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4 Make or Break Mortgage Qualifying Issues in a Divorce Settlement 

4 Factors iNoel_029n Your Divorce Decrees That Make or Break Your Clients Ability to Get Mortgage Financing < Click on headline to watch this 98 second video

I don’t expect a lawyer to have to think about these things. That’s why you have me. But, you become infinitely more valuable to your clients when you understand these four factors that WILL make or break their mortgage qualifying.

If these four elements are mishandled in the settlement (Mediated Settlement Agreements, Informal Settlement Agreements, final decrees or separation agreements in many states), the odds of your clients getting their mortgage loan edges closer and closer to ZERO. Whereas, if you understand these factors, you dramatically increase your clients’ odds of getting the right mortgage loan and, maybe, a loan at all.

Those elements are:
Factor #1: Debt/Income Ratio
Factor #2: Support
Factor #3: Buyouts
Factor #4: Timing

In the following 4 videos and blogs, I will expand – very simply – on each of these. I will warn you, however, that the big secret that makes it all work – the ONE THING that makes the difference - is connecting your client to me and my staff of Divorce-Lending Specialists.

And, candidly, it’s much simpler for you to just say “call The Mortgage Institute; I know Noel, and he will take care of you.” That way, you don’t have to do all the “figuring” for yourself. You just turn it over to me, and we “figure” it out.

But, you will increase your leverage in negotiations by knowing these factors...if for no other reason than to warn all parties that certain things just will not work.

I’ll give you an example. I’ve heard [some variation of] this many times. Let’s say in mediation, opposing attorney Foghorn Leghorn says “We’ll give her [your client] $5,000 a month for two years…any bank will be happy to give her a loan with that income.” (It's best if you say it in the Foghorn Leghorn voice).

First of all, when opposing says the word “bank,” just be aware that he or she probably doesn’t know what they’re talking about. I’m a mortgage banker and I have to get up every morning and find out if guidelines have changed overnight.  And, I can just tell you that there is far more misinformation out there than accurate information when it comes to lending standards. Don’t take anyone’s word for a lending standard – and $5,000/month for two years either passes lending standards or it doesn’t – when you’re in a mediation or negotiation. As it turns out, it does NOT pass lending standards. Keep reading.

Don’t even take a judge’s word for it. ESPECIALLY do not take a judge’s word for it.

The only person qualified to make a statement about a lending standard or guideline is the person writing the check.

It’s the golden rule – he who has the gold, makes the rule.

Secondly, and to my specific example, $5,000 per month for two years counts as $0 in qualifying income for a mortgage loan. That’s right – NADA. ZIP. NOTHING. GOOSE EGG. That’s because – and I’m getting ahead of myself – support income has to continue for THREE YEARS, not a month less.

But, even with that guideline, there are some interesting twists that mean that you can “save the day” for any divorcing person needing a mortgage loan – it all has to do with starting the loan application as soon as possible. More on that later.

For now – and if you’re negotiating before you can see all of the next 4 videos/blogs – just tell them “Hey look, we can make or break the clients’ ability to get a mortgage loan based on our attention to these FOUR FACTORS…

#1: Debt/Income Ratio
#2: Support
#3: Buyouts
#4: Timing

So, we’d better get Noel on the phone right now so he can steer us in the right direction.”

Noel Cookman


Here is the video to go along with this blog:


I hear it every other phone call. "My attorney says you can work miracles, so here goes."

Do you realize how scary and humbling that is. Talk about pressure. Ha.

Here are 3 Math Tricks I use to make sure divorcing home owners/buyers get mortgages.

  1. Spousal Support. Make it stretch out for 3 years. Anything less is not qualifying income. This involves multiplication and division.


  1. Structuring Support (Child and Spousal works this way). In order to use support payments as qualifying income, two major features must be in place: history and continuance.


  1. DTI – mortgage lingo for Debt To Income ratio.


*6 months is the current requirement (for the most part) in mortgage underwriting. It used to be 3, technically FHA requires 12 but the “automated findings” for nearly all mortgages have been stating 6 months for over a decade now.


