Q: My husband and I are obtaining a divorce. We have agreed that the family home, presently in both our names, will be transferred to me, and I will be obligated to make the monthly mortgage payments. I have been warned that this might trigger the so-called "due-on-sale" clause, and that I might lose the favorable 9 1/2 percent mortgage on the property. Do you have any advice?
A: It would take a very hard-hearted lender to want to accelerate your mortgage under the circumstances that you have outlined.
The standard due-on-sale clause says that if all or part of the property, is transferred by the borrower without the lender's prior written consent, the lender has the option to demand the balance of the mortgage. The clause usually excludes the creation of a second trust or a "purchase money security interest" for household appliances, transfer when a joint tenant dies, or the grant of any leasehold interest of three years or less not containing an option to buy.
Lenders are concerned with two major factors. First is the ability to make the monthly mortgage payments. Needless to say, if you do not have an income, and do not have any additional assets, a lender will be quite concerned about your ability to make the monthly payments.
Second, lenders are concerned about obtaining a greater yield--and your 9 1/2 percent mortgage in today's double-digit market is a thorn in the lender's pocketbook.
However, it has been my experience that most lenders will be sympathetic to divorce situations and will not call the loan merely for that reason.
I suggest the following approach: You or your lawyer should call the lender and ask about the policy for these kinds of situations. Do not identify yourself or the property, but try to determine the general policy. Most lenders will permit the transfer at the same rate, providing, of course, that you are able to make the monthly mortgage payments.
However, your husband should be aware of the fact that he will probably not be released from the obligation to make the payments, in the event that you are unable to keep current on the note. The lender relied on the credit worthiness of both of you, and the lender is not obligated to release your husband from this obligation just because of your personal circumstances.
Here is an important tip for you to consider: Have your lawyer check with the recorder of deeds in the county in which your property is located. If the property is transferred before the marriage is over, you may be able to save the transfer and recordation tax that would otherwise be imposed on the transaction.
The final paragraphs of last week's column, spelling out what could happen to condominium owners an adults-only building who decide to have children, were cut. They read:
If you cannot follow the rules and regulations, you should not buy in that condominium.
The case in the District of Columbia regarding the pregnant woman and the cooperative is important, but cannot give you any comfort. In that case, Superior Court Judge Frank Schwelb found that the adults-only policy of the cooperative violated the city's "Families With Children Equal Rights Act," which prohibited discrimination against such families.
Unless your jurisdiction, Prince George's County or Maryland, enacts similar legislation, it is highly doubtful that the District case would apply to you. Thus, it is sad to say that if you do become pregnant, your board of directors may decide to take legal action against you--and your child.