Question :
I'm going through the process of trying to release my ex-wife from liability on my mortgage on property that was awarded to me in a divorce. I have been the sole source of repayment of the loan for the past 6 years, and have done so without fail.
Since this is a transfer of title due to a divorce, this does not, in my view, represent a conventional assumption. I am aware that Garn-St. Germaine prohibits the lender from enforcing a due-on-sale clause in this case, but the lender is trying to extract exorbitant assumption and application fees from me (I'm OK with a credit reporting fee, but nothing else). I recently read a column by a popular real-estate attorney/columnist that suggested that given Garn-St. Germaine, the lender may not be legally entitled to assumption fees in this case as well. Is this true? Where can I find the statute or regulation that covers this? I'm not going to pay the lender any fees for the privilege of giving me a mortgage that I already am a party to.
Answer By William Bronchick:
Understand that a "mortgage" has two parts: the promissory note and the collateral (mortgage lien or deed of trust). As Robert Bruss correctly points out, the lender cannot enforce the due on sale provision of the mortgage upon a transfer in divorce. However, this does not affect the obligation for the note. It requires an "assumption" and permission from the lender to remove the other party from the obligation, which is 100% in their discretion. Thus, absent some state law in your jurisdiction (I am not aware of any), this is perfectly legal. It will remain on your wife's credit report as well, which is not necessarily "bad", since installment loans that are paid timely improve your FICA score. If she needs to get a new loan, she can explain to her lender that the property was deeded to you pursuant to the divorce. The new lender will probably not count this obligation against her in determining her debt "ratios" in qualifying for a new loan.
Disclaimer: The foregoing is not intended to be given as legal, financial or tax advice, but intended for instructional use only. If you require legal, financial or tax advice you should seek the assistance of a qualified professional.
|
MORE INFORMATION
|
More on asset protection...
More on real estate investing...
|
|
