Impact on Ex-Spouse's Bankruptcy on Home Mortgage

[kramer228girls]

My question involves real estate located in the State of: Ohio

I was divorced in March 2010. At the time of the divorce, I was awarded the home and my ex signed a quit claim deed to put the home in my name. However, I was never on the mortgage note. I am to refinance the home within two years (which I am starting to work on now, however, home value has declined). I have been making timely payments since the divorce. He is being sued for a credit card and is considering bankruptcy. I am pretty sure he will include this debt if he does, to relieve him from all debts. How will this affect me? Will they take the home?

[jk]

you have a dumb ex. S/he should not have signed a deed until removed from liability for the mortgage loan. Now they owe for the home but hold no interest in it.

. I am pretty sure he will include this debt if he does, to relieve him from all debts. How will this affect me? Will they take the home?

Let's put it this way:

you need to hurry up and get this taken care of.

You also realize that 2 years has already passed, right?

[despritfreya]

He is being sued. . . and is considering bankruptcy. I am pretty sure he will include this debt if he does, to relieve him from all debts. How will this affect me? Will they take the home?

1. "Pretty sure" is not an issue. Your ex MUST list every debt he owes and this would include the mortgage company.

2. Your home IS NOT at risk so long as the mortgage payments are current. His lender could care less about the bk if it is getting its money. It does not care where the $$ comes from. It only cares that it is getting paid.

Your concerns are misplaced. The bigger issue is whether or not you will be able to refinance: 1) Is there sufficient value in the property to persuade a new lender to payoff the existing loan? 2) Even if there is sufficient value in the property, will you qualify for a new loan?

Regardless, I tend to doubt your ex is going to hold you to the term in the divorce decree that requires a refinance. Why should he care at this point since he will be discharging any liability in his bk? If you have a tough time with the refi and are in “friendly” contact with him, you might want to find out if he cares. If he doesn’t you might want to get the divorce decree modified to read that you will refinance if you are able to and if you are not able to your ex has no problems with the current obligation since his liability was discharged. Just a thought. . .

Des.

[jk]

espritfreya;622993]

2. Your home IS NOT at risk so long as the mortgage payments are current. His lender could care less about the bk if it is getting its money. It does not care where the $$ comes from. It only cares that it is getting paid.

I know this is your thing so maybe you can help me.

are you saying the ex cannot willingly relinquish the house to absolve himself of any attachment to the house? (like if he wants to get back at the ex maybe). Even though he is absolved of liability for the mortgage loan, if the lender must foreclose, would they not have to involve him in some way?

If somewhere down the line OP had still not refinanced and stops making payments, does she now not have a claim to the title in opposition to the lender, at least for some share of the interest? Would a lender be willing to deal with foreclosing on a property where the title holder has not signed a security interest release in the case of default?

[despritfreya]

jk,

Your questions are a little confusing, especially this early in the a.m. but. . .

This is no different than someone selling the home with the buyer taking over the underlying debt (not through a lender approved assignment but more likely through a typical “wrap” closing).

Ignoring the "due on sale" clause, which, in most states is not enforceable, the lender's interest in the property is simply as collateral for the loan. If the loan is not paid the lender forecloses. The borrower is named as someone who was in the chain of title and who is still on the loan. Such would be the case no matter what since the borrower is in "privy of contract" and, under the mortgage/deed of trust must be notified. The foreclosure may be reported to the credit bureau and may impair borrower’s future attempts to finance a home purchase but, other than that, it is not a big deal.

Should the property sell at a foreclosure for more than the lender's credit bid, once again, those with some sort of interest in the transaction will be notified. The borrower is notified, not because he has an interest in the property - which he doesn't since he transferred title to the buyer - but because he is on the mortgage/deed of trust. The proceeds of the sale are interpled either to a court or to the county treasurer for proper distribution either to a junior lien holder, HOA or to the owner of the property (in this case, the buyer). If borrower thinks he has a right to the proceeds he can voice that right but I doubt he gets anything.

In OP's case there is a court order divesting the ex of any ownership interest in the property. What we don't know is what happens if OP is unable to refi. Typically the decree calls for the sale of the property, which, depending upon what is owed and the value of the property, may mean a short sale and - good luck with that.

Des.