In my over 20 years of practice I have never heard this so much as I have in the past 2 years. Why? I think it is due to the fact that people cannot sell their homes, their largest asset, and neither party can afford to take on the mortgage payments until the market recovers. Also, people are struggling financially—if they already have problems supporting one household, how will they support two? While I am not advocating for divorce, if this is the situation in which a couple finds themselves, then they must address their mortgage situation in order to reach a settlement that everyone can live with, both now and in the future. Here are the two scenarios I see most often.
First, there are the clients that have an Adjustable Rate Mortgage (ARM) or teaser rate, as I have heard them called. It will come due in a year or so and no one knows what will happen when it does. Will it double the monthly payment? Without knowing what the payment will be and without being able to sell their house for a fair price, parties cannot settle issues of support and property with any certainty. Too often they end up back in court once the ARM comes due, relitigating the same issues they spent so much money trying to resolve the first time! One way to address the problem is to get a loan modification, switch to a fixed term for a reasonable monthly payment, and then get those finances in order!
Second, there are clients with a fixed term mortgage, but with a high interest rate. There may also be other debt (i.e., credit cards), the stress of which likely contributed to the marriage breakdown and will make the divorce process even uglier. Also, they do not qualify for refinancing and they cannot sell their house. Rather than just let our clients agree to terms in their divorce judgment that will not work long-term, we need to help them get their finances in order. They can do this with a loan modification, without being behind in payments or in foreclosure. They can get assistance with debt settlement and debt repair. By reducing the monthly bills, including the mortgage payment, one party can take the house, even if it is just until we weather this economic storm, and then they can sell it for a more reasonable price than they could now.
Once our clients get the financial relief they need, they can look at their marriage without the added financial stresses and maybe reevaluate whether they need to get divorced at all! Or, if that is still the direction in which they are headed, they can come up with a settlement agreement that everyone can live with and stay out of court. That helps the family and the pocketbook! As attorneys, we need to work together for our clients and start helping families deal with all of their issues. When reconciliation is not possible, we need to help them prepare for the future during the process. This is good for them, their families and, in the long run, the entire community!
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