Refinance of home must wait for divorce

Q: I am sole owner of a property. My husband signed a quit claim deed when I purchased this place. I am no longer on speaking terms with my husband and will be filing for divorce soon. My question is, can I refinance on my own? Does my husband have to sign the quitclaim deed again? I am sure he won’t. What are my options?

A: I’m sorry to hear that you are heading for a divorce. Unfortunately, your situation is not that unusual these days. But what complicates matters for you is that you want to refinance your mortgage while your spouse refuses to cooperate with you.

Many married people own property as their “sole and separate estate” and since Washington is a community property state, mortgage lenders want to make sure that the spouse who is not on title to the property has affirmatively agreed that they have no ownership interest in the property. That’s why lenders typically require the spouse who is not on title to sign a quitclaim deed and/or other documents at the close of any new mortgage on the property. They want to protect themselves from potential litigation by a spouse claiming that their community property rights in the property have been violated.

Even in good marriages, this can be a problem when one spouse either doesn’t want to sign the papers or the spouse who owns the property doesn’t want the non-owning spouse’s name to appear on any documents related to the property. This recently happened with clients at my mortgage company. The lender wanted the non-owning spouse to “acknowledge” (i.e. sign) the deed of trust, which is the security instrument that gives the lender the right to sell the property at a foreclosure auction if the borrower fails to make the monthly mortgage payments. The borrower did not want his wife’s name to appear on any loan documents at all, even though she would have no ownership interest in the property nor responsibility for the mortgage payments. The lender merely wanted the spouse to acknowledge that she was aware that her husband was refinancing the mortgage on the property. We had to get a real estate attorney to talk to the borrower to convince him that letting his wife sign a couple of documents required by the lender in no way jeopardized his separate ownership of the property.

So if we run into problems like that with couples who are still married, imagine how difficult it will be to get a non-owning spouse to sign loan documents when the marriage is falling apart. And with today’s very strict loan underwriting standards, I can virtually assure you that you won’t find a mortgage lender willing to refinance your mortgage without getting your husband to sign documents to acknowledge the loan and/or sign a quitclaim deed to give up any ownership interest in the property.

Therefore, I’m afraid that you will have to wait until your divorce is final to refinance your property in your name only because lenders face too much risk if they allow you to take out a new loan on the property without having your husband give up his potential community property interest.

Steve Tytler is a licensed real estate broker. You can email him at business@heraldnet.com.

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