When applying for a mortgage as a married couple, they often take title to the property jointly. If a divorce occurs, the outcome of the home becomes complicated and the couple may end up having to face a foreclosure.
Obtaining the help of a Miami foreclosure defense attorney can ensure you achieve the best possible outcome. To educate individuals during this difficult time, here are the alternatives to foreclosure available to a couple in divorce.
When Neither Spouse Intends to Keep the Home
If neither spouse wishes to keep the home, here are the options to avoid a foreclosure.
- Sell the Home – The most popular option when neither party intends to jeep the home is to sell the property. If the amount owed is greater than the value of the property, it may be difficult to sell the home to help pay off the debt.
- Short Sale – A short sale is when a home is sold for less than the total debt balance remaining on the mortgage and the lender accepts the earnings. In some instances, the difference between the sale price and the remaining debt will be forgiven. In other cases, both spouses will be liable for the deficiency.
- Deed in Lieu of Foreclosure – A deed in lieu of foreclosure is when a lender agrees to accept a deed to the property as an alternative to foreclosure. In order to avoid a deficiency judgement, the agreement must explicitly state that the transaction is in full debt forgiveness. The deficiency amount is the difference between the market value of the home and the total debt.
- Rent Out the Home – If the homeowners are unable to sell the home or complete a deed in lieu of foreclosure, another option is to find tenants to rent out the property and apply the rental income toward the mortgage. This is not a viable option for some as is still holds the divorcing couple responsible.
If One Spouse Intends to Keep the Home
If one party in a divorce intends to keep the home. here are the options to do so and avoid foreclosure.
- Take Over the Mortgage – In the instance where one spouse wishes to keep the home, that spouse can take over responsibility for the loan. Under the Garn-St. Germain Act, lenders may not enforce a due-on-sale clause in the event in which a property is transferred as a result of a divorce or legal separation.
- Refinance the Mortgage – Another option to avoid foreclosure is for the spouse to refinance the mortgage in his or her own name. In this case, the co-borrower is ultimately released from the debt. Refinancing may not be allowed if the property is severely in debt or the homeowners are already delinquent on payments.
- Loan Modification – Another option to avoid foreclosure is to apply for a loan modification. It is a permanent restructure of the mortgage where one or more terms of the loan are changed to provide borrower a more affordable payment. If both spouses signed the initial loan, then both parties will have to sign the modification. However, if the divorce has been finalized and one spouse has been given the property, then that spouse can apply for the modification without the other spouse.
Talk to An Expert
Deciding on any of these can be very difficult, especially during divorce proceedings. If one wishes to avoid a foreclosure during a divorce, it is advised to seek help from one of our expert Miami foreclosure defense attorneys at Graham Legal, P.A. today to find out the best possible option to avoid foreclosure.