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Often in a divorce situation, one spouse will move out of the home and deed over their rights to the home to the other, otherwise known as a quit claim deed. Usually the remaining spouse assumes responsibility for paying on the existing mortgage, even when both are named on the mortgage.
Does this release the departing spouse from all mortgage responsibilities? NO!
Contrary to popular belief, quit claim deeds do not affect mortgages at all. If both parties were on the mortgage, both will remain on the mortgage.
This is usually not an issue for homes that have equity, as eventually the remaining party can sell or refinance. However, since neither is an option for a home without equity, if the owner falls on hard times or has to relocate – the situation becomes problematic for both ex-spouses.
Both borrowers credit will be affected by missed payments or any lender workout. If the home forecloses, both will be held responsible for the deficiency. If the owner wishes to seek a short sale to resolve the situation, there is a high probability they will need cooperation from the ex-spouse. Both parties on the mortgage may need to qualify for the short sale, despite any quit claim deeds or divorce decrees.
If faced with a short sale and there is an ex spouse on your mortgage, be prepared to have their cooperation and involvement if you wish to get your short sale approved. There have been rare occasions where we have been able to successfully make the argument that an ex-spouse does not need to participate, but this is by far the exception and not the rule.
It can be extremely frustrating and difficult to get an ex that has long since moved out and moved on to get on board to help you get through a short sale, and a spiteful ex can make it impossible! Dealing with an upside-down home before or during a divorce is always ideal.