By Douglas Katz – 08/09/23
One critical decision during divorce is determining what to do with the family home. Many divorcing couples often turn to lenders for housing advice due to their familiarity with the mortgage process. While logical and seemingly a solid choice, there are many fatal flaws to this approach. While adding some cost to the process, using the services of a divorce housing specialist, like The Divorce Housing Pro, adds significant value that eclipses that cost. Because they not tethered to a transaction they can offer focused, unbiased advice which a lenders who provide it as an additional service cannot. There are several reasons that support the decision to hire a divorce housing professional.
The Timing Factor
Divorcing couples often approach lenders too early or too late in the process. Lenders primarily focus on mortgage transactions, and offering comprehensive divorce housing advice might not be their forte and it definitely does not help them make a living. Seeking their advice too early can lead to misinformation, as they may not have the context of the entire divorce situation, or insufficient support as the duties of their lending role, the needs of clients with imminent deals and cost of supporting the divorcing couple exceed their threshold. Remember, there are no regulatory or job requirements for them to help.
Conversely, reaching out to them too late might result in missed opportunities and costly mistakes. I want to stress that the advice that they can provide is valuable which is precisely why the advice has value. Errors and mistakes in the settlement in everything from the equity split to the spousal and child support agreements can delay or deep six a deal.
Lenders more or less operate within a specific timeframe, usually around 90 days, to close a deal. Without a marital settlement agreement, a divorce related loan cannot get be submitted and evaluated. Lenders need clarity for the post-divorce financial landscape. This timeline does not usually align with the needs of divorcing couples, who require more time to make well-informed housing decisions. The pressure to close deals can potentially hinder the lenders’ ability to provide thorough advice and consider all the nuances of divorce-related housing choices.
The Expertise of Divorce Housing Specialists
Divorce housing specialists are professionals who specialize in providing guidance tailored to the unique needs of divorcing couples. They understand the emotional complexities involved and the importance of approaching housing decisions from a holistic perspective. Unlike lenders, who primarily deal with loans, divorce housing specialists are equipped to address emotional, legal, and financial aspects that impact housing decisions.
I sometimes joke that there is not a lender out there who will answer with anything but yes when you ask them about their aptitude, ability and experience with divorcing clients. I am regularly called on to help clients who went with someone who may have overstated their divorce lending resume. The reality is that most lenders are generalists and the problem worsened after 2008 when many experienced lenders left the business. This loss has continued and it is now not uncommon to have a moderately-trained, inexperienced lender who has been alive less time that many couples have been married. It sounds humorous, but it is true.
Finally, divorce housing professionals are incented to become better at that job. This includes getting trained in skills like mediation that better equip them to work in the divorce space. Lenders need to get better at lending. The training that they seek out is appropriately lending driven and targeted at creating, leveraging and managing lending opportunities. In a divorce, a loan may be one of many outcomes and the synthesis of a full set of options often depends on knowledge beyond lending which a divorce housing professional has.
Neutrality and Objectivity
Lenders have a vested interest in closing deals to earn commissions. While they offer valuable insights into mortgage options, their advice might be influenced by their desire to facilitate a transaction. Divorce housing specialists, on the other hand, are not tied to transactions and can offer impartial advice that aligns with the best interests of the divorcing parties. I understand and acknowledge that on the surface the cost of hiring a divorce housing specialist seems what my kids would call “extra,” but the fact that you are specifically seeking this advice should speak to its value. You want and need, objective, practical advice and with divorce housing advice, you get what you pay for.
If they are talking to a divorcing client, that deal needs to happen for obvious reasons. I am not intimating that lenders are in any way acting amorally or unethically. Most are not, but it is nearly impossible to act completely objective and neutral when the outcome is either no paycheck or even losing money. They have a name for people who run their business in a this manner and they are called volunteers and most lenders want a paycheck. This is why they cannot be neutral and provide a divorcing client the advice that they need.
It’s important to understand that lenders are professionals providing essential financial services. Their primary focus is on lending and closing mortgage deals to support their families and meet their employers’ expectations for revenue generation. While they can offer valuable information about financing, divorcing couples should be aware of the limitations when seeking broader housing advice.
Remember, lenders need to be good at lending and they need to maximize the revenue that they derive from lending. That is their priority and it should be. This is how they provide stellar service and terms to their client and anything that conflicts with that acts as a drag on their main purpose for existing in the first place. While many think that the divorce market is huge and that by specializing in lending for divorcing couple should present a profitable niche, the numbers say different.
Contrary to the conventional wisdom on divorce, at any given point ~2 – 3% of the population is going to a divorce at a given time. Forget the 50% nonsense that you hear about marriages ending in divorce, it is not valid. Of the aforementioned segment, not all divorcing couples will want or qualify for a loan. This means a market segment of ~ 1 – 2% of the population and a lender cannot make a living on that, especially if they take on advice and consulting for the divorcing couples.
A Divorce Housing Professional is a Necessity
Divorcing couples face complex housing decisions that extend beyond the realm of mortgages. While lenders are indispensable for financing, divorce housing specialists offer specialized, comprehensive advice that factors in emotional, legal, and financial considerations. Opting for neutral, objective guidance that aligns with the best interests of both parties can pave the way for more informed and well-rounded housing decisions during the challenging process of divorce. The best part is that you can even use the lender of your choice or one with whom you have had a good experience in the past if and when a deal happens.