Q: Is there a legal document to allow one person on a mortgage to leave without liability or claim to future proceeds?
In Humboldt County, California, my daughter and son-in-law are about to divorce. They haven't filed yet. My son-in-law would like to stop making his half of mortgage payments immediately (they have separate bank accounts), and receive what is thought to be his half of the current equity in the house, $15k. Is there a legal document to facilitate this?
A: Dear Property Split Questioner: Certainly a competent attorney could draft the Agreement that addresses the splitting of the equity in the house and the other particulars as to manner of division between these parties. However, the biggest challenge to the expressed "goal" of either/both parties escaping future liability in this type of potential transaction is this: they are both signatories to the Loan and even if they try and contract around the liability for mortgage payments, unless the Mortgage Lender accepts the new arrangement in writing (a rarity) going forward the Lender is entitled to pursue EITHER PARTY for failed payments under the "joint and several" exposure that each party has as signatory on the Loan. The only true way to negate that exposure under the Loan is: (1) a refinance by the the party whom desires to own the property, or (2) a sale and loan payoff. Lastly, and while this only happens occasionally, you should know that technically the making of an agreement between two parties to obviate a loan payment by one or the other is a potential breach of the loan terms which can open the door for the Lender to call the loan in default (this event occurred with more regularity in 2008 and 2009 when the lenders were holding realty assets that were worth less than their security).
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