My friend, Al, is going through a bitter divorce,
And she is still dragging this out.. Not Settled.
She qualifies by her self to refinance the mortgage, and she wishes to remove his interest.
Al doesn't want to be on the new loan, but he wants to protect his interest. What form does he need to sign which allows her to be obligated for the new loan, but he remains on Title. And how should the vesting be drawn? Her.. Single and separate ? Or Tenants in common? :confused: Thanks Friend.

Hello g:

The bank isn't going to go along with that arrangement. If SHE fails to pay, the bank is going to take the house, and doesn't want to argue with AL about it. For his part, I'm sure Al would put up quite an argument.

If he's happy waiting for his equity, he can file a lien. He should only do this in consort with an ATTORNEY.

excon

I completely disagree with the last post. What you need to do to begin to protect yourself is have an attorney file a quick claim deed. Even when your wife refi's your home, you are legally still on title. Therefore she would have to Quick claim you off title and therefore you would lose all rights to the property.

To keep your best interest in mind, a real estate attorney can best help you. What I like about making sure you stay on title but not on the loan is that it provides you a safety net if she fails to make the payments. However, until your divorce is final, it protects any equity rights you may have in the home.

You have to move quickly on this if she has already started the refinance process. Keep in mind again, if you were on title the first time, with the first loan, she cannot just have you removed. You have to sign to be removed. So keep your eyes and ears open and most importantly, consult with a real estate attorney.

Good luck to you.

Sorry, life1973happened, but excon's answer is 100% correct, as usual. Good luck finding a lender who will allow the wife to refi while Al remains on the deed.

Why should Al have his attorney file a quit claim deed now? He's already on the title. Filing a deed will remove him from the title. Unless you're suggesting that he be removed from the title while she refi's and then put back on the title afterwards? That would be committing a fraud against the lender.

To the OP: If the wife wants to remove Al's interest she will have to pay him for it. This can be done as part of the refi. Let her refi the house in her name alone and use the money from the refi to pay him his share. Then he can give her a deed.

If she can't qualify for a large enough mortgage to pay off the old loan and pay off Al at the same time, then Al will have to remain on the title and sign the mortgage, but not the mortgage note. (This means that he's not personally responsible for paying back the loan but he agrees that the lender can foreclose if his ex doesn't pay the loan.) Then he has to hope that she pays back the loan and doesn't allow the house to go into foreclosure. His other option is to give her a deed and take back a second mortgage for his share of the house. Then he still has to hope that she pays her loan and doesn't allow the house to go into foreclosure.

What does his attorney say?

Lisa you are going on the assumption he is on title at all. For all we know he isn't which is one of the reasons I brought up the quick claim deed. I agree with everything else you state. However, She can refinance that home and get a loan in her name only. There are lenders who do that everyday. I closed one last week, in which the boyfriend put the loan in his name only. In this case the girlfriend was put on title, as they wished, but was not on loan.

Second, in know way am I suggesting he quick claim himself off and add it on again later. The question seemed more general giving us little to go by. WHich is why I gave him a broad sense of the terms used and some options.

Hopefully, with all of our answers, which sometimes we will see differently on, it gives somebody enough help to know where to start. We all seem to agree that he needs to speak to his divorce attorney and also a real estate attorney.

Lisa you are going on the assumption he is on title at all. For all we know he isn't which is one of the reasons I brought up the quick claim deed.

The original post said "she wishes to remove his interest". That's a pretty good indicator that he's on the title.

And by the way, it's a QUIT claim deed, not quick.


I agree with everything else you state. However, She can refinance that home and get a loan in her name only. There are lenders who do that everyday. I closed one last week, in which the boyfriend put the loan in his name only. In this case the girlfriend was put on title, as they wished, but was not on loan.

Yes, she can get a loan in her name only. But he will still have to sign the mortgage to allow the lender to foreclose if she doesn't pay back the loan. Otherwise, how does a lender foreclose on half a house?

Hello life:

Well, you've mellowed out a bit. That's cool. I agree with you that a compilation of answers often times gives the best result - as long as our resident real estate attorney, LisaB is PART of the compilation.

