this point. he was going to put work into it and sell it in the spring. I am paying my lawyer to protect me and I was worried there may be a loop hole in this plan. We are hoping he can assume the mortgage but I need to move out before we will have that decision.

maybe I will email her and pose this scenario. thanks. if you have any other suggestions please reply.

There may be little that your attorney can do. He can make your stbx sign anything he wants, but if the house can't be sold for enough to cover the mortgage, the bank can come after you - no matter what you make stbx sign.

Your proposal to require refinancing before a sale won't do you any good - if the bank is willing to let him refinance, it would do so. Furthermore, the expense would just reduce the amount available to pay off the loan.

There are several things you can do to protect yourself:
1. First and foremost, do NOT sign a quit claim deed until he refinances or sells. That is your last ditch protection if he defaults.
2. Ask the bank if they would take your name off the mortgage when you divorce. They're not likely to do so, but it's easy to ask and you might just get lucky.
3. Make sure that the agreement your attorney drafts is as strongly worded as possible. That won't stop the bank from foreclosing on you if he defaults, but the more strongly worded that part of the agreement, the better your chance of recovering money from him if he defaults and you get stuck with the payment.

As long as the home is worth no more than the mortgage, there's always going to be some risk.

 

[LdiJ]

that is what I was worried about. but shouldnt my lawyer have in place something to protect me? she is working on the agreement now and from what I understand it was assume the mortgage and if he doesnt get approved he must take resposibility for the difference if it is sold. So maybe there needs to be another clause that he must refinance before a sale or something?

the house is not ready to sell at this point. he was going to put work into it and sell it in the spring. I am paying my lawyer to protect me and I was worried there may be a loop hole in this plan. We are hoping he can assume the mortgage but I need to move out before we will have that decision.

maybe I will email her and pose this scenario. thanks. if you have any other suggestions please reply.

Hon, you still aren't getting it. There is nothing your attorney can put in the agreement that will protect you any better than what is already going in there now. There is nothing that your attorney can put in the agreement that the mortgage holder would ever be required to honor. There is nothing you can put into the agreement that would cancel your contract with the mortgage company.

 

[sad1]

ok. so then why if my lawyers job is to protect me, is she not requiring he sell the house? We are working on the agreement and I hired her to take care of my best interest. she said it was ok if he assumes the mortgage and doesn't refinance and he didnt have to sell right now.

If I can't trust my lawyer, who can I trust? we are up against a deadline and I dont know what to do. He will not be happy if I make him refinance since it will cost him to do so. I guess I will try to call the lender on monday and see what I can do with the divorce. but I don't know.

I do GET it, I just dont know what to do about it. I am not a lawyer and as I said, I hired a lawyer to avoid this very thing. she was ok with him not refinancing or even waiting until spring to sell and now we have less than a few weeks to get it written up. and she obviously thought that putting this in the agreement would protect me. if it doesnt what can I myself do? I can't write up the document myself.

I will try to discuss this further with her on monday. but we are in a precarious position. he has said he is willing to take the house and the loss. he could easily say screw it and make me take 50% too. so I need to do this somewhat delicately.

I mean -of a property agreement my lawyer writes, we sign and is upheld in the divorce doesn't protect me from the lenders, what I am supposed to do? He doesn't even SPEAK to me and his lawyer has not been good about contacting my side either.

 

[sad1]

also is a quit claim paper the same as a liability release form? or is it SPECIFICALLY a quit claim that needs signed. in the assumption process there is a paper they want me to sign before they can process his application that is a liability release for the mortgage. If I sign that is that the same a a quit claim or would that likely come later when the divorce is finalled? they need the final decree to officially take me off apparently.

 

[LdiJ]

also is a quit claim paper the same as a liability release form? or is it SPECIFICALLY a quit claim that needs signed. in the assumption process there is a paper they want me to sign before they can process his application that is a liability release for the mortgage. If I sign that is that the same a a quit claim or would that likely come later when the divorce is finalled? they need the final decree to officially take me off apparently.

