Foreclosure and Divorce in Florida
The Difficulties of Facing Both Home Foreclosure and Divorce in Florida
It is a burdensome and difficult situation when anyone in Florida goes through the stress of a foreclosure action on their home, since in the State of Florida a foreclosure involves a formal lawsuit. When the bank forecloses, unlike other states, they literally sue the borrowers over the unpaid mortgage.
However, it is even more onerous and taxing when the homeowner who is facing foreclosure is also going through a divorce. Add the divorce to the mix, and the two people are parties in two different lawsuits - admittedly stressful for most people, who rarely if ever become involved in litigation.
First Issue in Foreclosure and Divorce: Who’s the Borrower?
In Florida, a divorcing couple whose Florida property is in foreclosure must first figure out whether the debt is the responsibility of a single spouse or if both spouses are being held responsible for the mortgage balance by the lender.
Did just one spouse sign the mortgage loan documents? Or did both spouses sign? The bank as plaintiff will refer to loan documentation to determine who the repaying party should be in its foreclosure lawsuit. No matter what, both spouses will be named as defendants if both husband and wife are named in the home loan documentation or the property is their homestead.
If both spouses are borrowers on the mortgage, then the judge in their divorce case will view the home loan as a joint obligation of the parties. Under Florida law, that divorce court judge has the power to order both spouses to keep making those mortgage payments each month, forcing the husband and wife to pay their share on a monthly basis until their divorce has been finalized. The divorce court judge also has the power to order one of the spouses (say, for example, the one with the greater monthly earning power) to pay an unequal share of the mortgage each month until the property division has been negotiated and finalized.
Another Issue in Foreclosure and Divorce: Can One Spouse Assume the Mortgage?
During a divorce, whether friendly and amicable or frosty and antagonistic, the husband and wife will have to split their shared property. Legally, if they can’t make the decision of who gets what between the two of them, then a judge can make that call.
When they have Florida property facing foreclosure, things get sticky. Not only is the issue of the asset (the property) an item in the divorce settlement negotiations, but the debt (the home loan) is, too. What if one spouse wants to keep the house after a divorce and the other wants to be relieved of any obligations under the mortgage?
If the divorcing couple has one spouse that wants to keep the house while the other is happy to let it go, then the spouse that wants to hold onto the property has some options. He or she can try to either refinance or assume the entire mortgage, for example.
Unfortunately, assuming the mortgage in its entirety is probably not possible in the Sunshine State because most Florida mortgages have language that specifically forbids an assignment (i.e. Due-on-Sale Clause). Additionally, from a practical perspective, it’s very unlikely the bank will release the non-resident signing spouse as a party in their foreclosure lawsuit. The bank’s lawsuit is a whole different ballgame from the divorce lawsuit, after all.
One possibility here: a loan modification negotiated between the spouse that wants to keep the home and the lender. Here, the lender might allow one spouse to be taken off the loan as part of the modification process for certain agreements. Another possibility: the spouse that wants to keep the home gets refinancing of the property.
Other options? The divorcing couple can always sell (or short sale if the property is underwater), or the spouse that wants the house can just keep paying the mortgage with the nonresident spouse still being legal bound.
Want to Know More? Ask Foreclosure Defense Lawyer Larry Tolchinsky.
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