Mortgage Advice During Divorce with Scott Levin & Sam Mehta | Divorce and Home Loan Options

Hey everyone, this is Scott Levin, Chief Peacekeeper. I'm here with a good friend of mine, Sam Mehta. How are you, Sam?

Good, Scott. How are you doing?

Good. So Sam is with Blue Fire Mortgage Group, a really longtime professional in the mortgage refinance business. Sam, how long have you been in business?

21 years.

Wow. And since you're 31 now, that means that 10 Try 44, but sure. Yeah, well, we're actually— I got you beat by a year. But so it's the reason I wanted Sam to come on and talk to us or with us for a few minutes is about, you know, obviously, given the mortgage rates and the mortgage climate that's been in existence for a little while now, clients of mine going through divorce and divorce mediation in particular, where they're trying to come up with a collaborative agreement and they're willing to give and take and figure out solutions that allow For example, one person to stay in the home and keep the home, but maybe they can't get the other person off the mortgage right now because of the rates being too high. So, Sam, if, if a couple and a family are considering like, look, we have these kids, we want them to live in this property with this person, but the loan, the loan element can't be modified right now. Walk us through you know, some of the things that they should be thinking about in terms of both, both parties staying on the loan and how that might change in the future and under what circumstances?

Sure. So that's a frequently asked question that we get where borrowers are separating or are in the process of separating and they refinanced during the ultra-low-rate environment of COVID So they might have a mortgage that's somewhere between 2% and 3%. And mortgage rates are much higher now. So where their goal is, is to basically figure out if they can keep their mortgage, keep the low rate, and stay the path with both being on the loan and title, or one party being taken off the loan. And technically, it can't really be done because mortgage loans are not assumable by nature. However, with the right mediation and cohabitation agreement or marriage settlement agreement in place, it's possible. That's where we're refer to people like you, Scott, to help kind of navigate that because that's a frequently asked question. Now, one of the things we tell borrowers is, look, we understand a lot of times that they don't want to refinance or they can't qualify because rates are higher and it's much more expensive. So a lot of times we tell them to refinance or stay the path where they're at, get through their settlement, and then revisit it in 6 months to a year. After the settlement's over. That way they have a little bit of breathing room and some time to figure it out. It still keeps— even with the settlement agreement in place and after everything is said and done, it still keeps the divorced couple kind of joined at the hip, financially speaking. So ultimately, it's not sustainable in the long run, but it might help them to bridge the gap by buying some time and kicking the can down the road on it.

So one of the things that we talk about when— so when one person who's not going to Like kind of be in the house or part owner of the house anymore, but they're on the loan. Obviously, their credit is tied to those payments. But one of the things that I often am told, or what I often mention, is that if they wanted to buy something down the road themselves, is there not a way for that, for this loan to not be considered for their mortgage capacity? So my understanding is that if the, if the, if the payer of the loan makes 12 consecutive monthly payments from a separate account, that this person who's still on the loan, but if they go to qualify for a new loan, that that loan won't be considered against their mortgage capacity. Is that, is that 100% of the time? Is that accurate?

Yes, that, that is completely correct. So typically, if you do get where— I think what you're trying to say is, is if a couple gets— goes through the separation process and then they're officially divorced, yet they still have the mortgage in their names. But one party is responsible for it, the other is not, and it's outlined in the marriage settlement agreement. Typically, a 12-month history showing that the spouse that kept the house has been making the payments is usually sufficient. Now, there is a possibility that they might reduce that to 6 months in the future, but that's not really been solidified. So we tell all borrowers that just be prepared to show a 12-month pay history. So the downside with that, where the departing spouse who's leaving to start, like, who's leaving the property or signing off on the property to their spouse, the ex-spouse, that person is handicapped because they have to wait 12 months before they can qualify for a mortgage, which means they have to rent and do that whole thing until they're closer to that 12-month watermark where their ex-spouse has made those payments consistently. So that's the only drawback that we see.

What if a couple has been separated since 2019 and they've kind of been already, or maybe Maybe that's too long. That doesn't always happen, but like 2022. So it's like almost 3 years, right? Or going on 3 years. You know, Party A is living in the house. They're paying all the payments. Party B has been out there. They're renting or whatever. Is that— and let's say this person, the payer, has been paying those payments. Does that mean that 12 months has started back then if they've been doing it from a 12-month— if they've been doing it from a separate account already? Or does it start from like the signing of the settlement agreement or some other, some other period?

