My mom is in a middle of a divorce and stuck with a huge mortgage, what should she do?

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Mother is in middle of divorce, may be stuck with a huge mortgage + HELOC loan attached. The home has no equity left, since they’ve refinanced twice (big mistake) in the past plus sinking home prices. As far as dividing up the liabilities, what other options does she have? This is in the state of California (Santa Clara County). She is afraid that she may be stuck with the house and not able to catch up with the mortgage. She would like to avoid foreclosing if all possible. Thanks

4 Comments
  1. Reply
    guba2giba -OMAR =)
    April 30, 2011 at 12:27 am

    alimony

  2. Reply
    Elliot L
    April 30, 2011 at 12:48 am

    If her husband is a co-borrower on all loans, your mom won’t be stuck with any huge mortgage on her own. The only way for him to be released from any financial responsibility for all of those loans would be for your mom to refinance in her name only and pay off the existing loans. It doesn’t sound like there’s enough equity to do that. She probably can’t agree to take the home even if she wanted to, since she would have to get her own loans to pay off the existing loans. I’m guessing the court will order the home to be liquidated and the proceeds used to pay off the loans. If there’s a short fall to pay all loans, the court could order other assets be used to make up the difference.

    Sounds like a bad situation. I don’t know the laws of California and not giving any legal advice so make sure she has a good divorce lawyer.

    Hope this helps. Good luck to her.

    Elliot Lau, Realtor of 22 years

  3. Reply
    Shanky
    April 30, 2011 at 1:00 am

    if she does get stuck with the house after divorce

    1) She could let the house on rent which will get her some regular monthly income. This will ease her mortgage payment burden.

    or

    2) Here is a link for The Catalog of Federal Domestic Assistance. See if there is any program in here that might be of any assistance to your mom.
    http://12.46.245.173/pls/portal30/CATALOG.FUNCTIONAL_PROGRAM_TXT_RPT.SHOW?p_arg_names=func_cat_cd&p_arg_values=MM

    Finally…

    3) She could negotiate a short sale with the lender

    Here is a blog that explains why a short sale is better than a foreclosure.

    http://theshortsalecompany.blogspot.com/2007/11/short-sale-vs-foreclosure.html

    All the best to you and your mom

  4. Reply
    Expert Realtor
    April 30, 2011 at 1:24 am

    She isn’t going to be stuck with the mortgage alone if her husband is on the mortgage note.

    That is something her attorney needs to work out.

    That is what happens when people buy more of a house than they can afford..they generally cannot keep it in the event of a divorce or a death of a spouse.

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