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Written by
Noel Cookman

Handy Dandy Checklist for Your New Divorce Clients

Published On 
March 9, 2016

Handy Dandy Checklist for Your New Divorce Clients

Thanks to the urging of the awesome Jennifer Richardson and Stuart Brown (of http://www.richardsonbrownlaw.com/) I have a handy checklist for you to give your clients.

This list is rare and only my “partners” (those of you who read my stuff) will have such a list. From time to time, I have offered recommendations for new divorce clients to help them prepare for their upcoming mortgage finance needs. But, this checklist will make these recommendations accessible for everyone on one list.

It’s really quite simple – anticipate what clients/borrowers will need in order for them to qualify for financing. First, here’s the principle behind what I am doing here: while you must work in the (legal) world of orders, agreements and judgments, I work in the world of documentation. Sure, my borrowers are subject to the legal orders, etc. But very often, documentation is superior to an order or agreement. Here’s an example of what I mean; and, it’s the first item on the list.

Think of spousal support. The legal world of family law and divorce settlements will usually think in terms of an order/agreement (temporary, MSA, ISA or final divorce) and support will begin on a particular date according to that order/agreement. But, in order for support to be considered qualifying income for a borrower, it needs to be documented as well as ordered. Here’s the rule: We must document that the support has been received for at least the previous six months and verify that it will continue for at least 3 years. Only a legal order or agreement can verify continuance. It’s one of the easiest things to underwrite – it’s written in plain English in a decree or agreement/order. A decree tells the mortgage underwriter the exact month support will discontinue. But, notice the front end of the support – only documentation is required. That means support can be paid on a good-faith basis only, no orders or written agreements required. [The one exception is Freddie Mac’s guidelines that, in fact, do require that the support be ordered in some legal fashion; however, we underwrite and document almost always to Fannie Mae standards in conventional loans and Freddie Mac is reserved for other nuances in borrowers’ needs. Freddie is the smaller of the mortgage “giants.”]

This is magical!

Now, the list…and the list within the list.

  1. Have clients begin paying/receiving support. And, make sure they pay/receive in a properly documented fashion. Here’s the idea – it must be clear that the payer is paying from his/her own separate/sole funds and that the payee is receiving funds in to his/her own separate account. It doesn’t matter what day of the months these payments are made so long as each month has its own pay documentation. In other words, if your client is in your office on the 29th of March, they can start the next day with March’s payment as the first of 6 months documented pay history.
    1. This may involve opening a new account or two.
    2. This may involve couples juggling their finances. For example, if husband has been paying the mortgage, utilities, car payments, etc., and if he is the contemplated payer, he might begin by paying wife the support amount and wife could begin paying those bills. It’s math.
    3. Months must be consecutive with no gaps.
  2. Check on Texas Home Equity financing. Is the first or second mortgage an equity loan? If they are unsure, have them check with me immediately. I can find out fairly quickly. Of course, they should be talking with me right about….now, anyway. The presence of an equity lien totally changes how financing is done. For starters, they simply need to know the realities of what they have.
  3. Be obsessive and compulsive about bill-paying especially during the divorce process. Do not leave anything to chance. Neither party has anything to gain by defaulting on debt or registering late payments with creditors.
  4. Give the client my “Items Needed” list. Write me at noel@themortgageinstitute.com and I'll send you a PDF format version of the purchase and refinance "Items Needed" list.
  5. The most important item on your checklist is for the client to call me ASAP. There is absolutely nothing to gain by waiting. Hey – I’m a nice guy and very easy to talk to. So, I will congratulate the client on choosing you as their lawyer. I will let them know that I will stick with them until they get what they need/want. More often than not, I set their minds at ease. And, in every case, I reassure them that everything’s going to be alright.

 

Thanks for reading,

Noel Cookman

noel@themortgageinstitute.com

817-454-4555

http://www.themortgageinstitute.com/

http://www.themortgageinstitute.com/blog/

 

 

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