HAMP Loan Modification and Your Credit After Divorce

by Melissa

Ask Kate about HAMP loan modification and credit after getting divorced: Melissa's spouse was awarded the house in the divorce decree and was given three years to remove her name. But a year later, he applied to his loan servicer for a loan modification who proceeded WITHOUT Melissa's authorization. If you are a homeowner contemplating divorce, be sure to read Melissa's story so you can avoid the resulting credit issues.


Melissa asks Kate About HAMP, Divorce, and Credit

Hi Kate,

My ex-husband got the house in the divorce decree a little over a year ago.

According to the decree, he has 3 years to take my name off the mortgage by either refi, assumption, or sale of the house.

In December 2012, he modified the loan without my knowledge through the HAMP program - because he could...

The HAMP program allows for this modification due to divorce without my signature. Now my credit is trashed and I am still on the hook for the loan despite the fact that he qualified without using my income.

Questions:
  1. How is this legal? How is it legally binding to hold me to a modified agreement that I did not agree to?


  2. According to the modification, my ex is not allowed to refi or assume the mortgage for 2 years from the date of the modification...he will end up being in contempt of court if he cannot get me off the loan in time. Again, how is this legal?

Thank you, Melissa

Kate Answers: HAMP Loan Modification and Credit After Divorce

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Dear Melissa,

I was not aware of this Home Affordable Modification Program (HAMP) guideline.

This practice is contrary to past requirements of Fannie Mae and Freddie Mac, demanding that all borrowers sign loan documents or come off the mortgage, regardless of verbiage in divorce decrees.

Making Home Affordable Modification Program and Divorce

Here is the quote from Making Home Affordable (MHA) Supplemental Documentation to HAMP:
If a borrower and a co-borrower are divorced and the property has been transferred to one spouse in the divorce decree, the spouse who no longer has an interest in the property is not required to execute the HAMP documents.
I think it is important to point out that MHA says no signature is needed if the ex-spouse has no interest in the property.

But this is arguable, in my opinion, since although you are divorced and your ex was awarded the house, you still have an interest in the house and mortgage for another 2 years.

How can you tell? Your ex-husband's late mortgage payments trashed YOUR credit.

It really irks me that Making Home Affordable feels they have the legal right to modify terms on a mortgage without a borrower's permission. They should either require the ex-spouse to be removed (per the divorce decree terms) or require written permission from all borrowers.

Beware of Divorce Terms that Can Affect Your Credit

What can we learn from this? Until borrowers are released from the lien by paying off the mortgage through refinance or selling the house, their ongoing credit status is dependent on the timeliness of future payments, regardless of divorce decree terms.

Now back to your two questions about legality. I recommend consulting an attorney. You are probably groaning at me right now, but unless you have the time and expertise to challenge the loan servicer, you need someone with power in your corner. In addition, you should file a complaint with your state's attorney general.

I wish you the very best. This is an uphill battle but one that needs to be won. Loan servicers should not be allowed to dictate terms that affect your credit status and future ability to borrow money without your permission! Period!

You can find more help regarding HAMP and divorce issues at these Ask Kate letters: Good luck,

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