In their separation agreement, DH gave his ex their home. He signed a Quit Claim and the house is now only in her name. The mortgage however is still in both their names. The separation agreement states DH is not responsible financially for the home, but the fact that his name is still on the mortgage concerns me. What can DH do to have his name removed from the mortgage? If she defaults on her mortgage payments, will it affect his credit? What recourses does he have?
To my knowledge the only way to have his name removed from the mortgage is to have her refinance into her name only. Until that is done…he is tied to that mortgage and if she defaults, pays late…it can affect his credit. The banks don’t care about divorce, they just look at the loan, and who signed on the line to be responsible.
Follow-up question:
My husband called the mortgage lender and was told that his ex can assume the loan and remove his name from it without having to refinance. However, she needs to make the request herself since she will be assuming complete financial responsibility. There is a fee associated with this process that can range anywhere between $500-1000.
Currently, we can’t afford to pay the fee and we doubt she will willingly pay it herself. So my question is, if she defaults and we end up having to pay the mortgage to keep DH’s credit from getting affected, besides suing her for that money, can DH claim the house or foreclose/force her to sell it? If he can force her to sell it, would he be entitled to any capital gains at that point (currently he’s not because he gave her the house in the sep agreement) or just the money he has spent making the mortgage payments?
If the separation agreement does not require the ex to refinance the mortgage, or otherwise remove the other party from the loan, there is no recourse other than to force her to indemnify the other party in the event of default.
As far as the mortgage company is concerned, in the event of default they can still go after the other spouse personally in the event of default she will have to indemnify him for any damages. Unfortunately this will not prevent his credit from being damaged.