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THREE TIPS FOR MEDIATION

Know this and you're in the top 1%

No one else - other than my readers and subscribers - know to do these three things. Yet, if you employ these three simple tips, you will be in the TOP 1% of attorneys and mediators - really, the top fraction of a percent. It will not always be this way because word is getting out - slowly, steadily, but surely. Be a leader and show your colleagues the way.

These tips will set you apart as a family law specialist. When you pull these cards from your hand, it will have the value of near shock to opposing...and, in a good way. They will not expect this. They have NEVER seen it, unless per chance, they have been on the other side of a customer with whom I have been working.

1. The Value of an Assessment/Approval Statement from me.
This one can save hours of "can she afford the house on her own?" "can she/he qualify for a loan without a job?" "We think his credit might not be that good" and my favorite - the all time dumbest reason to not require refinancing of a jointly held debt on an awarded asset - "we'll give you a Deed of Trust to Secure Assumption" as if that will relieve debt. (PS: it's actually the awarding of a "contingent" debt...but let's not get side-tracked).
The point is, a letter from me that says "we can do the financing under these conditions" can turn two hours of wasted, meaningless, un-knowledgeable discussion into 5 minutes. There is no guessing. There is no need for merely hoping. No confusion. Nothing but, "my client can qualify for their own financing and they can consummate the deal by X date."
Now, I need a little time to produce this. Briefly, I can do a pretty good letter in a few hours. But, if we have a couple of weeks, my letter can say "THIS IS NOT JUST A PRE-APPROVAL - this client's loan has been UNDERWRITTEN and APPROVED. All we need is agreement and the judge's signature....sign here." I'm telling you - it's amazing!
2. When negotiating a buyout (of any amount for whatever consideration and you are tempted to affix (memorialize in an IRREVOCABLE agreement...which some lawyers erroneously think is unchangeable or un-modifiable in its language) use this phrase:

"Net buyout to spouse is $ XX,XXX.XX; FINAL OWELTY LIEN TO BE DETERMINED BY LENDER IN CONSULTATION WITH THE BORROWER."

Even better is...

"Net buyout to spouse is $ XX,XXX.XX, FINAL OWELTY LIEN TO BE DETERMINED BY NOEL COOKMAN (LENDER) IN CONSULTATION WITH THE BORROWER."

Here's why this is critical.
If the decree cites the net buyout to spouse as the Owelty interest, than any other dollars financed in the customer's loan will be considered "cash out" with severe limitations on financing. If all cash needs are cited as part of the Owelty interest, then none of those other dollars will trigger the onerous Texas Home Equity Cash Out provisions.
But, sitting in mediation, you don't know what that total amount is.
Since, the financing of an Owelty (in the context of a refinance of the mortgage) cannot transpire until after divorce, the MSA is not underwritten, only the decree is. So, if net buyout to spouse is $50,000 and another $25,000 is needed, you can cite the Owelty in the final decree as $75,000 "TO BE DISBURSED AS" 1. $50,000 to ex-spouse, 2. $15,000 to credit cards and 3. $10,000 to your trust account to make sure all remaining legal fees are paid...or some configuration of that.
Don't try this at home...this is a job for the professionals. Which is to say, make sure I am reviewing the settlement and performing the loan financing. Hook me up with your client or with opposing. We don't have to hurt one side in order to help the other. In fact, we help one side BY helping the other.
3. When the other side is demanding your client refinance the debt on the house (in order to remove their client from its liability - mostly a reasonable requirement) here is the most common hot-button issue and how to address it. Their client thinks - as does what seems to be the entire literate world - that so long as the current mortgage appears on their credit report, they will not be able to qualify for an additional mortgage, their all-important debt/income ratios being too high.
Well, they are half-right. Debt ratios are supremely important, nearly a matter of law. Silly law (Dodd-Frank) but law, nonetheless.
Here is how to address it - quietly, calmly but with great force.
Just say this:
Your client's mortgage and other housing liabilities are EXCLUDED from their debt ratios by simply the standard assignment of that debt to my client in the divorce decree or Rule 11 Agreement (Rule 11 in the instance when a party wishes to purchase a home before final divorce). IT'S AN EXCLUDABLE DEBT FOR MORTGAGE QUALIFYING.
Yep. It's that simple and YUGE! But, hardly anyone in the mortgage world knows this and - it is hardly an exaggeration to say that NO ONE IN THE FAMILY LAW WORLD knows this. Well, now there's YOU.
More to follow. If you join my Platinum Club Inner Circle, I will give you a citation of the precise guidelines from Fannie Mae, Freddie Mac, HUD (FHA) and VA. It's a cheat sheet that will blow your mind...and blow your competition off the map.
Thanks for reading.
Noel Cookman
America’s Premier Divorce-Lending Specialist
office 972-724-2881 † fax 866-295-0567

