Tif fany Hughes

D IVORCING YOUR MORTGAGE

July 2016 Issue

Kit Crowne

D I D Y O U K N O W ?

A little history for the day…

July 4, 1776

July 2, 1776, marks the day the Declaration of Inde-pendence was voted in secretly by Congress for independence from Great Britain. The first sign of how this day would be cele-brated was on July 3, 1776 from John Adams to his wife, Abigail, stating “pomp and parade, with shows, games, sports, guns, bells, bonfires and illuminations.” In 1826, John Adams and Thomas Jefferson, both signers of the Declaration of Independence, died on July 4—50 years after the adoption.

However, July 4th was not the actual day the Declara-tion of Independence was voted on and signed—It was July 2nd. A copy of the Declaration was provided to the Colony Press on July 4th and it was made public on July 6th.

The Marital Home “To Sell or Not To Sell” - That is the Question

When there is a marital home (or other real estate) involved in a divorce situa-tion, the same question almost always arises: “What should we do with the marital home?” Typically, many reasons to keep the home and many reasons to sell the home are present and as the advisor, a neutral approach is needed to separate the emotion from the economics.

Do we keep the home until the children are out of school?

Do we sell the home, divide the proceeds and go our separate ways?

Do we have any equity in the home or are we underwater?

Do we refinance the home in one of the spouse’s name only?

Do we sell the home and each rent until ready to purchase again?

Each question is a valid question; yet each question may also have its own set of consequences that need to be addressed. While the housing market contin-ues to recover making it somewhat easier to answer questions where equity is a concern, many divorcing clients may still need guidance for their post-divorce housing.

When the decision has been made to sell or to retain the marital home, a new set of questions is derived and the question of current value is always at the top of the list.

When selling the home, working with a professional real estate agent can help determine the value or best selling price. When the decision is made to retain the marital home and refinancing the mortgage into one spouse’s name, an appraisal from the lender’s appraiser is required. Obtaining an independent appraisal PRIOR to refinancing will only incur additional costs for the divorcing clients as the lender will always require their own appraisal.

When divorcing couples face selling the marital home with a mortgage still underwater in a short sale or even faced with foreclosure, it’s important to document this event in the marital settlement agreement for future mortgage financing. Documenting these events in the marital settlement agreement may help clients meet the extenuating circumstances for a shorter waiting period before obtaining future financing.

Selling or Retaining the Marital Home

Kit Crowne,

Loan Of f icer

Right T rac F inancial Group, Inc

Direct : 860.647.7701 x125 k i t@r ight t racfg.com NMLS ID 49595

Page 2 Andy Sikora , Cert i f ied Liabi l i ty Advisor Page 2 Andy Sikora , Cert i f ied Liabi l i ty Advisor Page 2

www.KitCrowne.com

Kit Crowne, Loan Off icer

Extenuating Circumstances for Derogatory Credit Fannie Mae updated the Seller Guide with regards to Extenuating Circumstances for Derogatory

Credit which may help to benefit Divorcing Clients.

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substanti-ate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include:

Documents that confirm the event such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.; and

Documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event such as a copy of insurance papers or claim settlements; property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.

When you are working with divorcing clients and the divorce decree makes note of the clients filing bankruptcy, agreeing to short sale the marital home or allow the home to go through the foreclosure process, the clients may qualify for a shorter waiting period to purchase or refinance due to extenuating circumstances. It is important to note however, that the event must be documented in the divorce decree as related to the divorce process.

Knowing the facts with regards to divorce and mortgage guidelines can significantly help your divorcing clients. The chart on the following page shows that the waiting periods for future mortgage financing when divorce is documented as an extenuating circumstance can cut the waiting periods down to 50% of the current required waiting periods.

Continued on next page.

“TOPGRADING” YOUR Divorce TEAM

“Nothing matters more in winning than getting the right people on the field. All the clever strategies and advanced technologies in the world are nowhere near as effective without

great people to put them to work.”

—Jack Welch, Winning

In today’s challenging business market, any misstep can be devastating and very costly. Topgrading is designed to make certain that you have the very best opportunity to add ‘A Players’ to your team and avoid the cost of mistakes.

