Legal Question in Real Estate Law in Texas

Hi,

My wife and I just completed a divorce in which we agreed that she can keep the house that we bought together; both our names are on the deed of trust for the house but only mine is on the loan as she was/is in bankruptcy and was incapable of getting a house loan in her name. I received a Special Warranty Deed to sign yesterday to transfer the property to her which I am ready to sign but want a provision added saying my name will be removed from the loan so that she is fully responsible for the loan or as an alternative she can get her own loan because I believe that failure to release me from the loan can hinder my ability to get a house loan in the future or potentially damage my credit if she fails to pay the mortgage. She is signing an Assumption Deed to say she will be assuming the note but I am concerned that for example if she does not pay then I will be the one in foreclosure. Please advice if there is a way she can get the house without me being hooked on the loan like this.

Thanks a lot.


Asked on 11/19/10, 7:16 pm

1 Answer from Attorneys

Your suspicion is correct. If she doesn't pay, it will go on your credit, even if you deed the property to her, even if she assumes the loan. The bank wasn't a party to your divorce, so it does not care if she owns the home. The loan is in your name, so it's your credit that gets dinged if she can't pay the bills on time (or at all.)

The ONLY ways to get your name off of the note:

1. Have the bank voluntarily remove you from the note. (I have NEVER seen this happen.)

2. Have your wife refinance the property in her name, or with another co-signer.

3. Sell the home to a third party, outright.

You should talk to a real estate attorney about some alternatives, such as a wrap around mortgage or something in which you can keep control of the situation.

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Answered on 11/24/10, 9:20 pm


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