How do you divorce the mortgage - or the house, for that matter? That is a question asked of many Certified Divorce Lending Professionals (CDLP™).
Though a CDLP™ deals with all levels of divorcing homeowners, the more variables involved in a divorce case, the more complicated it can be. Many times a CDLP™ will face divorcing clients, both men and women, who are ill-prepared financially to obtain mortgage financing - even when the final settlement agreement states that one spouse is to refinance the marital property.
Certified Divorce Lending Professionals can help in these situations by spotting red flags through the divorce mortgage planning process and helping divorcing homeowners make a more informed decision regarding their overall mortgage and home equity solutions.
When the case involves both real property and mortgage financing, it also involves much more than the simple disposition of the property. The ability for either spouse to obtain...
The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance.
The law provides protections when you deal with any organizations or people who regularly extend credit, including banks, small loan, and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit or in setting the terms of that credit must comply with ECOA.
When You Apply for Credit, Creditors May Not...
Divorce can be intricate, tricky, and emotionally overwhelming. When you have to relocate, find new housing and decide to rent or purchase a new home, you pile on additional tasks and frustration.
Many divorcing spouses understand the financial benefits of owning a home rather than renting. While obtaining mortgage financing on any given day may oftentimes involve a lot of paperwork and challenges, doing so during a divorce may seem overwhelming and out of reach for many.
For many reasons, divorcing clients may decide to purchase a new home with cash rather than obtaining mortgage financing. New home buyers who are in a position to pay cash for their new home need to make sure it is not only the right decision financially but that you protect your ability to use the mortgage interest deduction on future mortgages.
The mortgage interest deduction is divided into two categories: Acquisition and Home Equity Indebtedness. Acquisition Indebtedness is any mortgage obtained to either...
Whether the divorcing couple is on good terms or bad terms getting divorced can be rough. It can be stressful, time-consuming, and confusing with all of the paperwork that goes into it. Chances are both parties are listed as shared parties on a lot of documents, including insurance policies.
How is the disposition of the marital home affected?
The person who stays in the marital home after the divorce will need to make sure that the homeowners' insurance is under his or her name. Likewise, the person moving out must make arrangements to purchase new homeowners or renters policy for the new residence. Previous insurance claims on the marital home may also cause problems and the property may be deemed uninsurable to new buyers.
Experts suggest that filing 2 claims within 3 years will subject an individual consumer or home to a significant risk of being rejected by insurance carriers.
What is a CLUE Report?
While the majority of divorcing consumers have an understanding of credit, unfortunately, there are still those whose spouses ‘took care of all that stuff’ and they truly do not have the experience of working with credit and bill paying.
Understanding the makeup of your credit score is the first step towards managing and improving it.
As you might expect, payment history is the most influential component and this is followed closely by the amounts owed. To lesser degrees, the length of time that you’ve utilized credit, the number of new accounts or inquiries that may have and the various types of credit accounts that you hold will also have an impact on your score.
The overall importance of any of these factors can be further influenced by the entirety of the information contained in your consumer credit report. As such, certain patterns, occurrences or items can be measured differently depending on any other factor or combination. There can be...
Divorce is messy as it is. Throw in the recent changes within the mortgage industry and it may get even messier. Just mention that just the name, Equity Buy-Out, and it can get even more confusing!
When a divorce involves refinancing the marital home, divorcing borrowers typically are looking to pull equity out of the home in order to buy-out the other spouse’s equity ownership. Although the divorce settlement agreement may outline the details of the transfer of ownership, it does not determine what type of financing is available for the divorcing borrower.
The name, Equity Buy-Out confuses some people into thinking they have to purchase the house from the other spouse. This isn’t true, an equity buy-out is actually handled as a refinance loan, not a purchase loan. Now, there are two types of refinances we need to consider because just because the court orders one party to buy the equity out of the other party, that doesn’t dictate the type of...
A professional divorce team has a range of team players including the attorney, financial planner, accountant, appraiser, mediator, and yes, a divorce lending professional. Every team member has a significant role in ensuring the divorcing client is set to succeed post-decree.
Diverse skills allow the divorce team to think about a specific problem in a different, and often more strategic, way. By being able to look at a problem from different angles and draw on a wealth of experience and knowledge from all team members, allows for innovative and creative solutions.
1 – Diverse Teams Fill In The Knowledge Gap | The reality is that no one knows everything. Teams solve problems faster when they’re more cognitively diverse.
2 – Diverse Teams Fill In the Perspective Gap | Perspective is the capacity to view or think about a situation or problem in a wise and reasonable way.
3 – Diverse Teams Fill In the Experience Gap |...
Where does a Certified Divorce Lending Professional (CDLP™) fit into the mediation process?
Mediation is a process in which a third person helps the participants in a dispute to resolve it. In order to resolve the dispute, the participants must negotiate a solution. Problem-solving is part of the negotiations. The process of mediation is the management of other people’s negotiations, and the mediator is the manager of the negotiations who organizes the discussion of the issues to be resolved. The more coherent and organized the process, the easier it is for the participants to arrive at solutions that are mutual and appropriate for them.
At the center of the mediation process is gathering the data (fact-finding), defining the problem, and developing options. When the subject matter is specialized as in negotiating the marital home, the cycle becomes specialized and may require the need for mediation support from a Certified Divorce Lending Professional (CDLP™).
Collaboration | Working together to achieve a goal. A recursive process where two or more people or organizations work together to realize shared goals.
It takes teamwork to bring the typical divorce settlement together. There are usually quite a few people involved from divorcing clients, attorneys, financial planners, mediators, real estate agents, appraisers, and mortgage professionals.
One of the most important team members in the collaborative divorce process is the financial neutral. The financial neutral is an impartial expert in his or her field. When a primary asset of the marital property is the marital home and other real estate assets, having a Certified Divorce Lending Professional (CDLP) as a financial neutral on your team becomes increasingly desirable.
In many divorce settings, negotiations break down over financial issues or concerns, oftentimes leading to litigation. The CDLP is a financial neutral who offers both parties a balanced, thorough financial...
One of the main concerns, when one party is retaining the marital home, is that the vacating or out spouse will not be able to qualify for future mortgage financing while their name remains tied to the current mortgage. This isn’t necessarily so and we can help our divorcing clients with this issue with the correct verbiage contained in the final divorce settlement agreement.
When a borrower has outstanding debt that was assigned to another party by court order (such as under a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. The lender may not be required to count this contingent liability as part of the borrower’s recurring monthly debt obligations.
Contingent liabilities are debts that a court orders one party the responsibility of paying yet does not relinquish the legal obligation of paying the liability to the creditor. In a divorce situation, often times a mortgage...