- The Washington Times - Wednesday, January 26, 2005

Q: My wife and I are in the middle of a divorce, and we are jointly liable for paying the

mortgage on the house. We have agreed that she will stay in the house as long as my name can be taken off the mortgage note.

We called the bank, and a representative told us that the only way we can accomplish this is to refinance the loan in my wife’s name.

I am worried that she may not be able to qualify for the mortgage on her income. I don’t want to be taken off the title of the house if I am still liable on the mortgage.

Are there any other options? Please give me some advice.

A: It doesn’t surprise me that your lender is refusing to remove your name from the mortgage note. First, it makes sense that they would prefer to have two persons rather than only one person obligated on the note.

You were originally approved with you and your wife jointly liable to pay back the loan, so why would they let you off the hook? Remember also that most mortgage loans are packaged in bundles and sold to investors as mortgage-backed securities.

Lenders who sell these loans are warranting to the buyers that each loan in the “pool” meets certain requirements regarding things such as borrower qualification, credit history and down payment. Removing your name may make your loan ineligible for sale.

Of course, it would be easier if the lender would simply erase your name from the note.

However, before you give up, refinancing could very well be a viable alternative. Thanks to the myriad mortgage programs available, my guess is that you and your wife will be able to solve the problem. The first thing you have to do is establish your objectives.

Here are some questions:

• What’s the current interest rate on the mortgage? Market rates could be lower today, creating a second reason to refinance.

• How long does your wife plan to hold the property? A lot of folks take a 30-year mortgage without fully considering their long-term plans. “Intermediate” adjustable rates that carry a fixed rate for three, five or seven years might be something to look at, as these programs will carry a lower rate than 30-year fixed mortgages.

• Have you decided on an equity split? In most cases of divorce when a property is to be retained by one party, the equity needs to be divided. If this is the case, your wife would need to refinance to take cash out or take out a second mortgage.

• How do you know your wife won’t qualify for a new mortgage on her own? There are lots of ways for a borrower to qualify.

If her credit is good, the automated underwriting systems available today might accept a higher than normal debt-to-income ratio. Furthermore, programs that allow interest-only payments reduce the monthly obligation, making qualification even easier.

This brings me to a very important point. I’ve said many times that a loan is available for almost anyone in America — you just have to be prepared to pay for it. It’s important that your wife is truly able to afford a new financing package on her own.

Just because a lender approves her for a mortgage doesn’t mean she can afford it. She needs to sit down with a professional, run the numbers and review the options.

Then, if she’s still comfortable with taking on the new obligation, she can apply for the loan. If the numbers don’t work in her personal situation, both of you may need to change course and sell the property.

An experienced and knowledgeable loan officer will be able to help you and your wife make the right decisions.

Henry Savage is president of PMC Mortgage in Alexandria. Contact him by e-mail (henrysavage@pmcmortgage.com).

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