Tuesday, March 22, 2016
TRANSFERING THE MARITAL HOME ISSUES - AN OPINION
I have an opinion based upon several consultations and cases I have handled.
Marital residences are divided in most divorces. Recently I saw several separation agreements and/or stipulations of settlement that just list the property and state which party gets the home. But if the home is to be transferred, a deed should be prepared, signed and filed simultaneously with the agreement, since the separation agreement clause, standing alone, will not be effective to transfer title.
And while it is true that when the home is mortgaged, an "assumption clause" would be used, making one of the parties responsible for the mortgage (and perhaps binding him/her to hold harmless and indemnify the other in regard to the mortgage debt as such transfers generally do not trigger the "due on sale" clause contained in most mortgages under the Garn – St. Germain Depository Institutions Act of 1982, 12 U.S.C. 1701j-3) may not be the best approach.
Assume the following: the agreement provides that the the departing spouse, the transferor, agrees that the house will be transferred to the remaining spouse, the transferee, but the departing spouse will be responsible for the mortgage. A deed may or may not have been signed and filed. Later, departing spouse, for whatever reasons stops payment. Foreclosure action begins.
Assume the following: the agreement provides that the the departing spouse, the transferor, agrees that the house will be transferred to the remaining spouse, the transferee, who will be responsible for the mortgage. After the agreement and judgment, a deed is prepared, signed and filed but there was no discharge from the bank to the departing spouse. Later, remaining spouse, for whatever reasons stops payment. Foreclosure action begins.
A best practice would be for the home to be transferred with the transferee refinancing the original debt thereby discharging the transferor spouse. Under this view, the departing spouse, the transferor, is paid its equitable share and is gone. The transferee, the remaining spouse, is responsible for the mortgage. However, financial circumstances may not allow this and each party should be made aware of the potential risks involved.