The Details of Disbursing Proceeds from the Marital Home in a Divorce

Sep 28, 2021

You get half. I get half. 

There is more to address in a divorce settlement agreement than just the disbursement of net proceeds or equity ownership in a divorce situation.

A mortgage escrow account is designed to hold a homeowner's periodic payments for real estate taxes, mortgage insurance, and possibly homeowner's insurance. Mortgage escrow accounts normally build up large balances at times because of the timing of payments made from them. Any excess mortgage escrow account balances must be properly accounted for and then refunded after homeowners sell their homes.

Mortgage escrow accounts accumulate money over several months, usually from borrowers' prorated payments for their real estate taxes. In most parts of the country, counties require property tax payments on a semi-annual or annual basis, meaning escrow accounts tend to build up until taxes are paid.

If the home is sold before tax and insurance payments are made, there will most likely be funds remaining in the...

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Are you at risk for identify theft after divorce?

Sep 21, 2021

During a marriage, the financial identity of both spouses may become comingled due to joint bank accounts, joint credit cards, co-mortgagees, and more. Protecting yourself or your clients from financial identity theft during and after the divorce is final should be a top priority.

According to the Federal Trade Commission, identity theft falls into six major categories:

  1. Employment or tax-related fraud (34%). The use of one’s social security number and other personal information to gain employment or file an income tax return.
  2. Credit Card Fraud (33%). The use of someone else’s credit card or
    opening a new credit line in someone else’s name.
  3. Phone or Utility Fraud (13%). The use of someone else’s personal
    information to open a wireless phone or utility account.
  4. Bank Fraud (12%). The use of someone else’s personal information to take over an existing financial account or opening a new account.
  5. Loan or Lease Fraud (7%). The use of...
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You're Awarded The Marital Home But Not On The Current Mortgage - Now What?

Sep 14, 2021

So, what now? You were awarded the marital home in the divorce but you’re not a borrower on the existing mortgage. How do you work with the Mortgage Holder going forward?

If you were awarded the marital home during divorce and will be refinancing the current mortgage into your name or if you will be keeping the existing mortgage as is - if you are not a current mortgagee (borrower) on the existing loan there are a couple of things to keep in mind.

When refinancing a mortgage into your name and you are not a current mortgagee, is not typically a problem. Whether your name is currently on the title to the home and if so for how long or your name is currently not on the title to the home may impact the type of mortgage you will be able to obtain. It is highly recommended that you speak with a divorce mortgage planning professional to determine your eligibility.

If the plan is to retain the existing mortgage as-is and you are not currently a mortgagee on the mortgage there...

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What is a Financial Neutral in a Divorce?

Aug 23, 2021

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 estate is the marital home and other real estate assets, having a Certified Divorce Lending Professional (CDLP™) as a financial neutral on the divorce team becomes increasingly desirable. 

In many divorce settings, negotiations break down over financial issues or concerns, oftentimes leading to litigation. The CDLP™, as a financial neutral, offers both parties a balanced, thorough financial evaluation of the current mortgage and future mortgage financing requirements and offers realistic solutions to obstacles in negotiations. 

Depending on each individual situation, the CDLP™ can perform a variety of functions in a collaborative divorce, such as:

  • Assisting with the collaborative process by offering solutions and needs for both spouses to obtain...
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Divorce Mediation - the House, the Mortgage, and the CDLP™

Aug 09, 2021

One of the biggest financial (and emotional) decisions to be made during a divorce is deciding what happens to the marital home. Deciding what to do with the home during divorce might not be as simple as who keeps the property and who moves out.

If the divorcing couple is mediating the disposition of the marital home, the goal is to close the gap in the negotiation and ultimately come to a solution that works for both parties. This may be easier said than done when emotions, finances, and even children are involved.

From a financial perspective, there are usually two options on the table:

Option 1: Sell the marital home and split the proceeds.

Option 2: One spouse retains the property and compensates the other spouse for their share of equity ownership.

The second option can be achieved in various ways; however, the two most common are:

  1. The spouse retaining the marital home refinances the current mortgage and pays the vacating spouse their ownership equity from proceeds with the...
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Can I buy a house if my name is still on the mortgage to the marital home?

Jul 26, 2021

“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Fortunately, this isn’t necessarily true.

In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.

This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle. While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP™) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.

When a borrower has an outstanding debt that was...

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Do you have the right people on your divorce team?

Jul 19, 2021

"Nothing matters more in winning than getting the right people on the field. All the clever strategies and advanced technologies in the world are nowhere near as effective without great people to put them to work." Jack Welch, Winning

Many times in a divorce, we are more focused on curing the problem at hand, i.e., distributing real property and assets, that we forget there is life after divorce. The biggest challenge is the lack of knowledge, understanding, and preparedness of how the various pieces of the divorce puzzle fit together and indeed overlap.

One of the primary keys to a successful divorce is understanding the various puzzle pieces of a divorce involving real property as well as assembling your professional divorce team. The intersection of family law, financial and tax planning, real property, and mortgage planning is real.

It takes teamwork to bring the typical divorce settlement together. There are usually quite a few people involved from divorcing clients,...

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Is an Equity Buy-Out a Mortgage Loan?

Jun 21, 2021

There is a lot of confusion and misunderstanding about equity buy-outs during a divorce. Is it a mortgage or is it a process? 

An equity buy-out is a process of acquiring the equity ownership of an existing legal owner of real property. Acquiring the equity ownership in the marital home from an ex-spouse is most commonly done by refinancing the existing mortgage.

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...

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Can I Buy a House While Going Through a Divorce?

May 23, 2021

Can I Buy a House While Going Through a Divorce?

You have to live somewhere after the divorce, right? And most homeowners would prefer not to go backward by becoming renters again. While many divorcing couples may not be in a financial position to consider buying a new home during the divorce, those fortunate enough to have good credit and what appears to be adequate income to buy a new house before the divorce is final may still find the road to homeownership a little bumpy.

Here are three areas of concern to address when buying a home during the divorce process:

Who owns the property?

In most states, all property purchased by either spouse during the marriage (i.e. until the final divorce decree is entered) is considered to be “marital property”. Marital property is subject to “equitable division” in most divorce cases. If the wife purchases a new home to live in while a divorce action is pending, the title to the new home might be in her name only. But the...

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Determining the Value of Real Property in the Midst of Divorce

Apr 26, 2021

When divorcing couples decide to call it quits one of the first things they think about is ‘what to do with the marital home?’. Should we sell it? Will one of us keep it? What’s it worth?

Obviously, assessing the value of the marital home and other real estate owned in a divorce is a big deal in the settlement process. The question is how to best determine the value.

How do we determine the value of the real property? Should we have an appraisal done or should we ask a real estate professional? It actually depends on what you might do with the property so understanding the difference between an appraisal and a Comparative Market Analysis (CMA) is important.

The two most common methods for assessing the value of real estate are obtaining an appraisal from a licensed appraiser or having a real estate professional provide a CMA— but what’s the difference between the two? To start, both methods are an opinion of value and no two will ever give you the same...

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