If you were awarded the marital home in your divorce but are not listed as a borrower on the existing mortgage, you might be wondering how to proceed with the mortgage holder. Here’s a guide to help you navigate this process effectively.
Refinancing a Mortgage into Your Name After Divorce
When refinancing a mortgage into your name, not being a current borrower typically isn’t a problem. However, whether your name is currently on the home title and the duration of that title holding can impact the type of mortgage you can obtain. It is highly recommended to consult a divorce mortgage planning professional to determine your eligibility.
Retaining the Existing Mortgage Without Refinancing
If you plan to retain the existing mortgage as-is without refinancing, and you are not a current borrower, there are crucial steps to take to notify the current lender of your intentions and rights moving forward.
Assumption & Release of Liability
When a former spouse assumes ownership of the home and the mortgage, it does not automatically release the original borrower from financial obligation. A loan assumption involves transferring ownership interest in the property and accepting responsibility for the mortgage terms, payments, and obligations. Unless a release of liability is requested, the original borrower remains liable.
Successor Homeowner’s Right to Mortgage Information
Divorcing spouses awarded ownership of the marital home but not obligated on the existing mortgage often face challenges obtaining mortgage information. Two important sets of CFPB amendments to RESPA and TILA mortgage servicing rules, effective April 19, 2018, extend protections to successors in interest, such as those awarded a home in a divorce.
Understanding the New Rules
The new rules expand the definitions of "borrower" under RESPA and "consumer" under TILA to include confirmed successors in interest. Successors in interest include transfers related to divorce or separation agreements, among other situations. Once a servicer confirms the successor's identity and ownership interest, these homeowners are entitled to the same protections as home mortgage borrowers.
Requesting Mortgage Information as a Successor in Interest
The CFPB created a special "Request for Information" for potential successors. If a servicer receives a written request indicating a person may be a successor in interest, containing the transferor’s name and enough information to identify the loan, the servicer must respond with the required documentation to confirm the person's identity and ownership interest. The servicer must acknowledge receipt within five business days and respond substantively within thirty business days.
Sample Assumption Notice
Here is a sample letter to notify the mortgage servicer:
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.
How a CDLP® Can Assist
A Certified Divorce Lending Professional (CDLP®) brings tremendous value to the divorce team by providing a thorough financial evaluation and offering realistic mortgage solutions. Their expertise in family law, tax law, real estate, and mortgage financing helps ensure a successful transition for divorcing homeowners.
The Importance of Early Involvement
Involving a CDLP® early in the divorce settlement process can help set the stage for successful mortgage financing in the future. They help identify potential conflicts between the divorce settlement, home equity solutions, and real property issues, facilitating a smoother transition for all parties involved.
Contact a CDLP® Today
For more information and assistance with your mortgage needs during and after divorce, contact a CDLP®. They can provide you with the "Divorcing Your Mortgage Homeowner Workbook," a guide to credit, real estate, and mortgage financing post-divorce.
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