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Mortgage Loan and Possible Divorce

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Established Member

Mortgage Loan and Possible Divorce

My sister is currently in a bad relationship that may be headed for a divorce. My sister's husband bought his house before they even met. Last year they apparently refinanced the house. However, the bill that they receive every month does not have her name on it. I ran her credit report this morning for all 3 credit bureaus and there was nothing on her credit report for the mortgage. There was a joint account for the Jeep they bought but nothing for the mortgage loan. Is it safe to say that if she did walk away from the house, her credit would not be effected since her name isn't on the loan and the mortgage company is not reporting to her credit report?

 

I posted this in the Relationships and Money section of these forums but I believe it to be more applicable here since it has to do with a mortgage loan.

Message 1 of 11
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Established Contributor

Re: Mortgage Loan and Possible Divorce

Hello, I think maybe your sister should contact an attorney because depending on the laws of what ever state she resides, she could benefit from the house as well...Good luck!

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Message 2 of 11
Established Member

Re: Mortgage Loan and Possible Divorce


@CreditHealthy wrote:

Hello, I think maybe your sister should contact an attorney because depending on the laws of what ever state she resides, she could benefit from the house as well...Good luck!


She has already spoken with an attorney last weekend but she was unaware of her status regarding the mortgage (she's not particularly street smart or aware of her credit situation). I had her over to my house today to babysit my girls and I took the opportunity to show her how to retrieve her credit reports. 

 

The bottom line is that they could potentially be upside down on the house at the moment and her husband lost his job for reasons that may prevent him from getting another job in his field for the forseeable future. I'm certainly not giving her any legal advice but was just curious to know that at least she won't be stuck paying for a mortgage she cannot afford on her own because he cannot and risking destroying her own credit in the process. 

Message 3 of 11
Regular Contributor

Re: Question about divorce and mortgage

You said "they" refinanced the house.  Did she sign any paperwork for the refi?  

 

I would STRONGLY recommend getting legal advice before making any decisions affecting one's financial interests in the event of a divorce.  Depending on how long they were married, the state that she lives in, and other factors, she might be entitled to a share of the equity in the house even if her name isn't on the deed or mortgage.  It may be in her best interest to walk away with no further ties, but it's best to do that AFTER you know what rights and obligations you might have.

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Message 4 of 11
Established Member

Re: Question about divorce and mortgage

Thank you. I can assure you she has already sought legal council regarding the matter. I just wanted to make sure my logic was sound regarding credit reporting and the mortgage. If the mortgage company is not reporting anything to the credit bureaus, is it fairly reasonable to assume that she has no financial obligation to the house? Again, I'm just confirming if, aside from seeking the actual promissory note which may prove complicated, her credit report is a good way to assume no financial obligation. 

 

She is already speaking to a lawyer but I just wanted to know for my own curiousity. My logic makes sense to me but I could be missing something obvious. 

Message 5 of 11
Super Contributor

Re: Mortgage Loan and Possible Divorce

are you in a community property state?

 

http://en.wikipedia.org/wiki/Community_property

 

Retired Lender
Message 6 of 11
Established Member

Re: Mortgage Loan and Possible Divorce


@DallasLoanGuy wrote:

are you in a community property state?

 

http://en.wikipedia.org/wiki/Community_property

 


She resides in New Jersey, so judging by that wiki, no.

Message 7 of 11
Valued Contributor

Re: Mortgage Loan and Possible Divorce

It looks like she would be in the clear, depending on how th enote was signed and how the home is titled.  If they were to foreclose on the home and her name is on title she would likely end up with a foreclosure public record on her credit report.  Find out how title is held

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Message 8 of 11
Established Member

Re: Mortgage Loan and Possible Divorce

The lawyer she spoke to pulled up a "Security Instrument", which from what I gather is a title of sorts (correct me if I'm wrong).  This security instrument was signed by both her and her husband. She was told by the lawyer to call the mortgage company regarding the promissary note. She called today and they told her that since her name wasn't on the mortgage that they could not release the promissary note to her. However, with your previous statement regarding the title, it appears that she could still take a hit on her credit report if the house were to foreclose. She will continue to consult her lawyer as I told her not to make any quick moves until her lawyer assures her she will be in the clear. 

 

So am I correct in my assumption that this signed security instument is the title in which you speak? Again, I'm not using this information as legal advice but I want to know for her sake. She would like to buy my home since my wife and I are looking at having a newer, larger home built but I don't want her to rush into anything without knowing all her liabilities.


@sccredit wrote:

It looks like she would be in the clear, depending on how th enote was signed and how the home is titled.  If they were to foreclose on the home and her name is on title she would likely end up with a foreclosure public record on her credit report.  Find out how title is held


 

Message 9 of 11
Super Contributor

Re: Mortgage Loan and Possible Divorce

the 'security instrument' is the deed. that is what ties the property to the loan.

 

she might be just fine. she never promised to pay(didnt sign note).

but if there is a deficiency balance, i bet they try to go after her

 

Retired Lender
Message 10 of 11
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