When spouses or domestic partners get ready to file for divorce or legal separation, they may have different points of view on issues like property division, time sharing with the minor children and financial support. However, just because the parties may have these disagreements, it does not mean that they must go in front of a judge to resolve them.
Generally, when couples separate or divorce, one party generally remains in the martial home. The party remaining in the marital home is often unable to pay the monthly mortgage payment, as a result of only one income, because of the exiting party requires their own income to survive. It is not uncommon for the marital home of separating or divorcing couples end up in foreclosure.
Once the house is in foreclosure, it is imperative that the parties understand who signed the Note, and who is on the Deed.
The Note is the document that makes the party/parties legally responsible for the debt for the house, and gives rights to that party to interact with the Bank regarding the loan.
Signing the Deed gives the person or person’s a legal interest in the property (not the legal responsibility for the debt of the property).
Three of the most common scenario’s seen for Note Signors in Foreclosure/Divorce cases:
- Only the Husband signs the Note.
- Only the Wife signs the Note.
- Both parties sign the Note.
When the Note is only signed by one of the Parties, it is often problematic when the Non-Note Signing individual desires to retain or sell the property. When the Note is signed by both parties, it often becomes problematic when the parties do not agree on what to do with the property, for example, applying for a loan modification, or short-sell the property.
- The Husband signed the Note, and the Husband and Wife both signed the Deed. The Husband relocated from the marital property, and the Wife remained in the property. A foreclosure action commenced, and the Wife would like to keep the property, but can only do so with a loan modification. The Husband would like to short-sell the property.
Generally, the Bank will not communicate with the Wife, or accept an application for a loan modification from the Wife, without the Husbands income information and signature on the application. Often, it is difficult for the couple to communicate about pending financial obligations, and even more difficult to persuade the other party, (the Husband in this example) to provide his financial information and ask him to remain financially obligated to a loan on a property that he is no longer residing in through a loan modification.
- The Husband and Wife signed the Note, and the Husband and Wife both signed the Deed. The Wife relocated from the marital property, and the Husband remained in the property. A foreclosure action commenced, and the Husband would like to short-sell the property. The Wife will not agree to short-sell the property, she would like to apply for a loan modification, and use the marital home for rental income. This is very troubling scenario, if both parties cannot agree, neither the short-sell, nor a potential loan modification can occur.
Both parties are required to sign the documents relating to a loan modification application, or to short–sell the property. This is a situation that usually results in the Bank obtaining a Judgment of Foreclosure, and the property is sold at auction, and will often result in a deficient amount to satisfy the loan obligation. If the Husband and Wife both signed the Note, both are legally responsible for the deficiency amount in satisfying the loan.
Mediation is critical for both of the above scenarios. The mediation should include the Family Law case, and the Attorney’s in that action, as well as the Foreclosure case, and the Attorney’s involved in that action. The Mediator must be well versed in both Family Law, and Foreclosure Law, in order to assist the parties in finding a resolution. The mediation often occurs in the early stage of a Family Law case, because in Florida, the Foreclosure actions are now moving quickly through the Court.
All too often, Family Law Attorney’s focus on the Parenting Plan, Child Support, potential Alimony and the separation of marital property. When the marital home goes into foreclosure, the burden of a forced relocation of the remaining spouse, and often children, from the home and the lasting negative impact on the party/parties credit should be viewed with urgency, and addressed promptly in mediation.