Archive for the ‘Avoiding Disaster: Divorce and Mortgages’ Category

Avoiding Disaster: Divorce and Mortgages

Saturday, August 24th, 2019

Are you preparing for a divorce and have a mortgage on a home or other property?  Valuing these assets is fundamental in order to ensure that you receive a fair shake in severing your marriage.  What common issues need to be clear moving forward on a path to becoming single again? There are several, but the mortgage holder is almost always the key to knowing who should stay in the home and who goes.  Unless you want to be roommates with your ex for the foreseeable future, follow this advice.  

A retired Chancellor from Rankin County, Honorable John Grant, used to say repeatedly that “Two can live cheaper than one”. The reason that credit bureaus will ding your score for a divorce is quite clear:  unless your income increases substantially, a divorce will always negatively impact your overall financial health. When two people own a home in a community property state such as Mississippi, they have essentially formed a joint business venture.  When the home is mortgaged in both parties’ names, both incomes are considered by the bank in determining whether or not to grant the loan application and provide credit. They are not particularly keen on allowing an otherwise responsible obligor (or “customer” in bankspeak) off of the hook.  Why should they be? They have a responsibility to their shareholders to ensure investment in mortgage assets are repaid at as high a rate as possible.

Very many divorced people ask me after the fact why it is that they cannot repurchase another home.  Unfortunately they have almost always suffered from poor lawyering and improper preplanning for severing marital ties.  The gist of their now major disaster is that their attorney did not make adequate provision in the dissolution agreement for the marital home.  They simply stated that one party, we will just say the wife for example, keeps use and possession of the home. Frequently a wife with children will stay in the home if she can afford it.  So the story usually goes as follows…Husband is on the mortgage. Husband assumes that he is off the hook for liability with the bank. Husband applies for a loan, only to be rejected due to a poor-debt to income ratio.  This all could have been very easily avoided.

A simple provision that stated, for instance, “Wife agrees to obtain separate financing for the marital home within 60 days or to list the home for sale at or below current appraisal value” would have done the trick.  Sale price and who decides upon that price can also, and should be laid out clearly prior to divorce. It still amazes me that some lesser experienced lawyers get their clients stuck in a hellish quagmire such as this.  It can and should be avoided with some degree of foresight. Fixing this issue can cost far more than doing it correctly the first time around. I have seen people that have unfortunately spent fifty of more hours in attorney time to clean up this type of mess.  

In the end, be sure that your attorney has discussed with you the best path to rectify any outstanding financial obligations, especially your mortgage.  Ensure that no assumptions are made moving forward. Ask your lawyer every question related to protecting your future and that of your kids. And after the emotional haze of divorce clears, never forget that two really can live cheaper than one.


Matthew Poole is a Jackson, Ms custody and divorce lawyer and a 2015 and 2018 N.F.L.A. top ten domestic lawyer, 2019 Birdeye top family attorney, and 2003 finalist of the Steen Reynolds trial competition at the University of Mississippi School of Law.  He was a Second-Century Scholar at Millsaps College in 2001.