Handling a home mortgage after your Texas Divorce

One of the issues that is often times the most concerning to people going through a divorce is the family home. After all, not only is it the place where more memories and important events occurred than any other for your family but it is most likely the largest financial investment and asset that you can claim. When you combine matters of the heart and matters of the wallet you can see why this subject leads many people to worry that it is being handled correctly in the context of a long and difficult divorce case.

If the family home was purchased during the course of your marriage then it is very likely community property. Community property has no one owner- it is jointly owned by you and your spouse. The specific proportion of ownership and its impact on your divorce is unique to your situation, but the point is that it will be up to you and your spouse to divide ownership of the home in your divorce or have the judge do so.

It is likely that your divorce will settle prior to entering into a trial. This means that you and your spouse will be in control of the terms of your marital split. When it comes to your house there are really only three ways to resolve its ownership: either you will remain in the house and your spouse will leave (or vice versa) or the house will be sold and the equity will be split between the two of you in some manner. For the sake of today’s blog post let’s limit the possibilities to the former of those two- with one spouse remaining in the home and the other leaving to live elsewhere.

What to do about the mortgage

Unless you and your spouse can count yourselves among the very few that own your home outright, it is likely that there is mortgage on your home that you make payments on. That mortgage is held by a financial institution of some sort- your credit union, bank, mortgage company or other entity. Supposing that you and your spouse agreed to have you remain in the home and he or she to move, there are specific steps that can be taken to ensure a smooth and relatively pain free transition is accomplished.

The debt that is owed to the lending company is secured by a mortgage against your home. Even though your divorce decree may free your ex-spouse of liability from making payments on the mortgage moving forward this will not suffice for purposes of freeing him or her from responsibility in the eyes of the mortgage company. After all, you both agreed to have your names listed on borrowers and are liable for the debt as a result. Even if your spouse has conveyed their ownership interest in the home to you in a Special Warranty Deed this still does not clear him or her of their responsibility to pay the mortgage.

Suppose then that you fall behind on your mortgage payments. What recourse does your ex-spouse have against you to protect their interests? With their having ceded all property rights in the home to you it would seem that they are in a no win position. If the bank would foreclose on your home and sell it, there is a possibility that it could sue both you and your ex-spouse in order to make up any deficiency as far as the difference between what the home sold for and the amount of money lent to you initially to purchase the home.

A Deed of Trust to Secure Assumption as a means to tie up the loose ends of your home loan

What will likely happen in your divorce is that your spouse’s attorney will request that a Deed of Trust to Secure Assumption is executed upon the conclusion of your divorce. This document will protect your ex-spouse from a default on the home loan that occurs if you fail to make timely payment in the future. You can think of a Deed of Trust to Secure Assumption like a second mortgage on the home- it allows your ex-spouse to re-enter the picture and take back the home if you do not pay the mortgage in a timely fashion each month. You are assuming the obligation to pay the mortgage and the deed of trust secures that responsibility for you.

Your spouse will want to contact the mortgage company as soon as possible after the divorce to notify them of his or her right as granted by the Deed of Trust to Secure Assumption. The reason being is that he or she will need to sue for foreclosure prior to the mortgage company or risk having their lien wiped out by the mortgage company’s foreclosure process.

Although the Deed of Trust to Secure Assumption is a method to protect your spouse’s rights, it is not without its drawbacks. For instance, if you do fall behind on your mortgage then your spouse will need to go through the foreclosure process him or herself, make all past due payments in order to get the loan current and then attempt to sell the property to get all the money back that he or she spent during the process. If this doesn’t sound ideal to you I can’t say that I disagree. However, in exchange for your getting the house of the divorce it is the protection that is offered to your spouse. The same is true if you are the spouse who no longer is to reside in the home.

Questions on Deeds of Trust to Secure Assumption? Contact the Law Office of Bryan Fagan

The process that we just described probably seems more akin to what a real estate attorney would be discussing rather than a family law attorney. With that said, divorce cases tend to blend together multiple areas of a family’s life and real estate is one such area. As a result, having an attorney who can advocate for your rights and protect your interests is crucial.

The attorneys with the Law Office of Bryan Fagan represent clients across southeast Texas and would be honored to speak to you and your family about doing the same for you. A free of charge consultation with one of our licensed family law attorneys is only a phone call away.

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