Topgrading is the art of packing your team with all high performing ‘A’ players.

Page 3 Kit Crowne, Loan Off icer

www.KitCrowne.com

Extenuating Circumstances Continued Below are the current waiting periods with and without extenuating circumstances for Fannie Mae financing requirements.

Event Waiting Period Extenuating Circumstances

Bankruptcy (Chpt 7 or 11) A 4-year waiting period is required, measured from the discharge/dismissal date of bankruptcy action

A 2-year waiting period, measured from the dis-charge/dismissal date of bankruptcy action.

Bankruptcy (Chpt 13) 2-years from Discharge Date

4-years from Dismissal Date

2-years from Discharge Date

2-years from Dismissal Date

Foreclosure A 7-year waiting period is required, measured from the completion date of the fore-closure action.

A 3-year waiting period, measure from the completion date of the foreclosure action. Additional requirements apply between 3 and 7 years which include:

Maximum LTV, CLTV or HCLTV ratios per the Eligibil-ity Matrix.

The purchase of a primary residence only. (All other occupancy types must wait the full 7 year waiting period)

Limited cash-out refinance are permitted for all occupan-cy types pursuant to the eligi-bility requirements in effect at the time.

Deed-in-Lieu of Foreclosure, Pre-foreclosure Sale (Short-Sale), and Charge-Off of a Mortgage Account

A 4-year waiting period is required from the completion date of the specific action.

A 2-year waiting period is permitted if extenuating circumstances are document-ed.

W h y y o u N e e d a C e r t i f i e d D i v o r c e L e n d i n g P r o f e s s i o n a l ( C D L P ) o n Y o u r P r o f e s s i o n a l D i v o r c e T e a m .

A professional divorce team has a range of team players including the attorney, financial planner, accountant, appraiser, mediator and yes, a divorce lending professional. Every team member has a significant role ensuring the divorcing client is set to succeed post decree.

A Certified Divorce Lending Professional brings the financial knowledge and expertise of a solid understanding of the connection between Divorce and Family Law, IRS Tax Rules and mortgage financing strategies as they all relate to real estate and divorce. Having a CDLP on your professional divorce team can provide you the benefit of:

A CDLP is trained to recognize potential legal and tax implications with regards to mortgage

financing in divorce situations.

A CDLP is skilled in specific mortgage guidelines as they pertain to divorcing

clients.

A CDLP is able to identify potential concerns with support/maintenance

structures that may conflict with mortgage financing opportunities.

A CDLP is able to recommend financing strategies helping divorcing clients identify

mortgage financing opportunities for retaining the marital home while helping to ensure the ability to achieve future financing for the departing spouse.

A CDLP is qualified to work with divorce professionals in a collaborative setting.

A CDLP can provide opportunities in restructuring a real estate portfolio to increase available

cash flow when needed.

A CDLP maintains a commitment to remaining educated and up to date in the ever changing

industry guidelines and tax rules as they pertain to divorce situations.

A CDLP is committed to providing a higher level of service to you and your

divorcing clients.

The role of the CDLP is to help not only the divorcing client but the attorney and financial planner

understand the opportunities available as well as the challenges divorce can bring to mortgage

financing during and after the divorce. When the CDLP is involved during the divorce process and

not after the fact, many potential financing struggles can be avoided with valuable and educated

input from the Certified Divorce Lending Professional.

“Nothing matters more in winning than getting the right people on the field. All the clever strategies and

advanced technologies in the world are nowhere near as effective without great people to put them to

work.” - Jack Welch, Winning

This is for informational purposes only and not for the purpose of providing legal or tax advice. You

should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are

estimates provided for informational purposes only, and are subject to market changes. This is not a commitment to

lend. Rates change daily - call for current quotations.

Copyright 2016 All Rights Divorce Lending & Real Estate Association, LLC

The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.

Kit Crowne, Loan Officer

Right Trac Financial Group, Inc 110 Main Street,

Manchester, CT 06042

Direct 860.647.7701 x125

Kit@RightTracFG.com

www.KitCrowne.com

NMLS ID Personal 49595

NMLS ID Corporate 796583