Legal question, divorce and refinancing of home?

Question

My friend married a man who had purchased a home 10 yrs prior to their marrying with his first wife (1993). In 1998 he took his wife (ex) off the original note and deed. In 2003, when he and my friend were already married, they refinanced the home and she (my friend) was the co-borrower. She is listed on the note and listed on the Deed of Trust. However, no new Deed was issued. Now they are getting a divorce, and her lawyer is telling her she does not own interest in the home. However, the mortgage company is telling her that when they refinanced the original Deed becomes Void and that she is indeed an owner of the home. She informed her lawyer and the attorney still says no. This is in the state of Texas, Community Property. I read on a website that anything you purchase once married is community property. Wouldn't refinancing a home, be considered a purchase? Also, should the title company have filed a new Deed with her listed and not done it. Please Help.

Answer 1

At this point, her attorney is right. She has no legal interest in the home. Just because she is a co-borrower, does not mean she is co-owner.

I find it hard to believe that the mortgage company told her what she claims that they told her, because it is completely inaccurate. The person who told that either was a new employee (with no clue what they were talking about) or your friend misunderstood what they said (which happens often). She is legally responsible for the *payment* but that’s it. She has no interest in the home itself.

Now, a judge can award her interest, as in he/she can order hubby to pay her a portion of the homes value, but the question is will he/she? He had the home for 10 years prior to them marrying, and her name was never added to the deed, so it’s very possible it will be considered 100% ‘separate’ property. But, she may be able to obtain a portion of the increased value that occurred during the marriage. The laws regarding this do vary by state and I’m really not sure about the state of TX, but her attorney should be sure. Apparently though, she feels her attorney is giving her inaccurate information (and really there’s no reason he/she would), so she should definitely discuss it with another attorney. If they both say the same thing, then….

Answer 2

She owns part of the LOAN that came with re-financing. She doesn't own any part of the home....none.

The only way she could have a piece of the house is if, after marriage, the two of them refiled the deed with HER name on it with his.

If they didn't do this, she is up the creek. She will be responsible to pay the money back but not have any stake in the house.

Foolishness. She needs to get her name off the loan - a good lawyer can take care of that during the divorce.....

Answer 3

That is a tough one. Community property can be tricky. I would tell your friend to find another attorney. Otherwise, see if there isn't a way she can get her name off the loan. When I got divorced, I had my name taken off of everything. That way I was not responsible for any outstanding bills.
I wish her luck!

Answer 4

Kind of him...but look to your own interests. Any property left in both your names is available for him to borrow against. You can reduce the interest by paying a little extra each year on it...but for the sake of your own security, make sure the place is in your name alone. Even if he's a prince, should he marry another woman, she could consider half your home hers, if he died. You don't need the heart ache.

Answer 5

tell her to get a new attorney
i say she might have interest in the home since she is listed as a co borrower and on the deed of trust
if only he had refinanced, then he might be able to claim sole interest in the home.

Making Sure the Lender is Paid: The Deed of Trust to Secure Assumption

Seldom is the home owned "free and clear." Instead, there is usually a purchase money debt secured by a lien against the home. Sometimes, there is a home equity loan as well. Because divorce marks a time of uncertainty and financial instability for both parties, the lender is rarely willing to release the conveying spouse from personal liability for payment of the mortgage.

Most clients mistakenly assume that when they convey their ownership interest in the home they are no longer liable for payment of the mortgage. In fact, the concepts of ownership and liability for the mortgage are completely separate, meaning that it is possible for you to be personally liable for payment of a debt on real estate in which you own no rights. (This twist in the law is particularly problematic for a veteran who may find his or her VA eligibility tied up in a home that belongs to a former spouse.) Even if your "ex" is ordered to pay or refinance the debt, unless your lawyer prepares the correct documents you may find yourself watching helplessly as the bank forecloses on the property, tarnishing your credit in the process. Worse, if the bank is unable to recover its full investment by foreclosing and selling the home, the bank might then file suit against you personally to collect the deficiency.

Let that sink in for a moment: your lender can sue you for a default on your home loan even if your former spouse took the home and the divorce judge ordered your ex to pay the mortgage!

So, what can you do to protect your credit if your ex defaults in payment of the mortgage after the divorce is finalized? The answer lies in a document called a Deed of Trust to Secure Assumption ("DTSA"). Put simply, a DTSA is a second mortgage (or third or fourth, depending on how many prior liens are already in place at the time of the divorce), which gives you the right to take the home back if your ex does not pay the mortgage. In this way, the DTSA "secures" the ex's obligation to "assume" the unpaid debt on the home.

Note that the lien created by your DTSA is inferior to your home mortgage, meaning that it will be wiped out if your bank or mortgage company forecloses. For this reason, it is important that you notify the lienholder of your security interest and your current address as soon as possible after the divorce, and that you request any notices of default be sent to you as well as your ex spouse. Your divorce attorney might also add language to your decree that requires your ex to provide copies to you as payments are made. Because the mortgage company can usually complete a foreclosure in less than two months (or half that time in the case of non-homestead property), it is imperative that you keep up with the status of the loan.

The DTSA is not a perfect solution. The process of asserting your rights under the DTSA can be quite burdensome because you will be required to make up the past-due payments to the lender, go through a foreclosure process, and then try to sell the property to another buyer to recover your money. While you may ultimately decide not to exercise your rights under the DTSA, it is best to preserve your options by having the DTSA executed as part of the divorce.

Enlisting the Aid of a Real Estate Attorney

The family law practitioner must be familiar with a broad range of legal fields, including employment law, criminal law, business and contract law, estate planning, and real estate. Because each of these fields has become so specialized, it is not realistic to expect any one lawyer to be an expert in each of them. While most family attorneys feel comfortable preparing a basic DTSA, the real estate implications can become quite complex -- particularly if the property involves the rights of third parties, an easement, outstanding oil or mineral interests, unresolved liens, and the like. Moreover, it is not uncommon for the original home loan to have been refinanced one or more times, or bought and sold by several lenders. Without a strong real estate background, many family attorneys do not have the resources or experience to properly draft the DTSA and describe the obligations assumed. In such cases, it is often beneficial for a family attorney to confer with real estate lawyer, or even to delegate the task of drafting the necessary documents.

f it is not possible to sell the home and you are forced to make joint payments, make sure the mortgage company sends you a duplicate copy of each statement. With regard to selling the home, it is very important that you place time limits and restrictions on how and when the home will be sold. As always, consult with your attorney before you begin this process. Finally, prior to the house being sold, do not take you name off the title. If you take your name off the title, usually via quitclaim deed, you are removing your ownership rights but you are not removing your responsibility for the debt with the mortgage company. In the event the home is sold, you might not receive any of the equity.

Deed of Trust

Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.

Refinancing

The process of the same mortgagor paying off one loan with the proceeds from another loan.

Answer 6

If she was never put on the original loan, then she has not claim to the house.

Answer 7

Tell her to fire her attorney and get a qualified attorney.