The Divorce Buy-Out – They’re still screwing it up

RE: Previous Divorce Decree—The attorney definitely needs to go to one of your CLE’s!

Got this email from one of my favorite family law attorneys – the awesome Bodie Freeman in Keller, TX. Subject line read: RE: Previous Divorce Decree—The attorney definitely needs to go to one of your CLE’s!

Noel,

Below please find a mortgage related question (from a client) we discussed a few weeks ago:

As discussed yesterday, I have a question that I am hoping your colleague who specializes in real estate matters could weigh in on.  As ordered in my divorce decree, I refinanced my home at 601 Hays Drive in Keller in 2017 to buy out my ex-husband’s interest in the property.  In light of the current favorable interest rates, I am looking to refinance the same property to get a lower interest rate.  I have run into a snag with the way the refi was previously handled in 2017 (see comments below we received from our lending institution, XYZ Community Credit Union, related to a concern with how the mortgage was classified).
Title advised that your mortgage is classified as an equity loan in Texas, even though it shows as a conventional mortgage on your credit report.
Texas had very specific laws dealing with loans classified as equity, which required all transactions to be equity products after the loan closed. The law was changed in 2018, however, XYZCU is currently not allowing equity loans to be refinanced into their first mortgage loan products. In order to move forward with XYZCU, we have to send your application over to our equity department. They will reach out once the transfer is complete.  
Underwriter gives a fairly detailed explanation below.
We just got the Title Work back on this property, and it appears that the current mortgage is a Texas Home Equity; I have attached the Security Instrument filed of record for reference.  This may have not been explained to the members at the closing of this loan- but before last year, once a Home Equity, every subsequent transaction had to be a Home Equity until it is paid off.  This is not to be confused with a HELOC; this was closed as a TXA6 which may still show up on the Credit Report as a conventional loan, but Equity was still taken out at some point on this property.  Unfortunately, this file will need to be cancelled or sent through your Home Equity Department.  Please let the member know that it is not Texas law that is not permitting them to Refi with XYZCU, (Texas changed the law in 2018 allowing parties to refi home equities into 1st Mtg products), it is XYZCU that currently isn’t offering this.  Please let me know of any questions.

Any insight you can offer would be most appreciated.

Best Regards,

Louis Boyd “Bodie” Freeman III
http://www.lbfreemanlaw.com/

Noel wrote back:

Bodie,

You get it. You’re one of the few who do. I bless the day that the legendary Stephanie Foster got us connected. My “hat’s off” to you. (Don’t tell Stephanie I said she was legendary – she’s MUCH to young to be a legend. ?).

I’m proud to say that you are actually performing on your commitment (home page of your website):

It is my goal to help every client successfully navigate their Family Law needs with compassion and effective assistance. When dealing with Family Law matters where children are involved, we have an opportunity to achieve your goals while keeping their future in mind.

I love it!

The lender did the loan wrongly – they did it as a cash-out rather than a buy-out. Unless the loan that preceded it was a cash out they should have done it only as a buyout. We see this all the time…still.

Cash-out mortgages in Texas have a quasi-permanent quality to them. Until, the legislature “fixed” that provision last year (early 2018), it wasn’t quasi – it was PERMANENT…until the loan was paid in full. I’ll get into that elsewhere.

For now, it means that we have a lot to do yet!

The Best,

Noel Cookman

————————————-
So, how to prevent this from happening.

Fortunately, I am connected with many family law attorneys who connect me with their clients (and sometimes with opposing). These attorneys are problem solvers. They are the epitome of what family law practitioners should be. I love each and every one of them. They are fabulous.

All attorneys need to follow their lead and take a more forceful role in directing their clients to that proper way of financing a buy-out.

Attorneys should connect their clients with me immediately just like Bodie Freeman and many others do.

Even though many attorneys constantly refer their clients, it is still a “drop in the bucket” compared to the actual need out there.

I don’t know how else to say it but to be very clear and even crassly commercial about it. Sure, I want more business. We are gearing up to be the most prolific loan originators in the country. But, it’s more than that. All that will do is cause me to work harder – and, hopefully, smarter – with no guarantees of making more money. (The more work we have, the more people who do not work for free we need). Ha.

But, at this point it’s a crusade for me. Besides, I believe that I will reap a good harvest if I sow the right kind of seed. So, I’m good with the ROI. It’s actually more than transactional for me as I am compensated from a higher source, if you know what I mean. ?

Enough of this “call your lender” or “call your bank” or “I don’t know – you’re on your own.”

  • Their current lender does NOT have their paper work; and, if they did, it still would not make their loan easier or more apt to be approved.
  • Their bank or credit union or lender DOES NOT KNOW WHAT THEY’RE DOING. I don’t know how to say that nicely. But, they don’t. They just don’t.
  • The bigger and more well known the bank is, the less likely it is that they know what they’re doing with divorcing folks. The biggest and most common mistakes I see are perpetrated by the biggest name lenders and banks.
  • The vast majority of lenders and loan officers are doing it wrong.

As a leading attorney – and you are automatically a leading attorney just by virtue of your reading these unique emails – you are paving the way to bring REAL SOLUTIONS to many, many clients. And, you will reap benefits.

Not only do you become known as a solutions-oriented attorney, your potential clients hear it loud and clear – YOU know how to take care of all of their divorce-related issues, especially the money stuff.

Some of this may sound arrogant and presumptuous. All I can say is that I do not have time to try to convince anyone that I am humble or that I am Mr. Wonderful. I’m not. I don’t think that I’m arrogant or presumptuous either. I’ve just worked very hard for 17 years to make sure that I know that of which I speak/write. And, my success always hangs on whether or not I am solving problems – turning white paper (divorce decrees) into green money (buyouts, funded loans, refinances, purchases).

We have GOT to help the divorcing community in this country.

And, here’s the awesome part – we absolutely can.

If I could connect with every divorcing person in the country, I guarantee that I would save them money, save their house, help them map a path to greater security and stability and spare them from the silly, sophomoric mistakes that virtually every other lender is making day in and day out.

What can I say? I’m tired of seeing thousands of these loans being done wrong. I’m tired of hearing these stories and KNOWING without a doubt that I could have made a HUGE difference in their financing. I’m tired of saying to myself “if only.”

So, I am resolving to be bolder and brasher if necessary. Think of me whatever you want – too much is at stake for me to beat around the bush and strain to appear humble and non-presumptive.

Please – connect me with EVERY DIVORCING CLIENT YOU HAVE. Heck-fire, connect me with every DIVORCED (past tense) PERSON you know. I’ll try to fix up what others have messed up. We’re doing a lot of that lately.

So much is riding on this. Yet, I’ve never seen such a large problem that was so easily fixed. We can do this!

Thanks for reading.

Noel Cookman
Noel@TheMortgageInstitute.com

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