By Pamela Edwards-Swift, CFLS
The other day I was consulting with a couple who had decided to divorce and had worked out, for the most part, how they wanted to divide their assets. Of course, one of those assets was the their house. They had decided the wife would continue to live in the house and make the house payments. The husband would sign a quit claim deed, transferring title over to his wife. Everything sounded good until I asked them if the wife would be refinancing their current loan into her name. The response from the husband was, “(W)e don’t need to do that, because I’m transferring title over to her, it is now her debt. She will own the house so she will be solely responsible for the mortgage.”
The husband’s response is something I hear all of the time. The problem is, he is wrong. Although between he and his wife, she will be responsible for the mortgage, the same is not true with regard to the mortgage holder. If the wife were to default on the loan, the mortgage company could still go after the husband for the debt owed. Transferring title alone does not transfer legal responsibility to the lender. Also, the debt, until paid, will continue to show up on his credit. As a result, his credit is effected negatively, as his debt ratio will be higher than if the mortgage were not showing on his credit.
I believe it is also important to know that the husband and wife, with whom I was meeting, were very intelligent and highly educated people. The point is that you can be very smart and know a lot of things, but you can’t know everything. No one can. That is why it is so important to consult a professional before making any major decision in your life. What you don’t know can, and will, impact your future.
Since I am on the topic of real estate, I would like to provide information of an upcoming Divorce Real Estate Clinic which will be presented by a Real Estate Professional and held on April 28, 2012 from 10:00 a.m. to 11:30 a.m. It is being sponsored by the Law Library of San Bernardino County located at 402 N. “D” Street, San Bernardino CA 92401. This is a free seminar and will be covering loan modifications, tax consequences of short sales and foreclosures, and information in helping to decide whether or not to keep the house, among other topics. If you are going through a divorce, or thinking about it, you may want to attend the clinic. After all, being well informed is pivotal to making the right decision.
Pamela Edwards-Swift, Certified Family Law Specialist, 2010, 2011, 2012, 2013 & 2014; Southern California Super Lawyer