Continuing Series: Things My Platinum Inner Circle Attorneys Would NEVER Do

This really happened. I leave the dates on the email exchanges but have, obviously, removed the real names of the people involved...to protect the innocent and the guilty.

Opposing for a case/file on which we had already obtained credit underwriting approval (i.e., loan was approved subject to appraisal and final divorce) refused to allow our customer to let an appraiser in the house for it to be appraised.

Get this: opposing wanted money, they wanted money from the refinance of the house but opposing (attorney and client) would not allow the house to be appraised. Wife (we were getting the loan for husband) had refused to allow access up to that point.

Attorney actually memorialized this silly refusal in an email...the first exchange below...keep reading.

Spoiler Alert. Scroll to the bottom to see how it turned out.

 

The chain of email communication:

From: Opposing Attorney
Sent: Thursday, January 3, 2019 1:39 PM
To: My Customer’s Attorney
Subject: Customer

I talked to my client about the appraisal and settlement.  She will sell all community assets to husband and forgive all debts he owes her for the sum of $250,000. She will not allow an appraisal [emphasis mine]. Call me at 214-555-DUMB if you want to discuss.

Opposing Attorney, Esq.

 

Husband (my customer) responded – rather appropriately I think - to this nonsense:

From: Husband/Customer
Sent: Thursday, January 3, 2019 3:31 PM
To: Customer’s Attorney
Cc: noel@themortgageinstitute.com
Subject: Husband/Customer

So, let me get this straight, I am supposed to get a loan to give to Wife $250K, but the bank can’t [is disallowed by opposing to] do appraisal?

Is this what they teach in Law school these days? Sounds like wasted money if that is what they are teaching.

Husband/Customer Name

 

From me (Noel, bent over double laughing):

Dear Husband/Customer (with Attorney):

Your sentiments are spot on. And, I totally agree.

For what it’s worth, I do my best to be supportive of the legal profession – I am supremely complimentary of lawyers every chance I get, as I have been about your attorney who deserves kudos and high praise. But Mr. Opposing Attorney’s statement doesn’t pass any test. It betrays not only an ignorance of financing but a deficiency of logic. I’ll let legal professionals weigh in on what sort of legal test his statement may or may not pass. My guess is that there is hardly any sound legal argument for his position.

Put simply, Mr. Opposing Attorney needs to be in possession of a few facts:

  1. Home financing - which is exactly how $250,000 (or whatever the agreed amount is) will be produced (neither Mr. Opposing Attorney nor Wife get to choose how Husband pays the obligation so long as such payment derives from legal sources) – requires all sorts of conditions for loan approval; not the least of which is an appraisal for the collateral. An appraisal WILL be performed if Wife receives her money.
  2. If Mr. Opposing Attorney wishes to lend Husband/Customer the $250,000, he may do so at any terms which are acceptable to borrower (Husband) and lender (Opposing Attorney) and legal. If he does not wish to lend his own money, he must observe the Golden Rule – He who has the gold makes the rules. This is to say that Mr. Opposing Attorney may think that legal rules, tricks and protocol apply here and NOT financing rules. That would only be true if he is producing money. But we all know that he is not. He should forget his trickery and ask himself “how shall we get money for my client?”
  3. No judge or court can change these rules. Of course, no judge or court will lend its own money so as to circumvent the normal protocols of mortgage lending.

