Divorce does not change mortgage obligation
Q. My wife and I were divorced about a year ago. Part of our agreement was that she got to stay in the house for one year and then she would have to either sell the house or refinance the house and get me off the mortgage. The agreement also states that she would be responsible for all expenses concerning the house, including the mortgage.
I just found out that my ex-wife has not been paying the mortgage. I know she has been sick and apparently she has been unable to make the payments. I contacted the mortgage company and found out she is two months behind and they are getting ready to start foreclosure.
As I am still on this mortgage, will this affect me? Does this affect my credit rating? I was going to try and buy a house when she took me off the mortgage so the last thing I need is a foreclosure on my record. Does it help me that the settlement agreement states that she is responsible for the mortgage?
A. It is fairly common that one of the parties of a divorce remains in possession of the marital residence after the divorce is final. It is also common that in the event the occupying party wishes to remain at the property for any length of time, the settlement agreement makes a provision for a sale or refinance of the property to remove the non-occupying party from the mortgage obligation.
Unfortunately, there are two major problems with these types of arrangements. One, so long as the non-occupying party remains on the mortgage, that obligation is deemed a primary obligation by the credit world. Unless the non-occupier earns a great deal of money, he or she will probably be unable to qualify for another loan. The second problem is your problem. Defaults by the occupying party are deemed defaults by all parties to the mortgage.
The language in your settlement agreement means nothing to the mortgage company. They have two signatures on the note and mortgage and therefore they have two parties primarily liable for the mortgage obligation. Ultimately, if you suffer a loss as a result of your ex-wife's actions, you may be able to recover your losses from her, depending upon the terms of your settlement agreement. However, the mortgage company will not treat your default any differently due to the terms of your divorce settlement.
As for advice, first, I would take whatever action necessary to prevent the mortgage company from commencing foreclosure proceedings. If this entails advancing money on your ex's behalf, so be it. Next, I would speak to your ex about how she intends to maintain the mortgage obligation (and pay you back). If her situation is such that she in now unable to maintain the mortgage, list the house for sale immediately. If she will not agree to that, you may be able to convince a judge to order it, based upon her failure to comply with the terms of the settlement agreement.