If I sign a Quitclaim Deed to remove my responsibility to a property a co-own with my ex-wife, will be financially responsible if she defaults on the loan and the property goes into foreclosure?
Answer
Co-ownership of real estate and co-responsibility for payment of the financing thereon are separate concepts. A quitclaim deed will remove you as an owner. The quitclaim, by itself, does nothing to affect your liability for payments on a note and deed of trust which is already in place and will remain in place. My understanding is that when couples divorce and one of them "gets the house," most lenders will re-write the financing to be consistent with the new sole ownership -- often for a (small) fee. This is something I recommend you discuss with your lender -- and perhaps your divorce attorney, if you have or had one. Also, see if your final divorce decree says anything specific about the financial obligation on the co-owned property or, for that matter, the ownership.
Answer
I mostly agree with Mr. Whipple. My perspective diverges only on the issue of how standard it is for lenders to re-write the financing. Lenders made the joint loan based on joint income, joint assets, etc. They will not just automatically re-write the loan to have only one person and half the assets backing the loan. The spouse who gets the house will have to qualify for the loan alone. Some lenders will do this as a loan modification for a fee, provided the spouse staying on the loan qualifies and the old loan is more favorable to the lender than current loans (e.g. higher interest rate). Many, probably at least a majority, of the lenders, however, require a full refinance, particularly if the joint loan is on better terms for the borrower than the current lending environment.
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