Q: As part of my recent divorce settlement, I signed deeds with my ex-wife for two rental properties. However, the mortgages are still in my name which makes me legally responsible for the properties. What’s the easiest way to legally transfer ownership and place the properties in your name?
A: You already transferred the ownership of both properties to your ex-wife when you signed the deeds. Unfortunately, you are still hooked for mortgages.
You are in the unenviable position of owing money for properties you no longer own. Your ex-wife is now a homeowner, but if she doesn’t make the monthly mortgage payment, the lender will try to collect you.
When you take out a mortgage, you sign two contracts. The first is the “promissory note,” and it is your agreement to repay the money you borrowed. This document is the “loan”.
The other form is a “mortgage,” which places a lien on your property, allowing the lender to foreclose and sell the property, with the proceeds going towards your debt.
If you are unable to make your monthly payments or break any of the other terms of this arrangement, such as not keeping insurance on the property or paying property tax, your lender can sue you individually, seize the property or the two.
However, because you no longer own these properties, you do not receive the rent payments, and if your ex-wife decides to use the money for something else, the properties may eventually be foreclosed, but you will still be responsible for the loans. This will hurt your credit and leave you responsible for any difference between the amount owed on the loan and the value of the property.
Your mortgage lender was not part of your divorce and does not have to transfer the loan to your ex-wife just because she now owns the properties. While you can ask it to do this, it is highly unlikely that the bank would do better to have both the properties and your good credit as collateral to make sure it gets paid off.
Your situation is the reason many divorcing couples sell their investment properties if the spouse who receives the property cannot take out a new loan on their behalf. Depending on what your divorce decree says on this issue, you may need to go back to court to add appropriate protections.
Gary M. Singer is a Florida attorney and board certified as an expert in real estate law by the Florida Bar. He practices real estate, commercial litigation and contract law from his office in Sunrise, Florida. He is president of the real estate section of the Broward County Bar Association and co-host of the weekly radio show “Legal News and Review.” “He consults frequently on general Florida real estate issues and trends with various companies across the country. Send him questions online at www.sunsentinel.com/askpro or follow him on Twitter @GarySingerLaw.