You say lenders do, what I don't think they do, every day. Lenders, of course, lent money without having a clue whether they'd be paid back or not. And I didn't think they'd do THAT. But I digress.

If they do what you suggest, please tell me how the bank protects its interest? Clearly, they're going to have a problem with the co-owner. He's not going to let them foreclose.

excon

The OP stated: "but he remains on Title". The question was about someone going through a divorce and protecting his interests. Therefore, the assumption is that the wife is looking to refinance the family home in her name only and the husband wants to protect his interest in the home. Frankly I don't see any other interpretation. Therefore, excon's and Lisa's answers make sense, Life's doesn't.

Why would a lender loan money on a property that the borrower doesn't have clear title to? That makes no sense.

This whole business should actually be covered under a divorce agreement. The agreement should state that the wife buys out the husband's interest. The wife can obtain her refi and at the closing, the husband gets paid off and quit claims the deed to the wife.

I have worked as a direct lender for Countrywide for the majority of my professional career. All the posts are partially correct. It boils down to this: Have the divorce decree finalized prior to refinancing the home. If there is enough equity available in the home and the borrower, exwife, qualifies for said loan, cashout the home to satisfy the divorce decree and quit claim OFF at closing. That way you have your money and no future interest in said property. However, you CAN refinance a home in just the wife or husbands name on the mortgage while both remain on title. Do not bother posting anything to say otherwise. I have personally done this dozens of times and it is legal. However, I would not go that route. This is my first post. HELLO ASK ME!:)

I have worked as a direct lender for Countrywide for the majority of my professional career. All the posts are partially correct. It boils down to this: Have the divorce decree finalized prior to refinancing the home. If there is enough equity available in the home and the borrower, exwife, qualifies for said loan, cashout the home to satisfy the divorce decree and quit claim OFF at closing. That way you have your money and no future interest in said property. However, you CAN refinance a home in just the wife or husbands name on the mortgage while both remain on title. Do not bother posting anything to say otherwise. I have personally done this dozens of times and it is legal. However, I would not go that route. This is my first post. HELLO ASK ME!:)


Do not bother to post otherwise?

This is not true in my area when banks are concerned (you cannot hold a mortgage in one name and title in two - the bank doesn't want the hassle if they have to foreclose); I believe Countrywide is a private lending institution so perhaps the guidelines are different.

What area are you in?

IHowever, you CAN refinance a home in just the wife or husbands name on the mortgage while both remain on title. Do not bother posting anything to say otherwise. I have personally done this dozens of times and it is legal.

First Welcome. Second, The advice of putting into the divore decree and cash out at closing (like I said) was right on. Third, no one is saying its not legal to have one borrower with two on the title. What we are saying is that its not prudent. If a default occurs this make it more difficult to foreclose. I strongly suspect that the loans you havde written that way are secondary mortgages (home equity loans) rather than primaries.

Do not bother to post otherwise?

This is not true in my area when banks are concerned (you cannot hold a mortgage in one name and title in two - the bank doesn't want the hassle if they have to foreclose); I believe Countrywide is a private lending institution so perhaps the guidelines are different.

What area are you in?
I work in Michigan, but do business throughout the greater midwest; Ohio, Indiana, Illinois, under a blanket license assigned to my branch. I apologize for any commentary that may have seemed rude; my ego got the best of me. As mentioned earlier, I have closed loans with only one spouse on the note while the both remain on title. I have done this may times on prime, sub-prime and alt-a products. I have even gone as far as to refinance mortgages in only a spouse's name who was not previously on title; simply by quit claiming the spouse on; ensuring the recording date was prior to the loans submission to underwriting, and refinancing in only that spouses name. I cannot speak for FHA or VA. I cannot recall any circumstances of filling in only one name with Government products. Yes, Countrywide is a private lending institution and the majority of our fundings are internally funded through Countrywide Bank. I understand that guidelines and products will differ with lenders, be it banks, credit unions or private lending. I will regress and state that Countrywide, amongst other private lenders, can refi with one spouse on note and both on title; this may not be the case outside private lending. :)

As mentioned earlier, I have closed loans with only one spouse on the note while the both remain on title.

