Refinance the mortgage….attempt to refinance the mortgage….OR apply to refinance the mortgage??

I’ve seen it all….usually in reverse. And it’s pretty much guess work – nearly all of it. Here’s why.

When two lawyers, two clients and a mediator (or, in court, a judge) are presented with the conundrum of a spouse who is being awarded the house but which has a mortgage which is in the name of the grantor spouse, the hope is that the grantee spouse will be able to refinance the mortgage and remove their spouse from its liability. It’s ALWAYS a good idea to do this. There are no up sides to keeping a divorced couple joined at the mortgage. Too many bad things can happen, not the least of which is a grantor spouse who, years down the road, has ruined credit and absolutely no practical recourse, Deeds of Trust to Secure Assumption notwithstanding.

I dealt with a client a few years ago whose ex-spouse of 18 years had defaulted on the mortgage more times than one could count but would always catch up on the payments before foreclosure and, thus, cure the default. His credit was “in the tank” and there was nothing, really, that he could to about it without paying off the $180,000 mortgage for an ex-wife of over 18 years. Not really a good option.

But, no one around the negotiating table knows IF the grantee spouse can qualify for the mortgage. So, everyone does the best that they can. Which is require that the grantee spouse refinance the mortgage….attempt to refinance the mortgage….OR apply to refinance the mortgage. Or maybe, nothing at all.

Clients, attorneys and courts (judges, mediators) need a reliable way to know – in advance, with a high degree of assurance – that the grantee has already qualified for a mortgage. And I don’t mean PRE-qualified. I mean QUALIFIED.

Here is what everyone else does – this is the expectation and common practice – and, by contrast, what we do.

Wait until divorce is final before taking the application. This is crazy. It gives assurances to no one and leaves the process to chance. We take the application as early as possible.

Wait until the divorce is final before stating an approval. Again, this helps no one. The parties, the attorneys, the court – all the people involved – need to know what to expect.

Wait until after divorce to get the property appraised. So, how does anyone know what equity is in the property and how much of it can be accessed. But wait – it gets worse.

An appraisal of the property is obtained while negotiating terms, separate from the loan application….and a buyout or asset division is agreed based upon that appraisal. THIS IS DISASTROUS. We order the only appraisal that matters – the one ordered by the lender and the only that can be underwritten for the mortgage loan. These two different appraisal types can vary wildly in opinion of value. Plus, it’s a waste of money since another appraisal will have to be ordered for the loan anyway.

Wait to see if the child support or spousal support is documented properly. We don’t just look at the documentation for support payments – we tell the client (and attorneys) exactly how the documentation must be generated. In this manner, the all-important “pay history” for qualifying support begins earlier than later. And therefore, the loan closes sooner than later, providing buyouts and refinances (to remove spouse from liability) sooner than later.

There are many more differences but, you get the idea. 

Here’s how you can walk into a mediation or meeting or make that phone call or show up in court prepared to state that the grantee has already been approved for a loan: Have the client call me – AS EARLY AS POSSIBLE IN THE PROCESS. There is no advantage for them or for anyone in waiting.

Here’s you talking to your client: "Call Noel as soon as you leave my office."

Or….."hold on, I’m calling Noel right now….I’ve got you on speaker phone."

Or…..(to opposing): "If you call Noel, he’ll get this cleared up for you and there will be no guess work."

Why spend any more time thinking about it, wondering about it, worrying about it?

You can know.

Thanks,

Noel Cookman

817-454-4555

Noel@TheMortgageInstitute.com