I’m not a lawyer; and, your Attorney can certainly predict the court’s behavior with greater accuracy than can I or any layman. But I think I can argue against Mr. Opposing Attorney’s position after imbibing 8 margaritas and a handful of pain killers. His position and that of his client’s is laughable. If he wants to argue before a court that Husband cannot have his lender perform an appraisal, Mr. Opposing Attorney will have to state that:

  1. Husband was approved for financing – not just pre-approved but underwritten and approved subject ONLY to an appraisal of the property and final divorce specifying terms properly (Owelty lien as I have prescribed).
  2. Noel Cookman, America’s Premier Divorce-Lending Authority, has stated such. If I say so myself, when I say I can deliver the money, I can deliver the money. Ask 200+ Texas divorce lawyers.
  3. His client demands payment but refuses the means of payment. Specifically, she refuses to allow the collateral (which is securing the loan husband must take in order to pay the settlement) to be appraised for its value. As I say it again, I am shaking my head, rolling my eyes and uttering disgusted-sounding chuckles. This guy is idiotic, apologies to idiots everywhere.

*From my experience and perspective, a small percentage of judges can be as ignorant, obtuse and obstinate about financing as anyone. (Who am I to talk, eh. I'm no stranger to ignorance). Generally, they are cooperative with rules of financing, once they understand them. But I would NEVER assume that they understand these matters without clear explanations. Still, the point on which all of this turns is if the objecting lawyer (or a judge who might side with him) will lend Husband the money at good terms. If not, they should rule according to what Husband’s Attorney submits and how I have designed the Owelty (buyout). Remember the Golden Rule.

Thank you. (Please forgive the sarcasm but this attorney’s behavior begs for it).

Noel Cookman
America’s Premier Divorce-Lending Specialist
office 972-724-2881 † mobile 817-454-4555 † fax 866-295-0567
www.TheMortgageInstitute.com
601 W. NW Highway † Suite 200 † Grapevine, TX 76051

RESOLUTION? The day after my email was sent, the house was appraised. Our loan - which will put a lot of money into wife's bank account - is ready to close. 

I try to explain divorce-related mortgage financing in a variety of ways. Sometimes, just saying something from a different perspective helps to break through the fogginess on a matter. I don’t talk or write like an attorney. Rather, I have to make deals work in the realm of mortgage finance. Yet, I still must interact and live within the legalities of divorce law, real estate law, and finance law – as well as industry standards in all of those categories.

So, here goes one of those “from a different perspective” attempts to explain the DIVORCE BUYOUT. In Texas, we deal with the Owelty. Texas is the only state that has an actual lien on property (by design or default) for a divorce buyout. In other words, one may or may not use the word “Owelty” when citing a buyout; but, if an amount of percentage of “equity” is tied to a spouse’s interest in a marital residence, the Owelty of Encumbrance has been created. That’s what I mean by “design or default.” You can intend it or not intend it – it is created when that language is used in a decree.

So, here is a letter I sent out today to one of my elite attorneys who had referred a client for financing a few months back. After every loan closing/funding, I update the attorney and provide documentation that verifies the client has complied with the settlement as it relates to the financing and buyout requirements.

Names and precise figures have changed slightly for security and clarity.

But first, here are the numbers of the BUYOUT in the loan we just funded.

Total Buyout              $100,000.00

Ex-Wife                           75,000.00
Car Payoff                      20,000.00
Atty Trust Account          5,000.00

In Texas, the buyout is an Owelty Lien. In all other states, there is no lien, NECESSARILY. I have instructed on this recently and will instruct on it in the near future.

Dear Attorney

Thank you again for connecting us with Juan Gonzales. We have closed and funded his refinance loan. Funds for wife’s buyout amount of $75,000.00 have been wired to her account; and the other funds have also been disbursed. (See attached wiring confirmations).

