4 Sale by Divorce September 2016

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A B R , A S P , C D PE , C R S

4 S A L E B Y D IVO RC E Divorce & Real Estate September 2016

DID YOU KNOW? In July 2016, the foreclosure inventory was down 3.9% from June 2016, representing 57 months of consecutive year-over-year declines.

There were 34,000 completed foreclosures nationally, down from 41,000 in July 2015.

Approximately 355,000 homes in the United States were in some stage of foreclosure, compared to 501,000 in July 2015.

Loan modifications, foreclosures, and stronger housing and labor markets have each played a role in bringing the foreclosure rate to the lowest level in nine years. The U.S. Treasury’s Making Home Affordable program has contributed to the decline through permanent modifications, forbearance and foreclosure alternatives which have assisted 2.5 million homeowners with first mortgages at risk of foreclosure since 2009.

- Frank Nothaft, Chief Economist, CoreLogic

Phillip H. Lande RE/MAX Legends Group/ Atlas Group Direct: 317.863.2356 plande@atlasrealty.com www.remax-atlasgroup.com

The Lasting Effects of Negative Credit Not only can divorce lead to emotional strain, it can also cause all sorts of financial problems. All those shared accounts and co-signed loans that once seemed so romantic are now the cause of major issues.

While divorcing spouses may not seem willing to work with each other, they need to understand the effects of negative credit. They need to understand the negative effects long after the divorce is final. 

What if there is a late history of mortgage payments?

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What if the home is sold in a Short Sale or is Foreclosed upon?

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What if one party makes a late payment AFTER the divorce on joint liabilities?

These are common everyday questions and occurrences in divorce situations and the more you can educate your clients, the more prepared they are for success with credit post divorce.

ADVISING YOUR CLIENTS ON CREDIT Don’t assume your clients will play nice and don’t assume they fully understand what happens with their credit during the divorce. When joint credit is obtained, a contractual agreement is made to pay the bills. A divorce decree doesn’t change that contract. When clients divorce—each spouse remains fully liable for all joint debt as well as their new independent debt.

There are ways to prevent credit obligations from making divorce more difficult, and re-establish independent credit lines:

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Communication between soon-to-be-ex-spouses.

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Keep joint bills current—even missed payments made years after the divorce will be reported for all individuals associated with the account.

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Ask the credit grantor to remove a spouse who is only an authorized user or close the joint account to additional charges.

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Advise creditors that one spouse is not responsible for debts charged by the other spouse on joint accounts after the divorce.

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Close as many joint accounts as possible.

Failure to make a clean separation of debt and obligations can haunt both clients well after the divorce is final.

Ask each company and bank that extended joint credit to transfer the debt to the name of the person who will be responsible.

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Common credit concerns found with divorcing couples: Mortgage payment is missed. Whether an oversight or intentional, when a mortgage payment is missed there are more repercussions than just a negative hit to the credit score.

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A single 30 day late mortgage loan payment can cause a credit score to drop by as much as one hundred points.

A single 30 day late mortgage loan payment may prevent you from obtaining mortgage financing from 12 months up to 24 months depending on the loan program and investor.

Marital Home in Foreclosure Proceedings. Many times in a divorce situation there are financial struggles and often times the marital home is involved in foreclosure proceedings.

If foreclosure proceedings have already begun the best option and sometimes the only option is to contact the current lender/servicer to determine if there is a loan modification or alternative plan to salvage the marital home if this is desired.

Once the foreclosure proceedings are underway, new traditional mortgage financing is very difficult if not impossible to obtain. Even if the foreclosure proceedings were resolved, the recent mortgage payment history stated above will be a factor in obtaining new financing.

Joint Marital Debt Retained Post Divorce. When it is currently not possible or not the best option to close out joint marital debt the court may order one party responsible for the full payment of specific debts. When this occurs, the debt is considered a “Contingent Liability” and for mortgage financing purposes, contingent liability is not typically included in the debt to income ratio for the party not responsible for the joint marital debt. But what happens if the responsible spouse makes a late payment on the joint obligation?

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The credit score of both spouses will be affected negatively as both individuals are still liable to the creditor.

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Contingent Liability guidelines are applicable to all joint marital debt including mortgage financing, auto loans, installment loans, credit cards, etc.

For mortgage underwriting purposes, if the debt was ordered to be paid solely by one party per the Marital Settlement Agreement, the payment history of the debt after the contingent liability was ordered may not be considered by the mortgage underwriter.

FREE Credit Reports Many times, divorcing clients will provide their attorneys with a list of their existing debt; however, the safest way to make sure no debt is overlooked, it is advisable to obtain independent credit reports for both divorcing parties.

