Q: When I was married, my wife and I signed a loan to buy a home. We got divorced, but she was awarded the house in the divorce agreement and stayed in the property for a few years after our marriage was finished.
I had to sign a quit claim deed and in the divorce decree it was stated that she would refinance if possible. Well, the house went into foreclosure, and was sold and now the lender is coming after me for some of the money.
Am I still liable for this loan? It has been years since I lived in the property. And, if I am liable, what can I do to take care of this situation?
A: One mistake homeowners frequently make when getting divorced is signing a divorce decree that requires a spouse to refinance the property at some unspecified time in the future, even though it assigns the ownership of the property to that spouse.
When you signed the quit claim deed, ownership of the property transferred to your wife. But your name remained on the loan documents. So, your wife got the house, and she never refinanced. Apparently, she couldn’t afford the house either, which is why it went into foreclosure.
The bottom line is that you were listed on the original loan and remained legally liable for this debt. Your divorce agreement did not get rid of your continuing obligation to your mortgage lender to make the monthly payments and to pay off the debt.
Not only do you owe the entire sum on the loan, your credit has likely been trashed by the foreclosure. Although she is the one who was legally responsible for paying down the mortgage, because your name and Social Security number was on the loan, the lender has likely been reporting you as severely delinquent on the mortgage. Now that the house has fallen into foreclosure, you’ll have that foreclosure listed on your credit history as well.
To check out the status of your credit, go to AnnualCreditReport.com and get a free copy of your credit history from each of the three credit reporting bureaus, Experian, Equifax, and TransUnion. For around $9, you can purchase a copy of your credit score, which will tell you how you’re doing. If you’ve already picked up your free annual copy of your credit history, you can buy a copy of your credit history from any of the credit reporting bureaus, or MyFico.com.
As for what you should do next, I’d recommend speaking with your divorce attorney who can advise you on what you owe, and how to approach the lender for this negotiation.