When you close a loan where only one owner is on the note, does Countrywide require the non-responsible owner to sign the security instrument?

First Welcome. Second, The advice of putting into the divore decree and cash out at closing (like I said) was right on. Third, no one is saying its not legal to have one borrower with two on the title. What we are saying is that its not prudent. If a default occurs this make it more difficult to foreclose. I strongly suspect that the loans you havde written that way are secondary mortgages (home equity loans) rather than primaries.
Thank you for the welcome. The majority of my lending has been on first mortgages, with 2nds and HELOCs typically few and far between. Even in the case of 2nd liens or HELOCs, Countrywide requires the bank holding first lien position to grant subornation of their lien, putting Countrywide in a primary lien position. In a foreclosure proceeding, the bank can only foreclose those on the note of the home. In essence, both parties will loss the home, but only those who have signed the mortgage obligating them make timely payments to the lender will have there credit effected. Furthemore, mortgages are not like auto loans; once the home is foreclosed, that is the end of your relationship with the lender. The lender will not make any attempt collect any past due payments or unpaid balance of the principal. My only concern would be that if the spouse becomes delinquent on taxes or water, a lien will be placed on the home and effect the credit of all who are vested on title. So yes, it is risky but possible in the private lending sector. :)

Hello again:

I don't dispute that any of this happens. We've had too many people here say that it DOES occur.

However, nobody has answered the question of how the bank protects its interests in such a situation.

If the borrower defaults, the bank is going to want to foreclose. As Lisa pointed out, they can't foreclose on the half that the borrower owns. They're going to want to foreclose on the entire house, and the co-owner is going to stop them. No? I don't see why the co-owner COULDN'T stop them either. THEY'RE not in default.

Please, splain it to me.

excon

When you close a loan where only one owner is on the note, does Countrywide require the non-responsible owner to sign the security instrument?
No. The non-borrower will only be required at closing to sign the new deed, as he or she is currently vested and no action, refi or sale, can take place without his or her signature. The non-borrowering spouse will hold absolutely no ties to Countrywide. :)

No. The non-borrower will only be required at closing to sign the new deed, as he or she is currently vested and no action, refi or sale, can take place without his or her signature. The non-borrowering spouse will hold absolutly no ties to Countrywide. :)

If both the borrower and the non-borrowing owner are already owners by a prior deed, then there would be no need for a new deed. In that case, does Countrywide require the non-borrowing owner to sign the security instrument?

Why would she agree to a new loan, if she is not getting his name off the title, That is the reason for a new loan to start with.

This will be settled in court where the judge decides who gets clear title to the home and how.

why would she agree to a new loan, if she is not getting his name off the title, That is the reason for a new loan to start with.

This will be settled in court where the judge decides who gets clear title to the home and how.
I with you, FR and GEM. Handle in court.:)

If both the borrower and the non-borrowing owner are already owners by a prior deed, then there would be no need for a new deed. In that case, does Countrywide require the non-borrowing owner to sign the security instrument?
Lisa, I ran your question through our underwriting guidelines to be sure. The non-borrower is not required to sign a security instrument. Somewhere in this lengthy tread, I lost track of vesting. Of course no new deed per previous vesting. :) This web site is addictive, huh?

Hello again:

I'm still missing something here.

If the only advantage to being a co-owner and NOT a co-borrower is that your credit won't be ruined when the house goes into foreclosure, then it's not really much of an advantage... Is it? You're going to LOSE your home and ALL your equity, but your credit will be SAVED??

Why would someone do that?

In addition, if the borrower stopped paying, in order to protect HIS interest, the NON borrower would have to make the payments himself, thereby saving the BORROWERS credit, and building up equity for HIM? Plus, he couldn't take the interest as a deduction, because he's not on the loan.

Again, why would someone do that?

excon

Lisa, I ran your question through our underwriting guidelines to be sure. The non-borrower is not required to sign a security instrument. Somewhere in this lengthy tread, I lost track of vesting. Of course no new deed per previous vesting. :) This web site is addictive, huh?

