Managing Your Mortgage Post-Divorce: Key Steps and Considerations

Awarded the Marital Home in Divorce? Here’s What to Do Next

If you've been awarded the marital home in your divorce but are not a borrower on the existing mortgage, navigating the next steps with your mortgage holder is crucial. Whether you plan to refinance the current mortgage into your name or keep the existing mortgage as is, understanding your options and obligations is essential.

Refinancing the Mortgage Into Your Name

Refinancing the mortgage into your name, even if you are not currently a borrower, is typically not problematic. However, factors such as whether your name is on the title to the home and the duration of ownership may impact the type of mortgage you can obtain. It is highly recommended to consult with a divorce mortgage planning professional to determine your eligibility and best course of action.

Retaining the Existing Mortgage

If you plan to keep the existing mortgage as is and are not currently a borrower, there are several steps to take to notify the current lender of your intent and rights moving forward.

Assumption & Release of Liability: When a former spouse assumes ownership of the home and the mortgage, it doesn’t automatically release the original borrower from their financial obligation. A loan assumption involves the new owner (assumptor) accepting responsibility for the mortgage terms, payments, and obligations. Unless a release of liability is requested, the original borrower remains liable for the debt.

Successor Homeowner’s Right to Information: Obtaining information on the current mortgage can be challenging for divorcing spouses awarded ownership but not obligated on the existing mortgage.

CFPB Amendments and Successors in Interest

Two important sets of Consumer Financial Protection Bureau (CFPB) amendments to RESPA and TILA mortgage servicing rules went into effect on April 19, 2018. These amendments extend mortgage servicing protections to successors in interest, such as homeowners awarded the marital home in a divorce. These protections include:

Loan modifications
Dispute rights
Monthly statements
Escrow accounts
Servicing transfers

The new rules expand the definition of a “borrower” under RESPA and a “consumer” under TILA to include a confirmed successor in interest. This includes transfers related to divorce or separation agreements, among others. Once a servicer confirms a successor’s identity and ownership interest, the successor is entitled to these protections.

Request for Information for Potential Successors

Under new RESPA § 1024.36(i), if a servicer receives a written request indicating that a person may be a successor in interest, they must respond with a written description of the required documents to confirm the successor’s identity and ownership interest. The servicer must acknowledge receipt within five business days and respond substantively within thirty business days.

Sample Assumption Notice Letter

Here’s a sample letter to notify the mortgage holder of your intent to assume the mortgage:

Loan No. 12345678

GARN-ST. GERMAIN ACT ASSUMPTION NOTICE

I write to inform you that, as of April 1, 2018, my husband and I were divorced by an order of the Circuit Court of Henry County, Georgia. Pursuant to the divorce decree, Mr. Smith is required to transfer to me his entire interest in the marital residence located at 1234 Main Street. The transfer will take place on May 30, 2018. On that date, I am to assume the mortgage that encumbers the property and make the payments thereon.

Therefore, pursuant to the Garn-St. Germain Depository Institutions Act of 1982, I hereby notify you of my intent to assume the Mortgage and Note. You may begin mailing statements to me immediately. Thank you for your cooperation and understanding.

Benefits of a Certified Divorce Lending Professional (CDLP®)

A Certified Divorce Lending Professional (CDLP®) can help divorcing homeowners make informed decisions regarding their home equity solutions while assisting the professional divorce team in identifying potential conflicts between the divorce settlement, home equity solutions, and real property issues.

Early Involvement of a CDLP®

Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can help set the stage for successful mortgage financing in the future.

Note: This information is for informational purposes only and not for providing legal or tax advice. You should contact an attorney or tax professional for legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily—call for current quotations. The information in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.