By Douglas Katz – 01/19/2023
There are many types of divorce. From different levels of legal representation to different degrees of animosity, divorce is varied and unique to each couple. What does not differ is the requirement to deal with the physical, tangible things that need to de dispositioned and/or divided. Maybe it is just my perspective as a lender, but I see the house or houses in some cases as one of these key items. As a Certified Divorce Lending Professional (CDLP) and the Divorce Housing Pro, I see this done incorrectly more times than I like to share and the outcomes can be very bad. The good news is that there is a simple solution.
MORTGAGE LOANS – CONFUSING AND COMPLEX
Before sharing the way to avoid frustration or disaster with your marital real estate, you first need to accept that the lending industry and loan process is on one hand complex, confusing and ever-changing. On the other it is rigid and governed by significant rules, guidelines and regulations. I have been lending for over two decades and have still yet to learn everything and, even if I did, the dynamic nature of the mortgage industry means it would do me no good. It is training and the experience of doing countless deals that tempers the aforementioned complexities. This cannot be replicated and replaced by google searches and hanging out on forums. Nor can it be reproduced by any other discipline. The only way to tame the mortgage tiger, which in the case of divorce is a giant, rabid pre-historic monster is to elicit the help of and to work with an expert – a professional who knows both divorce and lending.
THE ANSWER – A DIVORCE HOUSING PRO
There is a simple and relatively inexpensive way to avoid problems when dealing with the financing of your home post divorce. It is actually what you likely do with other specialized needs in your life. I am guessing for important requirements for which you do not have experience or expertise that you find and hire an expert. You make the conscious and rational decision to prioritize outcomes over cost and by doing so avoid added costs and likelihood catastrophe of while you learn.
The good news is that this expertise is not expensive and is sometimes of no greater cost than competing loan options. Just as when you hire a particular contractor for a unique job, you need the right person. I recall when I lived in an area with a housing stock that had a large concentration of unique and architecturally significant properties. With many well over 100 years old, these had a host of challenges ranging from structural to ones caused by limitations on historical properties. To help owners of these homes, there were expert contractors whose sole business was working on these type of homes. Owners doing renovations would, of course, use the contractor with the most possibility of a successful project. Divorce lending is very similar. You can hire a generalist, but the outcomes may not be optimal and can be terrible.
At this point, the need for a divorce professional who works in lending should be obvious as an essential requirement for your divorce, but need and value can be separated by a wide chasm. Now before explaining what they can do for you it is important to go back and reread my description. A divorce professional who provides you lending is a different animal than a lender who handles divorce and that is where the value lies and you can expect some things when you hire one.
DIVORCE FOCUSED PROCESS
You need a loan process that mirrors your divorce and a divorce lending professional can provide that. Except in the case of a pre-approval, you do not contact your lender months before you are ready to execute a deal. In divorce, everything is changing from income to the assets you have at your disposal. Loans are based on many of the same items, so the processes need to be coordinated. A divorce housing professional will work with you and your team, if you have hired any other professionals, to make sure that the marriage settlement agreement puts you in the best position to refinance or buy something new.
COORDINATION AND COMMUNICATION
I hear way to many times from applicants that they were told to wait until the deal is done to reach out. the problem is that all the mistakes are made by then. That is a siloed approach and silos create blind spots. You divorce housing professional will coordinate closely with your other representation or with you if you are going pro se to avoid these mistakes or to help put temporary measures in place for things like maintenance to set the stage for a good transaction. I, for example, will often be included in meetings with stakeholders and representatives to opine on the housing issues and to make recommendations. This needs to happen. You can have a great attorney, a world class accountant, and an amazing financial advisor but they do not necessarily know housing. A good divorce lender will fill that gap from beginning to end. Upon request or sometimes based on my insistence, I even provide the team a detailed report that captures the current situation and the options available to the divorcing couple.
A LENDER WITH CROSS-FUNCTIONAL SKILLS
Earlier in this article, I made the distinction between a lender who does divorce and a divorce professional who provides lending services. While it may seem like a difference without a distinction, it is anything but. Since divorce creates a multi-faceted mess of interrelated issues, a general lenders who dabbles in divorce is not what you need. This is especially true in situations with limited scope representation or pro se divorce where there is less of a team to support you and you need each individual to provide you with the most bang for the buck and the best representation.
I, for example, have been trained in mediation, credit repair and financial literacy in addition to my lending skills. These are not just to make my resume look awesome, but rather to afford my clients what they need when they entrust me with their home during a divorce. I often informally mediate or provide support or consul. In some matters, I still recommend speaking with licensed professionals, but my divorce clients certainly get more than just the processing of a loan when they hire me. There are divorce lending professionals like me who have broadened their skill sets in other areas to meet the needs of clients in their markets. Hiring the right one with the right skills can be a major benefit to you.
AN MARRIAGE SETTLEMENT AGREEMENT COMPATIBLE WITH LENDING
A marriage settlement agreement will set the stage for you loan. A bad one will spell disaster, while a thoughtful agreement drafted with lending in mind can avert it. This is your ultimate goal with respect to the real estate. You need to be able to move quickly to take the best advantage possible of any favorable market conditions. If, for example, you handle income and maintenance incorrectly, you could have to wait 6 months or more to execute a loan transaction. If you have 18 months to disposition the home, this now reduces your actionable timeline to 12 months as you wait to get into the allowable tolerance of the loan guidelines. This not only compresses you timeline but also hamstrings you if rates take a sudden drop or if rates are trending upward and you need to act. This is one example. There are many more.
I am not professing that a divorce lending professional will make your divorce a breeze, even regarding lending and mortgages. What I can tell you is that you will have much better chance at a successful next act if you use one. Ignorance, as they say, is no excuse and a divorce housing professional will ensure that you are informed, supported and content that you will not need to utter the words “I didn’t know.”
I always end with a reminder that we have discounts available for veterans, first responders and law enforcement. Make sure that you check out the section of the page covering our commitment to those who served with discounted mediation services. My lending partner also offers a discount as well, so if your buying or refinancing check it out