MORTGAGE FORECLOSURE

Another situation I find common at the Settlement Conference is that both Husband and Wife are on the Deed but only one spouse is on the Note and Mortgage. In such a case, the initial closing documents must be examined because if Husband and Wife want to remain in the home, it may be that the parties can allow the house to go into foreclosure because the bank can only foreclose on one spouse's interest. The bank will have to wait until the defaulting spouse dies or the parties divorce before they can foreclose on their interest. This is the protection only afforded to spouses who hold real estate as "Tenant's By The Entirety" as explained in the below article from the NY Times (although from 1997, the rules have not changed):

"June 8, 1997
YOUR HOME
Addressing The Forms Of Title
By JAY ROMANO
Correction Appended

MOST homebuyers know that what comes along with a house is its title. But what is often not noted is that there are various forms of title, and various ways that title can be held. In fact, real estate experts say, such seemingly arcane points can have significant practical and financial consequences when the time comes to sell the property or pass it on to one's heirs or beneficiaries.

Here, then, is a lay person's guide to Property 101.

''The standard form of title to real estate is called 'fee simple' title,'' said Christine F. Li, a Woodbridge, N.J., lawyer who specializes in real estate. ''Fee simple simply means that you own a particular piece of property,'' Ms. Li said, adding that ''you'' could mean one or more individuals, a husband and wife, a partnership, a corporation or various other legal entities that can be created to hold title to property.

Fee simple ownership, Ms. Li said, carries with it the right to possession of property and the right to sell that right to others -- either temporarily, as with a lease, or permanently, through a subsequent fee simple conveyance to someone else.

With individual ownership, for example, an individual owner can typically sell the property at any time (subject to paying off any outstanding mortgages, of course). If the property has not been sold before the owner's death, Ms. Li said, ownership will pass to the decedent's beneficiaries if there is a will or to his or her heirs if there is not.

Aside from individual ownership, she said, there are three basic ways for more than one person to take fee simple title to real estate: as tenants in common, as joint tenants with the right of survivorship and, when the parties are husband and wife, as tenants by the entirety.

With a tenancy in common, said Michael Schlesinger, a Manhattan real estate lawyer, each owner owns a specific percentage interest in a piece of property. If that interest is not defined, Mr. Schlesinger said, the presumption is that each owner owns an equal share. Moreover, he said, absent language to the contrary, co-owners who are not husband and wife are typically presumed to be tenants in common.

With a tenancy in common, Mr. Schlesinger said, each owner generally has the right to sell his or her interest or to pass that interest to heirs or beneficiaries.

For that reason, Mr. Schlesinger said, it is often wise to have a written agreement when purchasing property with someone other than a spouse. For example, he said, it usually makes sense for both parties to agree to a ''right of first refusal'' whereby an ownership interest cannot be sold without the interest first being offered to the co-owner. Unless there is a specific agreement to the contrary, or unless the parties have taken title as a legal partnership, the law presumes that any owner has an absolute right to do whatever he or she wants with an interest in real estate.

Another common presumption of property law in many jurisdictions -- including New York and New Jersey -- is that when parties buying a primary residence indicate they are husband and wife, the form of title is automatically considered a tenancy by the entirety unless otherwise specified. Connecticut does not recognize tenancy by the entirety.

''A tenancy by the entirety is for husband and wife only and only for the primary residence,'' Mr. Schlesinger said, adding that such form of title ''goes back to the ancient concept of preserving the marital abode.''

Mr. Schlesinger explained that tenancy by the entirety is a form of joint tenancy with the right of survivorship. In a joint tenancy, he said, each owner is considered an owner of the entire property. The right of survivorship, he said, means that when a joint owner dies, the deceased owner's interest in the property essentially vanishes, leaving the surviving owner or owners to automatically succeed to the deceased owner's former interest.

With a joint tenancy -- including a tenancy by the entirety -- a deceased owner's interest does not ''pass through'' the decedent's estate, Mr. Schlesinger said.

That means that property held as a joint tenancy cannot be passed to beneficiaries or heirs. Moreover, he said, a joint tenant cannot sell his or her interest in the property without the consent of the other joint owner.

Generally speaking, Mr. Schlesinger said, the only way for a joint owner to dissolve a joint tenancy without the cooperation and consent of all other owners is through what is known as an action for partition, whereby the court is asked to separate the ownership interests of the respective parties.

The basic difference between a joint tenancy and a tenancy by the entirety, Mr. Schlesinger said, is that with the former, a joint owner's creditors can force a partition of jointly owned property to recover a judgment. With a tenancy by the entirety, that is not permitted.

''That means that if a husband and wife own their house as tenants by the entirety, and the husband owes back taxes, the I.R.S. is going to have to wait until the wife dies before it can go after the house,'' Mr. Schlesinger said. ''And if the husband dies before the wife, the I.R.S. is out of luck.''

In fact, he said, there is only one way that a tenancy by the entirety can be dissolved without the consent of both spouses: ''It's called a divorce.''

In fact, divorce is one way in which a person's title to property can change without the execution of a new deed. The death of a joint tenant is another.

Richard Sussman, a Manhattan real estate lawyer, explained that when a joint tenant dies, that person's ownership interest passes automatically to the surviving joint owners. With a tenancy in common, on the other hand, any change in ownership interest would have to be made with a deed executed either by the person who is selling his interest or by the executor or administrator of that person's estate.

There are times, however, when it is wise to keep real estate paperwork up to date after the death of a joint tenant or the divorce of tenants by the entirety.

Eliot Zuckerman, a Manhattan co-op lawyer, explained that since Jan. 1, 1996, married couples who take title to shares of a co-op as their principal residence are presumed to be doing so as tenants by the entirety. While such a presumption would generate little difficulty for the owners of real property in the event of a subsequent death or divorce, it can cause a significant headache for owners of shares in a co-op corporation.

''This is coming up more and more often,'' Mr. Zuckerman said, explaining that owners of co-ops who do not request new stock certificates upon divorce or the death of a joint tenant could find themselves unable to sell their unit without having to go through a legal obstacle course to have new stock certificates issued.

''I've had closings adjourned because of this,'' Mr. Zuckerman said, adding that to have new certificates issued long after the death of a joint owner it is typically necessary to reopen the estate and have the administrator or executor fill out the necessary paperwork.

And that, Mr. Zuckerman said, can be easy when compared to tracking down an ex-spouse and asking for a favor.

Correction: June 22, 1997, Sunday The ''Your Home'' column on June 8, about ways in which title to real estate can be held, misstated the availability of the form known as ''tenancy by the entirety.'' That form of ownership, available to married couples only, can be used in New York and New Jersey for any real estate; it is not confined to a principal residence. (''Tenancy by the entirety'' is not recognized in Connecticut.)"