I do not have a copy of the check to ABC Credit Union but I will shortly. The FedEx air bill that shipped it to Mobility is attached.

As is the case with all of your clients, Juan should be congratulated for hiring the best. You are awesome, attentive, astute, diligent….just a professional amongst professionals. It’s a great honor to work with you.

To reiterate a point that is often lost – Juan’s loan was structured as it would hardly ever be structured in any other situation or by any other lender (if I say so myself). This loan is a regular, “plain vanilla” purchase-money transaction – the same class of lien with which he purchased the house. Specifically, it is NOT a Texas Home Equity loan (attended by all its restrictive limitations, higher rates, etc.). The key element is how the Owelty was cited in the decree, how it was disbursed per the Proceeds Allocation and, of course, the fact that the ancillary real estate documents created an Owelty of $100,000 (not $75,000).

You are in an elite category of attorneys in the entire country who understand this and, more importantly, establish the mechanisms which make it work. Congratulations!

Thank you for introducing me to Juan. He is the finest of finest of customers and citizens. We are honored to know him and hope to be friends for life.

At Your Service,

Noel Cookman
Noel@TheMortgageInstitute.com

Mr. Cookman,

I have been following your emails and blog for some time, being a family law specialist in Texas; I have moved to Tennessee and been teaching domestic relations in a little law school up here for a while, and my question is pretty simple.

Will Owelty liens and your divorce lending services work here in Tennessee? They have never heard of an Owelty lien, and I am curious what the interstate application of these services might be.

Thank you for your time, and Merry Christmas.

Still Licensed to Practice in Texas, Teaching in Tennessee

♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦

Dear Friend,

So great to hear from you. I remember you well. I remember when you moved. I remember being happy for your opportunity in Tennessee and a bit disappointed that Texas was losing you. Glad you’re doing well. And, thanks for reading.

It’s interesting you should ask this. I am writing courses and materials for other states right now. And, here are the two main points of my initial synopsis/thesis:

  1. Texas is the only state that provides a lien on property for a divorce buyout (of a marital residence). So far as I have learned so far, the Owelty is only a legal provision in Texas. Although, it’s a general concept – a word with a definition – so, per state laws, I would imagine there might be some latitude in what liens are called. (See below).
  1. The key to get the proper financing in all the other states is to get the buyout to look like and function as a lien on property (Texas being the template) rather than a mere judgment against a person.

To the second part of your question –

Will…your divorce lending services work here in Tennessee? – The answer is a straightforward – YES.

I consult on those loans/cases but my “multi-state desk” handles the actual loan. My mortgage bank handles loans in all but a few states; I am personally licensed in Texas and California and my branch is licensed in those two states as well as New Mexico, Oklahoma and Arkansas. So, we can pretty much handle the business anywhere.

As to the Owelty question, let me just add that it’s amazing how mortgage financiers are missing this in Texas (a little less now that more mortgage folks have learned about the Owelty) and in all the other states. The mistake they are making is that they are “cashing out” rather than “buying out” – and there is a HUGE difference between the two.

So, until I get all the states studied out thoroughly, I recommend that divorce settlements (decrees, property settlements, etc.) specify the buyout and cite an actual lien – probably in the style or class of a vendor’s lien (might be called by various names – just avoid the word “equity” at all costs since equity financing is what triggers onerous limitations not only in Texas where it is law but in all the other states wherein limitations are per industry standards).

In point of fact, the Owelty lien (in Texas) is of the same lien type as a vendor’s lien. Vendor means “seller.” So, in every sense, the divorce buyout, being the selling of one’s interest in a property, is of vendor quality and kind. Hopefully, some simple research will indicate which liens are valid per state law and which are suspect.

I hope this helps. I’m so happy that we are still connected.

Noel Cookman
America’s Premier Divorce-Lending Specialist
office 972-724-2881 † fax 866-295-0567
www.TheMortgageInstitute.com
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