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Some things should be taken care of prior to completion of the divorce or they may come back to haunt one of the parties for years to come. When people get divorced in Michigan or anywhere else in the country, one of the divorcing parties will often sign a deed to the marital residence over to the other party as part of the property division agreement. This could become problematic if the party leaving the house is not removed from the mortgage document.
If the party who is exiting remains on the mortgage that information will continue to be reported and may prevent that person from obtaining new financing, credit cards or similar benefits. The typical way to handle this problem is to have the spouse who is keeping the property refinance the loan in his or her name alone prior to the finalization of the divorce. This guarantees that the exiting spouse will not have problems with his or her name remaining on a mortgage that is no longer relevant.
What is normally done is that a transfer of the marital property of the home residence to one of the parties is decided on as part of the property division negotiations. Due to both names appearing on a mortgage of record, the new deed from the exiting spouse to the spouse keeping the home will be held by one of the lawyers until the party keeping the home gets approval for and signs a new mortgage. Then the deed may be recorded and the papers for finalizing the divorce may be filed with the court.
Relying on the cooperation of the other spouse years after the divorce can turn out to be futile and potentially disastrous. Good lawyering in Michigan and elsewhere protects the client’s interests by making it obligatory that the mortgage be changed to eliminate the exiting spouse’s name. The only other simple resolution to this problem is to require that both spouses agree to a sale of the house and splitting the proceeds as part of the property division agreement.
Source: chieftan.com, “Divorce doesn’t wipe out mortgage,” Gary M. Singer, July 5, 2013