My first piece of advice is – TAKE A BREATH!!!!! I am not sure what state you reside in and the foreclosure process varies by jurisdiction – but the good news is that you must live in a state which requires judicial foreclosure as opposed to a deed of trust state where the court is not involved and the loan papers contain a “power of sale” clause which grants the lender the right to sell the property to the highest bidder literally on the court house steps. A judicial foreclosure state requires a court action where the lender has to receive a judgment in order to sell the house. So, while it is a stressful process, you have time to figure out what you can do. His answer is due in 20 days – this does not mean that you have to have everything figured out within that time period. This is just the time period under the rules of civil procedure for an answer to be filed. After an answer is filed, a hearing will be set. If you live in a busy jurisdiction, the date will be down the road a bit.
Okay, now that I have you breathing again 🙂 – let’s move on. . . . . . .
My first question was already raised by someone else: Who was your hussband’s attorney dudring the divorce???? While I am not a domestic law attorney, I have gone through a divorce myself. When I drafted the petition, I added language where I would refinance the house within 2 years and my ex signed a quit claim deed at the time of the divorce. The reason we made the period 2 years was so I could wait and get a good interest rate instead of being rushed. This is a typical requirement when a house is transferred from one spouse to another. Your husband’s attorney should have required the refi as part of the settlement. I would expect also that there would be indefmnification provisions for any costs/expenses that your husband would suffer caused by his ex-wife’s failure to make payments and refinance the house. Does the decree have such a provision???? If it does not, I think that your husband would have a malpractice claim.
Next, I disagree with the post where someone said to handle each point seperately. If I was your attorney (and I am NOT and this is NOT legal advice creating such a relationship), I would definitely address the issues together. First, you do not want to be paying money to the bank and not have come to an agreement on who owns the house. They have to be handle simultaneously.
With respect to your options at this point, banks do NOT want to foreclose on the house if at all possible. There are way too many of these happening and they would much rather work out a solution. Someone already pointed out that you will not be able to just simply take over the payments and go forward. However, you can work out an arrangement whereby the past due amounts are rolled back into the mortgage. Depending upon your credit with your husband, the bank will have a few options to allow you to choose. I would start with asking to have all of it rolled back into the loan. If they won’t do that, then maybe a combination of paying some of the past due amounts and having some rolled back into the balance. There are government refi programs but from what I have heard, the approval rate is very low and the time it takes for you to get an answer will cut into the time you have left to find a solution.
I have to assume that the house was deeded over to her when they divorced. Has the ex agreed to you two taking over the house? Obviously, you will need to have that agreed to prior to doing anything. Do NOT take over payments and move into the house without having her sign a deed over to you. Otherwise, you will just be renting the property from her.
Once a judgment is obtained for the balance of the mortgage, the bank will sell the property to the highest bidder (again, literally at the court house). The highest bidder is usually the bank (unless there is quite a bit of equity in the house). The reason is that for any other bidder to buy the house, it has to be where the loan balance is low enough to make him/her comfortable that they are getting a great deal – because the buyer will not have seen the inside of the house or be able to have inspections done prior to purchasing (unlike in a regular sale of a home). The buyer is taking the property “as -is” and has no idea if the inside of the house is a complete mess or if there are multiple mechanical/structural issues. Once the sale occurs, there will be a redemption period and this varies by state. Could be 12 months… .could be 3 months.
With respect to your question about garnishing your wages, that will only happen if there is a deficiency judgment. If there is little to no equity, most likely the bank will not be “made whole” by buying the house and re-selling it. If that is the case, and if your state allows it, the bank could come after the owners for whatever that shortfall is. That is where the garnishment comes into play. I don’t think that it actually happens a lot but I’m sure it does sometimes. And I would assume that the loan documents do not require the lender to split that difference and go after both your husband and his ex to recover it. Most likely the docs provide for joint and several liability which means that the lender can go after whichever party appears to have more money!
Other possibilities are a deed-in-lieu or a short sale. A deed in lieu is where the borrower deeds the property back to the lender and that ends all obligations. A short sale is where the lender allows the owner time to attempt to sell the house, even at a loss.
Sorry for the long response – tried to keep is short and simple. If I was you, I would contact the lender immediately and discuss what opions are available. I would do this prior to meeting with an attorney. If the lender is willing to work with you all, you may not need an attorney and can use that money towards the past due balance. In any event, your meeting with the attorney will be much more productive if you can tell him/her what your lender is willing/not willing to do.
Hope this helps a little. Remember, I cannot give you legal advice because you are not my client and most likely live in a jurisdiction where I am not licensed.
Sorry for any spelling/grammar errors – I am doing this on my phone!