In 2003, Congress passed the Fair and Accurate Credit Transaction Act as a way to address identity theft. FACTA is an addendum to the Fair Credit Report Act.

Under the FACTA, consumers have the right to request one free copy of their credit report from all three bureaus: Experian, Equifax and TransUnion.

Congress also created a website where consumers can order all three reports in one place: www.annualcreditreport.com Tip: Advise clients to maybe pull one bureau every 3-4 months as a way to monitor their credit for free on a constant basis.

www.remax-atlasgroup.com

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Understanding your Credit and the Factors that Influence It. As you might expect, payment history is the most Influential component and this is followed closely by the amounts you owe. To lesser degrees, the length of time that you’ve utilized credit, the number of new accounts or inquiries that may have and the various types of credit accounts that you hold will also have an impact on your score.

The overall importance of any of these factors can be further influenced by the entirety of the information contained in your report. As such, certain patterns, occurrences or items can be measured differently dependent on any other factor or combination. There can be great complexity in the way that the scoring formulas work and it’s for this reason that they are difficult to assess.

Protect Your Identity It is a sad truth, but many couples go through messy divorces that leave both parties as bitter enemies in the end. When this is the case, it is important to consider the potential damage that a disgruntled spouse could do to your credit. Armed with your Social Security number, birth date, and other financial details, an ex could potentially steal your identity and cause significant damage to your credit.

After a contentious divorce, you should take a few steps to guard against any possible identity theft crimes before anything can happen. Sign up for credit monitoring that immediately alerts you to changes in your credit data. Be on the lookout for suspicious mail and signs that new accounts have been opened in your name. Change your online banking passwords and request that your account numbers are changed. If you suspect identity theft, contact the credit bureaus immediately and place a 90-day fraud alert on your credit reports.

Most importantly, simply be aware of your possible risk for identity theft. According to a 2013 identity theft survey by the Better Business Bureau, 50% of identity thieves turned out to be relatives, close friends, and neighbors of the victim. Denying that your ex could steal your identity may cause you to miss important early signs of fraud.

Going through a divorce can be very stressful. Trying to keep yourself together is hard enough without worrying about your financial situation. However, awareness of major risks to protect you, your credit report and your credit scores will be extremely helpful.

You do have the option to repair your credit report and make sure that all accounts are accurate and reporting properly. If the credit bureaus do not have a certain amount of paperwork in your files [for each account] then these accounts can be disputed. If you find yourself in the midst of negative reporting on your credit report then you should consider credit repair services.

www.remax-atlasgroup.com

Phillip H. Lande ABR, ASP, CDPE, CRS RE/MAX Legends Group/ Atlas Group 5645 Castle Creek Pkwy N Indianapolis, IN 46250 www.remax-atlasgroup.com plande@atlasrealty.com Direct: 317.863.2356

As professional real estate agents specializing in helping divorcing couples, we are here to help both parties involved through a smooth yet emotionally difficult process when they need to sell the marital home and purchase new homes moving forward.

As a member of your professional divorce team, our goal is to: 1. Help clients understand the legal and tax aspects of divorce in regards to the sale of the marital home and other real estate.

2. Offer alternatives to the usual mistrust and the emotional responses as a result of dividing real estate assets.

3. Work with both parties together to help them save and make money now and down the road with regards to real estate.

4. Work with both parties, not just one, in selling the marital home for the best price.

Please don’t hesitate to call us if we can be of service to you and your divorcing clients!

R E A L E S TAT E

S T R AT E G I E S FOR DIVORCING COUPLES

With the divorce rate stable at fifty percent and home ownership at sixty-two percent, there are a lot of families who need professional guidance as they navigate what to do with their home. For most people their home is the largest asset they own, so the decision must be carefully thought out and analyzed. Now more than ever a full time local Realtor must provide professional guidance. This is not the time to take the real estate advice of family, friends or other professionals. While your legal adviser or family member who lives in another state means well, real estate still remains local, particularly with our mercurial national market.

The sale of the marital home is not an isolated decision. There are short and long term financial, emotional and tax consequences. A Realtor, preferably one who specializes in divorce, can offer the best guidance regarding the marital home. They must understand that they will work in tandem with other professionals for the best customized outcome.

The goal should be a client that has their individual needs met and is making informed decisions from a knowledgeable place.

This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Not a commitment to lend.

Copyright 2016 All Rights Divorce Lending & Real Estate Association, LLC

The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes. This Newsletter is not to be reproduced or edited in any format without the written consent of the Divorce Lending & Real estate Association, LLC.