Divorce and keeping home

S

squire

New Member
Jurisdiction
California
Asking for a non-native-speaking friend…California…

My friend has been married for seven years, a citizen for two years. Her husband owned their home (I assume before they married, not sure).

A year ago, they bought a second property (condo). My friend put $130k down of her own money (20% down payment). I believe she makes the loan payments while her husband pays utilities, and they rent the other place out. Her goal was to buy this place on her own, but she is a hair stylist on 1099, so they are co-borrowers on the loan.

She wants a divorce, they have no children. She just wants to maintain ownership of this condo and let him have the other, not looking for spousal support.

It seems divorce would require her to refinance as a sole borrower. The problem is that she can't qualify for a new loan, as a self-employed hairstylist, in the eyes of the lender. Her family is in another country, she has no one who can help as co-borrower or cosigner.

Are there no other options to keep the property and continue to make payments to the bank?
 
I strongly suggest she obtain the services of a divorce attorney.

Mortgage contracts have a due on sale clause but there is often an exception for a transfer of ownership as a result of divorce (intrafamily).

She can probably continue to make the payments but he would still be a co-owner of the property and responsible for the loan if she defaults. He might be the one who wants to divest himself of that obligation.

In exchange, she could seek enough cash out of the value of his home (also community property) to pay off the mortgage.

Again, she needs a divorce lawyer who speaks her language, not a friend who is relying on strangers on the internet.
 
Thanks, that's exactly what I was thinking, mainly that it was possible a divorce settlement could keep him on the loan (she doesn't want to get money out of him). I had mentioned that to her, and to talk to a lawyer, but she said nothing could be done, so I was looking for an opinion to back me up and maybe convince her to get help. Appreciate the advice.
 
squire said:
Are there no other options to keep the property and continue to make payments to the bank?
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She likely can assume title and keep the current loan. Divorce is one of the situations covered in the federal Garmin-St. Germain Depository Institutions Act of 1982 (12 U.S. Code § 1701j–3). This law prohibits the lender from enforcing a due on sale/transfer law in several common situations, usually involving transfers to co-owners or family members. A transfer by divorce is one of them. So if she gets the home and continues to make the mortgage payments the lender probably cannot force her to refinance the place. She should discuss this with a divorce attorney, which she should do anyway because the community property laws in CA apply certain presumptive rules about what each spouse owns. She may be entitled to more than she realizes and ought to know what her options are. She doesn't have to squeeze her spouse for every penny but she shouldn't easily give up rights she already has under federal law and community property either.
 
Thank you, very helpful information. This will help me encourage her to speak to a lawyer—I'm sure she can find one that speaks her native language in the are she lives.
 
Tax Counsel said:
She likely can assume title and keep the current loan. Divorce is one of the situations covered in the federal Garmin-St. Germain Depository Institutions Act of 1982 (12 U.S. Code § 1701j–3). This law prohibits the lender from enforcing a due on sale/transfer law in several common situations, usually involving transfers to co-owners or family members. A transfer by divorce is one of them. So if she gets the home and continues to make the mortgage payments the lender probably cannot force her to refinance the place. She should discuss this with a divorce attorney, which she should do anyway because the community property laws in CA apply certain presumptive rules about what each spouse owns. She may be entitled to more than she realizes and ought to know what her options are. She doesn't have to squeeze her spouse for every penny but she shouldn't easily give up rights she already has under Illinois divorce mediation, federal law and community property either.
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Thank you for sharing such information.

Any suggestion for best attorney there?
 

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