thefoos, Other/Just Looking in San Francisco, CA

Short sale credit rating effect on a divorced couple.

Asked by thefoos, San Francisco, CA Mon Jan 28, 2013

Scenario: A couple has divorced agreeing that the husband will own and maintain their primary residence and be responsible for the mortgage payments. The primary residence is under water ad the husband wants out. He and the ex-spouse agree to remove her name from the deed. He now wants to go through the short sale process. Will this affect the credit rating of the ex-spouse? If the lender refuses the short sale, will forclosure affect the ex-spouse's credit rating? If either answer is yes, is there anything the ex-spouse can do to protect he credit rating?

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Answers

4
Jen Pfeffer’s answer
I second Tim's and Janice's answers. It doesn't matter to the bank who's on the deed, that just shows ownership. What the bank cares about is who signed to take responsibility of the mortgage. If you are both on the mortgage, you both will be affected. You may get a good real estate attorney to handle negotiating the short sale with the lender, they may be able to show documentation from your divorce to help, but its a stretch. Good luck with everything!
0 votes Thank Flag Link Mon Jan 28, 2013
If the ex spouse is on the mortgage, then, yes, it will effect their credit rating. If the payments are kept current it will be a much smaller effect. Divorce constitutes a 'hardship' for the purposes of a short sale, so it's not likely he/she will not qualify.

You and your spouse should sit down with a licensed real estate agent who specializes in short sales right away to see whether the home qualifies for the government program, HAFA, and to explore options. You need to know positives and negatives. The bottom line is if the ex can no longer afford the mortgage, sooner or later they will stop making payments which will be a much more devastating negative affect on credit rating so the sooner you take action the better.
0 votes Thank Flag Link Mon Jan 28, 2013
Is the ex-spouse on the mortgage? If so, I suggest the ex-spouse see a good real estate attorney.
0 votes Thank Flag Link Mon Jan 28, 2013
The names on the deed are meaningless other than to say who owns the home. The names on the mortgage are the one that will be damaged by foreclosure or short sale which are both defaulting of the loan terms which BOTH names signed and agreed to. Yes, they will both be damaged.
0 votes Thank Flag Link Mon Jan 28, 2013
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