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Refinance, sale may be only ways to remove ex-spouse from loan

Benny Kass
Inman News

DEAR BENNY: I am recently divorced. In our divorce decree, it states that I give my ex-husband the house. He is currently living there. He was to have my name removed from the mortgage and get a new loan in his name alone.

Just recently, I found out through my attorney that the mortgage holder refuses to remove me from that loan. However, when I call to inquire about the mortgage, I am told that my name is not on the mortgage. Please help. My name is on the deed and I cannot remove my name from the deed until I show proof that I am no longer on the mortgage. I cannot get another mortgage until I get my name off of that house. What am I to do? --Hoop

DEAR HOOP: You are in the classical "Catch-22." Your attorney should be able to quickly determine if you are on the mortgage document (typically called a deed of trust in most states). She can do a title search to get a copy of the existing mortgage document that was recorded among the land records in the county where your property is located. In fact, in many parts of the country, this information can be found online from the local recorder of deeds office.

If you are not on the mortgage, a copy of the existing document should be adequate proof. But if you are on the mortgage, then you have a potential problem. Mortgage lenders will generally not allow a divorced spouse to be removed from the loan, and the only way to accomplish this is either (1) have your husband refinance or (2) sell the house.

Before you ask your ex to take one of these two steps, I suggest you talk with your new potential lender. My experience is that if you can show that for the past 12 months you have not been making any payments on the old loan (your ex will have to cooperate and provide copies of his canceled checks), you should be able to get a new loan.

However, I am afraid that you may have to wait a full year in order to convince the new lender to make a loan to you.

Do you have a friend or a relative that can co-sign for you? That may solve your concerns. I know that this is a good time to buy in many areas, especially because interest rates (and home prices) are low, so perhaps you can also convince your ex to cooperate and refinance the property immediately.

DEAR BENNY: In 2007, we built a home in an upscale development inside the city limits of our town. With two lots remaining to sell and in the middle of the housing boom at the time, the homeowners in the development verbally agreed to allow the developer -- who also is a resident in the development -- to delay paving the entrance to the neighborhood and installing the top coat of the road surface to our street.

However, as the housing market softened, it became evident that the remaining lots would not be sold quickly. For the last year, the rest of the homeowners have repeatedly asked the developer to complete the paving, but have received no response. The city sold the land to the developer for $6, with the understanding that he would build affordable housing -- but the homes he built were in the range of $500,000 and higher.

The city takes the position that its contract with the developer does not include a time frame for completing the paving work. And now, the developer has stopped paying the power bill and the water bill for the common areas.

We have retained an attorney, but the developer remains nonresponsive. Other than filing a lawsuit against the developer, what can we do? --Ron

DEAR RON: You have advised me that you reside in a community association comprised of four homes, plus the unsold lots. You have further advised me that the developer controls the association.

You should file a lawsuit against the developer, but against him in his capacity as a board member. What developers often do not understand is that while they are in control of the association they created, they wear two hats: (1) developer but also (2) board member. And in the latter capacity, they have a fiduciary duty to the association and must act in the best interests of that association.

So, not paying common-element utilities is, in my opinion, a breach of fiduciary duty, and a judge should rule in your favor.

DEAR BENNY: I am an elderly widow with serious health problems and I wish to put my home in my four children's names; I wish to remove my name completely. I realize I will need to have a lawyer, but will all of my children need to be here? Some live out of state.