So if the non-borrower is not required to sign the security instrument, how can Countrywide foreclose in the event of a default by the borrower?

First, I'm not disputing what you have said, only its logic.


Countrywide requires the bank holding first lien position to grant subornation of their lien, putting Countrywide in a primary lien position.

And why would the primary lender do that? They are giving up a primary position for what? I can't conceive of a reason the primary lienholder would cede their position.


In a foreclosure proceeding, the bank can only foreclose those on the note of the home. In essence, both parties will loss the home, but only those who have signed the mortgage obligating them make timely payments to the lender will have there credit effected.

Now why would both parties lose the home? The lender can only foreclose on what was pledged as security. So if someone else owns half the home, they can only foreclose on the half pledged as security for the mortgage. Depending on the way ownership is held the lender may not be able to force a sale and who is going to buy half a home occupied by someone else?


Furthemore, mortgages are not like auto loans; once the home is foreclosed, that is the end of your relationship with the lender. The lender will not make any attempt collect any past due payments or unpaid balance of the principal.

This is news to me. Is this a Countrywide rule or by statute or what? As I understand a mortgage, it's a promissory note secured by real property. The borrower is promising to pay the borrowed amount. If the property is redeemed for less than that amount, the borrower still owes it.

Hello again:

I'm still missing something here.

If the only advantage to being a co-owner and NOT a co-borrower is that your credit won't be ruined when the house goes into foreclosure, then it's not really much of an advantage...... Is it??

You're going to LOSE your home and ALL your equity, but your credit will be SAVED?????

Why would someone do that?

In addition, if the borrower stopped paying, in order to protect HIS interest, the NON borrower would have to make the payments himself, thereby saving the BORROWERS credit, and building up equity for HIM? Plus, he couldn't take the interest as a deduction, because he's not on the loan.

Again, why would someone do that?

excon

I still don't understand how the non-borrower could lose their home if they never signed the security instrument.

Hello again:

I'm still missing something here.

If the only advantage to being a co-owner and NOT a co-borrower is that your credit won't be ruined when the house goes into foreclosure, then it's not really much of an advantage...... Is it?? You're going to LOSE your home and ALL your equity, but your credit will be SAVED?????

Why would someone do that?

In addition, if the borrower stopped paying, in order to protect HIS interest, the NON borrower would have to make the payments himself, thereby saving the BORROWERS credit, and building up equity for HIM? Plus, he couldn't take the interest as a deduction, because he's not on the loan.

Again, why would someone do that?

excon
Excon, I'm with you all the way. As my wife and I have a great relationship, I would do it if circumstances called for it. But if she was divorcing me, I'll go with GEM and FR and have it handled in court. I like you, exon. You cut right to heart of the matter, no BS. :cool:

Hello again:

Maybe there aren't answers to any of this, and the sub-prime meltdown is the result. Certainly, logical questions such as those we pose, WEREN'T asked or answered when they mattered.

excon

Scott, in a refi situation, if there are already 2 loans and the borrower is refinancing the first loan, it is standard practice for the second mortgage holder to subordinate to the new lender. Usually the second mortgage holder is a HELOC or similar and they went into the original loan knowing that they would be secondary. If they refuse to subordinate then the homeowner will have to pay them off as a condition of the refi of the first loan. Once they get paid off they lose the borrower's business and it's awfully hard to get them to sign a brand new HELOC. So it's in their best interest to keep their second position rather than having no position at all.

Of course when the borrower requests a subordination the second mortgage holder reviews the details of the proposed new loan. If the amount is that much higher then the second mortgage holder may not agree to subordinate, since their lending guidelines may have been exceeded.

Oddly, enough Countrywide is one of the sub prime lenders who haven't failed as a result of the meltdown. How, they can make such imprudent loans is beyond me.

A lot of the meltdown is due to borrowers who over bought more than mistakes by the lenders. The real estate price drops caught a lot of people by surprise.

Scott, in a refi situation, if there are already 2 loans and the borrower is refinancing the first loan, it is standard practice for the second mortgage holder to subordinate to the new lender.

