Divorce Issues/Removing my name from a mortgage
I finalized my divorce in November 2011. My x wife is responsible for the lake house mortgage as stated in the settlement. A time frame to have my name removed from the mortgage is December 31, 2012 and she has not sold the property or refinanced to remove my name from the mortgage. Now she wants to short sell. She says if I sign a quitclaim deed, I will not be held responsible for the mortgage and my credit will not be affected by the short sell. I do not believe this is correct. Does it make a difference if the house is in South Carolina regarding quitclaims? What is my next step?
I believe you are correct and are on the right track! The quit claim is strictly for removing your name from the lien and not from the mortgage, which as you know, is what is reported on toward your FICO score. A short sale WILL affect your credit if your name is still on the loan at the time the home is sold and/or payments are missed. This holds true for South Carolina.
Here's a slight upside for you -- Nothing can be done with the house while your name is on either the house or the loan without your consent. This means you do not have to agree to a short sale. If your ex is able to refinance via the Home Affordable Refinance Program (HARP) 2.0, this could be an opportunity for both of you. Check out: www.MakingHomeAffordable.gov for details. Please note: Along with needing to qualify financially for the program, the loan must be owned by Fannie or Freddie. Even if the house is 'underwater', there's a chance it can still qualify, as the guidelines for the program go as high as 150 percent of loan to value. However, most lenders will only go as high as 125 percent.
It's also important to know that even though you may read or be told the terms of your original loan cannot be changed, when using the programs you'll read about on the aforementioned website, divorce is an exception to that rule. I mention this because having the original parties continue on a loan modification or refinance would ordinarily be seen as part of the terms of the loan.
My recommendations to you:
* Do NOT sign a quit claim deed without first talking to your attorney
* Check out the website
* Contact a local Realtor and get an up to date estimate of the value of the home
* Speak to your ex re: an updated plan that will include her refinancing, or waiting for a period of time to sell so as not to have a short sale on your record - if you are on speaking terms
* Email her a synopsis of your conversation to ensure 'buy-in'
* Contact your attorney and have the divorce decree updated to reflect the new terms
Just in case you have the question of what's worse...? This is the order of what's hardest on your credit:
* Short sale without any missed payments -- and these are now available!
* Short sale with missed payments
* Deed-in-lieu of foreclosure; this is when the lender agrees to take the keys and deed without going through the foreclosure process. Hopefully, this is with as few as possible missed payments
I sincerely hope this helps, Paul. And, remember: Due to your being on the deed and the mortgage you have the same rights to information as your ex does!
Best of luck!