That's a great question. So it depends. Now, typically, if the payments have been made, being— have been made consistently for 12 months. So let's say they separated, the payments have been going on for 12 months, and then they decide to go through mediation and do all that. Typically, if it's already outlined, it usually goes from the file date. But if they're going— if The separation agreement has the right verbiage in it to show that the last 12 months were accounted for, then usually there's some flexibility. It's a little bit of a gray area, but we can work through that. So it's really important to address that at the beginning of the mediation session with your respective— or with the respective mortgage lender who might be able to help navigate them. But it could— I've seen it go both ways, but it really falls back on the Verbiage of the settlement agreement and the actual circumstances of when the file date was. So there's technically— it changes constantly.

It could be possible that if the verbiage in the settlement agreement referenced that the parties had agreed that that 12 months started sometime in the past, what if it could— it could— it could override the fact that those 12 months were not from a separate account? Or do you need both? Like, if they still were paying the payments from a joint account, But they had agreed that the money funding that joint account was really from the person who was living there. Can that be kind of—

I think it can be eligible if it shows that who's accountable, but they have a shared bank account. And then if the assets were split in that account and Party A had enough, you know, to cover the payments and their expenses, and then Party B had their separate, then that's fine. It just has to be really detailed in the settlement agreement. But yeah, it can be done that way. Typically what we usually see is one party moves out in a situation like this. What's a little bit more common is one party moves out and then they're just kind of making the payments and then keeping some cash in the joint bank account so the ex-spouse can pay their bills, joint bills like the utilities and other expenses and credit cards, just to kind of get by.

Okay.

So that's typically what I'm used to seeing. But the bank account, to my knowledge, hasn't really surfaced. But once again, I think if it's buttoned up correctly in the settlement agreement, then your mortgage lender should be able to play well with the circumstances.

So lots of issues going on with mortgages and refis and also coming out of a— maybe even coming out of a sale. And like, what should you think about in terms of getting your next mortgage? Is there one piece of advice that obviously most of the people watching this that are following me are are kind of plugged into the divorce process or entering it, or maybe in the middle of it. Are there any— is there one overriding kind of challenge that you find the people calling you are in and how they could avoid those things? Is there kind of one piece of advice you could leave people with?

I think the key thing is we are huge proponents of mediation. So as long as they're— if it's cordial enough, We always recommend that they talk to a mediator first and, you know, determine what is doable and what isn't. That's usually the first, you know, order, like the first precedent that we always kind of push towards. Now, that being said, not all mediators are created equal. So, for example, some understand the importance of getting the real estate piece settled between the 2 spouses, and then maybe there's further negotiations between retirement accounts or other financial assets, and they're, they're not sure. That's okay. But as long as the mediator is savvy enough to figure out the real estate piece, that's usually the biggest financial entanglement between both parties. So we always say start from there first, as long as there's like a house in the mix. Now, if they don't own a house, I don't think it matters as much in the sense that Their financial footprint is probably much simpler. So where this, like, webinar or this discussion really comes in, where it becomes really pivotal, is when there is real estate owned. So that's the biggest, I think, differentiator. And that's where a lot of things get complicated because there are some tax questions around vesting, you know, the tax deductions and write-offs. And then mediation, and not all 3, along with the mortgage, and not all 3 play fair with each other at all points in time. So, you know, just having the right parties to kind of help navigate through is really key, especially—

I agree with you. I agree with you. And when people want to talk about, you know, that are working with me, you know, issues beyond the house, we always have to get the house figured out first, but everything else comes from the house, especially if there's equity or significant equity. Right. Because all the other things are like, you know, tradeoffs and what— but like, who's going to— does one of you want to own the house? Does the other? Is there going to be a sale? Is there going to be co-ownership? Like, that has to be addressed. And then the other pieces kind of fall into place. Sam has helped so many people that I—

that are—

that are so many of my clients and network. in and out of the divorce world, I can't tell you. I'm not the— I'm certainly not the biggest referrer to Sam, but I mean, he's batting 1,000% in responsiveness, education, willingness to share knowledge, time, responsiveness. I mean, everything that you would want in someone in his position when you need answers, he has literally delivered to anyone that I've ever referred. I encourage you to reach out to him. Sam, I'm going to put in your information. Is there like one place that you want people— do you want people to go? How can they easily reach out?

No, they can check out, you know, they can reach out on our website at bluefiremortgage.com. We're on Instagram @bluefiremortgage. You can also email me at sam@bluefiremortgage.com if you have any questions.

And known as the best email newsletter in the game, I think, too. Every Friday there's thousands of people that look for that email newsletter. All right, Sam, I'll talk to you soon.

Thank you very much, Scott, for putting this together. I appreciate all your help. Thank you.

Talk soon.