When getting a divorce and signing a quitclaim, it is crucial to remember your home mortgage is separate from your property title.
Q: I’m divorced and signed a quitclaim deed to my ex-wife. My ex-wife failed to make payments on the mortgage and the home has now gone into foreclosure. Mine is the first name on the mortgage.
I have read a lot of information on your website, ThinkGlink.com, and learned a lot. But I didn’t see where it was spelled out if it makes any difference to the lender that the house was awarded to the now “owner/occupier” in the divorce.
A: We often hear from folks like you who in the course of a divorce end up with one or the other spouse awarded the home they used to share. The Judge in the case orders one party in the divorce to transfer ownership of the property to the ex-spouse and that spouse complies with the court order.
In some cases, the divorce decree simply provides for the parties to transfer title from one to the other without regard to the loan secured by the mortgage on the home. When the spouse keeping the home doesn’t refinance, the ex-spouse that no longer lives or owns the home remains on the loan and winds up where you are today.
The problem is that you and your ex-spouse signed a contract with your lender to repay the debt you took out on the purchase or refinance on the home. The lender doesn’t care about the divorce and who was awarded the property. The lender only cares about who signed the loan documents and where they’re going to get their money. In other words, you can wave your divorce decree at the lender, and show them the court decree but we suspect the lender will waive back the promissory note you signed and will ask you to pay up.
What you should have done is refused to sign the quitclaim deed until your ex-wife refinanced the property into her name alone. If she couldn’t afford to do that, you should have probably insisted on her selling the property and buying something new that would have been more affordable for her. That’s an expensive lesson you’ve learned for next time – though we’re hoping you don’t find yourself in these waters again.
Unfortunately, there’s little you can do now. You’re kind of stuck. It will take you some years to clean up your credit and reverse the damage your ex-spouse has wrought.
There are two issues you face; one issue is the claim your lender has to repay the money on the mortgage. The other is the impact the foreclosure will have on your credit history and credit score. While your lender may decide not to go after you for the deficiency you and your ex-spouse might owe after the foreclosure sale, they generally do report the failure to make payments on a mortgage loan and the resulting loan going into foreclosure.
Your credit will take a hit, of course, but you may be able to add a statement of explanation to your credit history and explain that the home was transferred to your ex-spouse by court order and that your ex-spouse had the obligation to make the payments to the lender and failed to do so.