There have been recent changes to foreclosure laws in New York due to Covid-19. The “COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020” grants homeowners a mortgage moratorium for 60 days after they file a hardship declaration. Defaulting on your home loan ends in your house being foreclosed. So if you sell the house and there’s money left after the loan and penalties paid, this is known as equity and it’s yours. The equity reduces gradually as the home nears foreclosure. In the event of a divorce foreclosure, the lender appraises the home at lower values and sells at lower prices at an auction sale. We offer quality legal representation for divorce and foreclosure cases. If you are need of a defense attorney, contact us today!
Divorce and Foreclosure
It is sad that many spouses, who are getting a divorce might have to foreclose on their home. However, it is important to ascertain which of the spouses is responsible for the mortgage and promissory note, attached to the property. Provided both are signed by just one of the couple, the person would be culpable for the debts associated with a divorce. This frees the other spouse from paying to the lender, if the foreclosure causes a deficiency judgment. In a divorce, the property settlement may state that the spouse interested in keeping the house will have to refinance the loan, in order to release their partners from the debt. This is only valid, if the spouse has a strong credit and resources to obtain a new loan.
The Consequences of Foreclosure After Divorce
Financial instability can result from a house foreclosure after divorce. Although, you might wonder who’s responsible for any liability from the foreclosure. However, this has credit and tax implications that either spouse must cope with asides the stress of getting a divorce. It impacts both of them equally unless one spouse acquires the home loan and holds the title separately, instead of together. A foreclosure could be instigated, if the couple took the loan but the spouse with sole ownership of the home fails to make the necessary payments after the divorce. The foreclosure damages both their credit scores, resulting in a joint deficiency judgment.
How to Avoid Foreclosure After Divorce
It is actually possible to avoid foreclosure after divorce. It is easier when the couple choose to either sell the house and share the profits on a property with equity. They could also refinance the home and exempt the other spouse from the mortgage. Another option is for a spouse to relinquish his/her claim to the marital home. In this situation, a spouse terminates their interests in the jointly owned home hence, giving the receiving spouse all the rights to the property. The spouse receiving the property would be required to refinance the home in their own name to prevent future liability. There are various ways to avoid suffering a foreclosure, depending on the couple’s decisions to keep or sell the home.
Neither Spouse Wants to Keep the Home
It’s best to avoid a foreclosure even if you don’t plan on keeping the home. If both parties are uninterested, the house could be sold to pay off the loan. This relieves the burden of paying the mortgage and ultimately prevents them from experiencing the rigors of foreclosure. It is a valid option and the decision should be agreed on by the couple. It is important to hire a lawyer experienced in divorce and foreclosure to help you through these trying times.
Rent the Property
It is a sound choice for both spouses to rent out the house, while making enough to cover their new rents. This is uncommon yet highly beneficial. But, the couple still have to work together and agree on details such as:
1. Repair fees
2. Finding tenants
3. Splitting mortgage, taxes, and insurance, and
4. What happens in case of a sale.
The other partner is given the right of first refusal in case of the latter, and time to buy out the selling partner.
Sell the Home
In the event that no one wants to keep the house, a sale is the best option and the profits would be shared equally most times. This is good particularly for couples without children. Selling a home is not without its stress so, they could employ the services of a real estate agent with experience in selling such properties.
A short sale occurs when a mortgage lender allows the borrower to sell the house below the amount on the mortgage. It provides quick alternatives for a couple in financial distress. Although, short sales might take some more time to complete than foreclosures, it has a lesser effect on your credit score and allows the beneficiaries to acquire another house without any delays.
Deed in lieu of foreclosure
A deed in lieu of foreclosure is a really helpful to divorcing couples because although, they give up their legal rights to the home, their loan obligations are relieved when facing an imminent foreclosure. The lender obtains the title of the house in exchange for not foreclosing.
Both Spouses Want to Keep the House
This depends on the title of the property. If it is titled in one spouse’s name, then only this person is allowed to keep the property. The other spouse can ask for a monetary award because it is still a a marital home. But if it is titled in both spouse’s name, the house can be transferred to any of them, provided both spouses can refinance it to absolve their partner of the mortgage. A court could overrule this decision however and order the home to be sold, with the proceeds shared equally. We provide answers to your divorce and foreclosure questions. Our legal team charges affordable rates and you won’t regret working with us!
One Spouse Wants to Keep the Home
There’s also the option of one spouse keeping the home. The willing spouse can assume the mortgage, or refinance the loan such that it leaves only their name on it. If the person fails to carry out any of these two steps and stops making payments, a foreclosure would most likely occur after the divorce, which affects both spouse’s credit scores. The home should only be kept by a spouse who can afford to. To keep the house, the spouse might need to borrow money to buy his/her partner or pay with their premarital savings.
Apply for a Loan Modification
Applying for a loan modification can help in getting your finances back in order after divorcing your spouse. A modification means that the existing terms of the deal are changed to make paying easier. It may include a lesser interest rate, changing from variable to a fixed rate or extending the loan for up to 40 years. All these help to lower the payments, which makes it easier for the person to buy out their spouse.
Refinance the Mortgage
Understanding the difference between the names on the mortgage and titles is important. The name on the mortgage is the person paying the debt, while the title is that of the homeowner. To refinance the loan, the spouse that’s left on the mortgage has to use his/her income and assets to qualify for the new one. Your name can be on the title and not the mortgage although, a quitclaim deed can easily rectify this, preventing a divorce foreclosure.
If your mortgage plan allows for a loan assumption, then you should consider this. Loan assumption is the process by which a borrower is removed from a current loan, without the other party having to refinance the existing loan. You can exempt yourself from your existing joint mortgage with a loan assumption.
Get Legal Advice about Foreclosure After Divorce
You stand a higher chance of winning the case, if you work with an experienced foreclosure defense attorney. The lawyer helps you understand your options and defends your interests in court. These are some of the benefits of a quality attorney:
- They know the legal terrain better than you and will save you time, money and your home with their experience. You stand a better chance with a good lawyer.
- Your attorney can help you attend mandatory conferences, which help in reaching a resolution about your home foreclosure during divorce.
- You can secure a loan modification with an experienced attorney, who has the knowledge to present your case and get you a new loan that’s affordable.
- They inform you of the loss mitigation options you are entitled to under your lender’s plan. An attorney will help you choose your best options.
- If your home is foreclosed wrongfully, a skilled lawyer can represent your interests in court, in case of a lawsuit.
Our attorneys are top-notch professionals who are sure to help you massively in your divorce foreclosure cases. Reach out to us and let’s win you a home today!
If your house is foreclosed during the divorce, it would be appraised by the bank at lower values and sold at a price below it’s value at an auction sale.
The mortgage is paid by the person(s) who has their names registered with the lender. It depends on if the house is owned singly by a spouse or jointly.
No. A foreclosure affects your credit score negatively. Therefore, it is really difficult and you cannot obtain a new loan for at least two to three years afterwards.
If one person stops paying the mortgage, both parties are liable to suffer the consequences which ultimately is the home being foreclosed.
A foreclosure stays on your credit for about two to three years and hinders you from getting a new loan.