Written by Joseph Shagena.
Having a mortgage broker who understands the Collaborative Law process is beneficial when it comes time to engage in a discussion regarding marital real property. Often both spouses wish to retain the same piece of real property (typically their family home). Before engaging in a discussion of which spouse keeps real property, it is important to preliminarily analyze whether a spouse is able to qualify to retain the property, versus qualification to obtain another, perhaps less expensive, residence.
The structure of the financial settlement between the parties could also have an effect on a participant’s ability to refinance or obtain a new residence. Advance preparation is vital before a participant applies for a mortgage loan. A mortgage broker can assist a participant who has limited credit, income and/or asset, particularly where the participant’s credit was historically otherwise good, but has been impaired due to the divorce process. Mortgage brokers can counsel participants on ways to help lift credit scores, remove old delinquent accounts and take advantage of rules that may allow some delinquent accounts to not be counted towards mortgage qualification.
A Mortgage Buyout Case Study
A person going through a divorce called a mortgage broker, frantic that the credit union had declined a revised loan which they were currently servicing, due to a valuation issue (appraisal below 80% LTV). This person had placed the other spouse on the title of the home less than 3 years before and had now agreed to buy out the other spouse’s interest for $19,000, which caused an administrative issue within the credit union. The homeowner’s credit was good and had sufficient income, but this property value was further complicated because there was another home deeded on the same lot, which created difficulty for the appraiser in finding comparable homes. Unfortunately, the client had not retained a mortgage broker early in the divorce process and had less than three weeks to accomplish the mortgage buyout, in order to meet the deadlines in the parties’ Separation Agreement. Thankfully, the mortgage broker was able to coordinate with the appraiser, the credit union and the title company, in order to close the loan with another lender, within the requisite time frame.
This example (which actually happened) illustrates the benefit to participants of early involvement by a mortgage broker. Even if a participant appears on paper to have sufficient assets to refinance, peculiarities in the mortgage process and with language in the separation agreement may hamper a participant’s ability to timely complete the refinancing process. It is better for participants to know up front, during the negotiation process, whether they can clear obstacles to refinancing, rather than creating an agreement which cannot be fulfilled.
A collaboratively trained mortgage broker understands the collaborative process and can help guide the participants and their attorneys to craft a successful agreement regarding their real property. Best of all for the participants, the mortgage broker is compensated by the clients after closing and takes no fees up front for work done in the Collaborative Divorce, which can be a relief to participants who are concerned about legal fees.