DO NOT sign a quit claim deed until he either refinances the house or sells it. A quit claim deed releases your ownership of the property to him, but does not absolve you from the mortgage. Therefore, if you sign it before the mortgage is taken out of your name then he will have no incentive to refinance or sell. You will not be fully protected until he either refinances or sells.

If its written into the agreement that he has to refinance or sell by a certain date, (ie sometime in the Spring or Summer of next year) then that gives you a measure of protection, because it gives you recourse if he doesn't live up to that.

I think that your attorney is trying to protect you from taking a credit hit now. If you force the sale of the house now, and its upside down, then you WILL be responsible for 50% of the shortfall in the eyes of the lender. If the house can sell for more money in the Spring, then you would be in better shape.

 

[tranquility]

How rich is your soon to be ex?

 

[sad1]

I am not sure if it will be worth more in the spring or not, all I can hope is the market will be better.

he is not RICH, but does make good money. although his job is not as secure as others. he makes just under 6 figures. but it will be strapping him to carry the mortgage on his own. if he lives cheap, he can do it. but its not like he has a ton of extra money.

I guess I need to see if this form he has for me is a liability form just from the VA (he is doing the assumption through VA) or if it does act as a quit claim form as well. this is just so confusing and difficult.

IF he had a brain in his head, we would have seperated for 6 months or a year to financially prepare ourselves and the house. instead he all of a sudden wanted a divorce with no warning (financially or otherwise) and wants a quickie divorce no matter what the financial cost. so neither of us are in any position to be able to afford this. and the house we only owned 2 years and had just put a lot of work into.

 

[mistoffolees]

ok. so then why if my lawyers job is to protect me, is she not requiring he sell the house? We are working on the agreement and I hired her to take care of my best interest. she said it was ok if he assumes the mortgage and doesn't refinance and he didnt have to sell right now.

Ask her specifically if the bank can come after you if he defaults on the mortgage. I think you'll get the same response you've been getting here.

If I can't trust my lawyer, who can I trust? we are up against a deadline and I dont know what to do. He will not be happy if I make him refinance since it will cost him to do so. I guess I will try to call the lender on monday and see what I can do with the divorce. but I don't know.

You need to be very specific with your attorney. Explain the concerns here and ask why you should sign this agreement.

It is entirely possible that it could be the best thing for you to do - if you think that he'll take care of the house and pay the mortgage until the market recovers, it may be a reasonable gamble. No one can judge that except you. But you DO need to know that it IS a gamble.

I do GET it, I just dont know what to do about it. I am not a lawyer and as I said, I hired a lawyer to avoid this very thing. she was ok with him not refinancing or even waiting until spring to sell and now we have less than a few weeks to get it written up. and she obviously thought that putting this in the agreement would protect me. if it doesnt what can I myself do? I can't write up the document myself.

Talk with her about it. Explain the concerns. Ultimately, she has to be willing to address your concerns. It may be that it's the best thing for you - if you think he'll take care of the house and make payments. But none of us has all the facts - so you have to talk it over with your attorney (or find another one).

I will try to discuss this further with her on monday. but we are in a precarious position. he has said he is willing to take the house and the loss. he could easily say screw it and make me take 50% too. so I need to do this somewhat delicately.

It's all a matter of credibility. Are you wiling to stake a lot of money on believing him? There are tons of stories here from people who did the same thing that you are going to do and lived to regret it.

I mean -of a property agreement my lawyer writes, we sign and is upheld in the divorce doesn't protect me from the lenders, what I am supposed to do? He doesn't even SPEAK to me and his lawyer has not been good about contacting my side either.

You've already got your answer. DO NOT SIGN A QUIT CLAIM DEED until the mortgage is satisfied. That gives you some protection.

Furthermore, you MAY want to insist that he refinance the house within 90 days and if he can't refinance that it be put on the market at a mutually acceptable price within 90 days after that.

Also, insist that you get copies of the monthly statement directly from the mortgage company. That way, if he stops making payments, you can take action immediately rather than finding out only when it goes into foreclosure.

 

[Ozark_Sophist]

If he defaults and stop paying, the bank will come at OP for 100% of the shortfall--not 50%.