Breakup leads to buy­out, ques­tions about mort­gage

Sun Sentinel Broward Edition - Homespot - Broward East - - REAL ESTATE - By Ilyce Glink and Sa­muel J. Tamkin

Tri­bune Con­tent Agency Q: Ipur­chasedmy

home with a part­ner with­out be­ing mar­ried to him. My part­ner and I have split up; how­ever, he is will­ing to quit­claim the prop­erty over tome in ex­change for cash and mu­tual prop­erty. We have an at­tor­ney who will do the deed and con­tract for this agree­ment.

I am­now wor­ried that the bank may try and make me redo the loan, which I will not qual­ify for be­cause I am­self-em­ployed. I have an ex­cel­lent credit score and I pay all my bills be­fore they are due. My ex knows that this mort­gage will get paid. Will the bank just leave things the way they are if they are get­ting paid on the mort­gage note? A:

Usu­ally lenders won’t come af­ter a bor­rower un­der your cir­cum­stances. From a prac­ti­cal point of view, the lender wants its loan to be paid on time over its term. The loan doc­u­ments give the lender the right to call the loan, which means the lender can re­quire the loan to be re­paid in full upon the sale or trans­fer of the prop­erty. So if we step back a sec­ond, you are one of the two bor­row­ers and will buy out the other bor­rower. Once you do that, you will still be on the loan and on the ti­tle to the home, but your co-bor­rower will no longer own the home.

If you de­fault on mak­ing your pay­ments on the loan, the lender can still fore­close on the home to sat­isfy the amount you owe on the loan and can still sue you and your part­ner for any amount still owed af­ter the home is sold. Given th­ese cir­cum­stances, we’d find it hard to see why a lender would want to call the loan. But if the lender did, you ask, could it?

In the strictest sense of the loan doc­u­ments, the lender should be able to call the loan given a trans­fer or sale of the half in­ter­est in the home to you. You in­di­cated that you and your co-bor­rower were not mar­ried, but then the ques­tion be­comes whether you had a le­gal liv­ing ar­range­ment.

Un­der fed­eral law, your lender can’t force you to re­pay the loan un­der cer­tain sit­u­a­tions that most com­monly in­volve death or other life chang­ing sit­u­a­tions. The Garn-St. Ger­main Act pro­hibits lenders from call­ing a loan in sit­u­a­tions where the loan se­cures the pri­mary res­i­dence of the bor­rower and that bor­rower dies and the home passes to a spouse, chil­dren or other rel­a­tive. Also, in the case of di­vorce or a le­gal sep­a­ra­tion or prop­erty set­tle­ment agree­ment, the lender may not call the loan.

If you were not mar­ried and did not have an­other liv­ing ar­range­ment that could be con­strued as a le­gal part­ner­ship, the bank could call the loan. We’re not aware of any lender try­ing to call a loan in a sit­u­a­tion where a cou­ple is to­gether, but not mar­ried. There are more and more sit­u­a­tions where peo­ple de­cide to live to­gether with­out get­ting mar­ried and then break up. If each lender called a loan in that sit­u­a­tion, we could see an­other huge caseload of loans go­ing into fore­clo­sure. We doubt that would hap­pen.

We can’t tell you for sure that the lender would or wouldn’t call your loan, but we have a sense that most lenders out there wouldn’t call the loan so long as the monthly pay­ments are made on time and the new in­sur­ance cer­tifi­cate for the cov­er­age on the home still showed one of the orig­i­nal bor­row­ers on the loan.

You have an at­tor­ney who’s help­ing you out and knows the par­tic­u­lars of your sit­u­a­tion, so you should pose your ques­tion to her.

Ilyce Glink is the cre­ator of an 18-part we­bi­nar and ebook se­ries called “The In­ten­tional In­vestor: How to be wildly suc­cess­ful in real es­tate,” as well as the au­thor of many books on real es­tate. She also of­fers in­for­ma­tion on her YouTube chan­nel. (youtube.com/user/Ex­pertRealEs­tateTips).

Con­tact Ilyce and Sam through her web­site, ThinkGlink.com.

© 2016 Ilyce R. Glink and Sa­muel J. Tamkin. Dis­trib­uted by Tri­bune Con­tent Agency, LLC.

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