Supporting Successor in Interest Claim in an NJ Divorce Property Settlement Agreement

When people get divorced, if one person wants to keep the home and be able to get a loan modification, they need to have specific language included in the divorce settlement that states only one party is the sole owner of the home.

The Property Settlement Agreement should require that a quitclaim deed be executed, and it should state that if the spouse does not sign, the Court Order for Divorce will effectuate the transfer. The Property Settlement Agreement should also require a letter from the spouse stating that they are not living in the house; they have no interest in the house; and they are not contributing financially to mortgage payments for the house.

Assumptions and Successor in Interest

Someone who takes ownership of properties based on the death of parents or divorce is called a successor in interest. Additionally, if that person takes over responsibility for a loan associated with a property, and wants to apply for a loan modification, they may need to get an assumption of the loan.

What is a Successor in Interest?

“Successor in interest” means a person to whom an ownership interest in a property securing a mortgage loan is transferred from a borrower, provided that the transfer is:

  • A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety
  • A transfer to a relative resulting from the death of a borrower
  • A transfer where the spouse or children of the borrower become an owner of the property
  • A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or incidental property settlement agreement.

What is an Assumption?

An Assumption allows a new person to take personal liability for payments on the Note, giving them all the rights of a borrower, including applying for a loan modification. That said, it does not relieve the original homeowner of personal liability unless the creditor agrees to such terms in writing.

Assumptions Cannot Be Rejected Based Upon Garn-St Germain Depository Institutions Act

Assumptions cannot be rejected by lenders based upon the Garn-St. Germain Depository Institutions Act at 12 U.S.C. § 1701j-3 et seq (1982), when the ownership interest in the property is transferred:

  • To a person who obtained ownership of the property via devise, descent, or operation of law upon the death of a joint tenant or tenant by entirety
  • To a relative of Borrower resulting from death of Borrower;
  • To a spouse or child of the Borrower
  • To a spouse pursuant to a divorce decree or separation agreement

Additionally, if the loan is Fannie Mae, Freddie Mac or FHA, you can send a letter to the Servicer and advise them that you are Assuming responsibility for payment of the loan, if you obtained title to the property:

  • Via devise, descent, or operation of law upon the death of a joint tenant;
  • As a relative of Borrower resulting from death of Borrower;
  • As a spouse or child of the Borrower; or
  • As a spouse pursuant to a divorce decree or separation agreement

If you obtained title based upon one of the above conditions and the loan is with Fannie Mae, Freddie Mac or FHA, they are required to allow the Assumption.

Contact the Law Office of Ira J. Metrick today if you need assistance with issues regarding ownership of a property following death of parents or divorce.

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