OK, that I understand. I wasn't looking at it from that angle. I was looking at it from a home equity loan asking the primary loan to subordiante. But if they are refinacing, then the existing secondary becomes primary, so the refinancing lender would want to maintain the primary.

Oddly, enough Countrywide is one of the sub prime lenders who haven't failed as a result of the meltdown. How, they can make such imprudent loans is beyond me.

A lot of the meltdown is due to borrowers who over bought more than mistakes by the lenders. The real estate price drops caught a lot of people by surprise.
Scott, I unfortunately have to disagree. At the inception of the infamous meltdown our stock price dropped 70% and have maintained rather stagnant since. We suffered a huge reduction in force. We lost an entire division known as Specialty Lending. Specialty Lending played a supporting role to our prime offices. Whenever a prime office could not help a borrower, they would refer them to Specialty Lending to explore sub-prime options. For clarification, Specialty Lending was, until not too recently, known as the Consumer Markets Division Dedicated Full Spectrum Lending. A merge between Consumer Markets and Consumer Markets Dedicated Full Spectrum resulted in the development of the Specialty Lending Division. That division... no longer exist. Furthermore, Full Spectrums retail branches have been all but dissolved, from roughly three per state to only a handful spread out the West coast and they have very few products to offer. Countrywide took a beating! Thousands of good people were put out on the street with measly separation packages.

Hello again:

Maybe there aren't answers to any of this, and the sub-prime meltdown is the result. Certainly, logical questions such as those we pose, WEREN'T asked or answered when they mattered.

excon

The sub-prime meltdown is a result of lenders vastly reducing their lending criteria. They did so because the market was booming and the value of the property was increasing quickly enough that, within a year or two the value of the property would be high enough to make the loan fall within a more strict lending requirement.

Then the real estate bubble went boom. The properties were no longer increasing in value at the same rate. After a year or two, when the introductory interest rates expired and the monthly payments went up, the borrower could no longer afford the payment and the property hadn't increased in value enough for it to be sold or refinanced for enough to cover the mortgages.

I handled a sale 2 years ago. The buyers were a young couple just starting. They bought my clients' house with an 80/20 loan. That meant a first mortgage for 80% and a second mortgage for 20%. They were financing 100% of the purchase price. I was astounded that a lender would give them these terms. But the introductory interest rates were low enough that they could afford the monthly payments at that time. I'm pretty sure that they got into big financial trouble when those intro rates expired.

A lot of the meltdown is due to borrowers who over bought more than mistakes by the lenders. The real estate price drops caught a lot of people by surprise.Hello again, Scott:

I also disagree to an extent. I think the lenders are MUCH more culpable than the borrowers.

Borrowers are always going to BS on their applications and buy too much house. But, it's up to the underwriters to ferret them out. Or, it used to be.

I worked as a loan officer when people had to prove they worked and could afford the loan. Yes, there were no income verification loans. But there weren't any NO income verification and NO work verification loans then.

There are now. And, those loans were prevalent until just recently. I know a guy who doesn't work and has no money, who recently got 100% financed for a half a million dollar house.

Both lenders and buyers were relying on the increase in housing prices to bale them out. The lenders should have instead been relying on their borrowers ability to pay them back. They didn't.

excon

What are you disagreeing with? Did I say the CW wasn't hurt? All I said was they haven't failed. Since you still have a job that is an accurate statement.

Clearly lenders took huge risks by relaxing their standards. They probably felt it was prudent at the time, figuring a bust like the one that occurred wouldn't happen.

But look at people like the ones Lisa's client sold to. They probably figured they could afford the intro payments, but didn't plan ahead for when the interest rates would go up.

But look at people like the ones Lisa's client sold to. They probably figured they could afford the intro payments, but didn't plan ahead for when the interest rates would go up.

I can almost hear their mortgage broker telling them "Don't worry. In a year you can refinance."

What are you disagreeing with? Did I say the CW wasn't hurt? All I said was they haven't failed. Since you still have a job that is an accurate statement.
Sure, albeit the your definition of failure is "completely shutdown, doors closed, no longer in business". :(

That's what business failure means; shutdown.