Many attorneys yield that a court cannot order a lender to advance funds so therefore, it is not possible to truly require a party in a divorce to refinance the mortgage note (in order to remove the ex from its liability and, possibly, to include a buyout for spouse's interest). The premise is correct but the conclusion is wrong. Refinances can be - effectively - required. And here's how to do it. As in much of law and life, it's not in the requirement, it's in the "or else." It's called incentives.

Moreover, the purpose of a refinance of a mortgage debt (emanating from a divorce) is NOT the refinance transaction itself. It is, more often than not, to relieve a party of a liability on an asset which they no longer own. "Get me off the mortgage [note]" is NOT an unreasonable request or demand.

I will not deal herein with THE MOST IMPORTANT ISSUE - which is HOW it is done and WHETHER you are satisfied before final divorce THAT it is done - in other words how to turn white paper into green money. Please bear in mind that such consideration is VERY important.

But, here I will give suggested language to put teeth into the requirement for the home-owning party to refinance the debt and thereby relieve their spouse of its liability.

Here 'tis.

Provisions for Refinance or Sale of Marital Residence

 IT IS ORDERED AND DECREED that PETITIONER/RESPONDENT refinance the property and all improvements located thereon at [Legal Description] and more commonly known as 1234 Main Street, Tombstone, Tarrant County, Texas, into the sole name and liability of [same PETITIONER/RESPONDENT and any co-signers or co-borrowers which may be qualified and willing] on or before [1 X days after entry of this final decree], (optional>) and pay OTHER PARTY the amount of $XXX,XXX.XX.

OTHER PARTY is ORDERED to cooperate with PETITIONER/RESPONDENT to timely execute any documents required to effectuate the terms of this provision 2 upon presentment.

In the event PETITIONER/RESPONDENT fails to refinance the property before [X days after entry of this final decree], and/or fails to pay OTHER PARTY the amount of $ XXX,XXX.XX on or before X days after entry of this final decree, IT IS ORDERED that the property and all improvements located thereon at [full legal description] and more commonly known as 1234 Main Street, Tombstone, Tarrant County, Texas, shall be sold under the following terms and conditions:

  1. 3 The property shall be listed for sale with a duly licensed real estate broker having sales experience in the area where the property is located, provided further that the real estate broker shall be an active member in the Multiple Listing Service with the [Local] Board of Realtors.
  1. The property shall be sold for a price that is mutually agreeable to [PETITIONER and RESPONDENT]. If [PETITIONER/RESPONDENT] and [other PETITIONER/RESPONDENT] are unable to agree on a sales price, the parties shall follow the recommendation of the real estate broker.
  1. 4 On the application of either party, the property shall be sold under terms and conditions determined by a court-appointed receiver. [Please retain an ethical receiver who operates in the interests of the court but not against the interests of the home owners or the marital estate. See my thoughts about receivers on my blog at]
  1. PETITIONER/RESPONDENT shall continue to make all payments of principal, interest, taxes, and insurance on the property during the pendency of the sale, and PETITIONER/RESPONDENT shall have the exclusive right to enjoy the use and possession of the premises until closing. All maintenance and repairs necessary to keep the property in its present condition shall be paid by PETITIONER/RESPONDENT.
  1. The net sales proceeds (defined as the gross sales price less cost of sale and full payment of any mortgage indebtedness or liens on the property) shall be distributed as follows:

------- OR ------



1 I do not recommend calendar dates here unless such date is a) in the distant future or b) required by some other factor or law or reasonable purpose – rather, tie it to X days after entry of final decree. Now, the question is "how many days?" That's why you need to call me. Why are you just pulling this number out of your...well, you know? One of my team member Divorce-Lending Specialist Professionals needs to tell you exactly how long it will take. It could take from, literally, 2 days...yes, we close loans 2 days after final divorce because we don't do what other lenders do and wait until final divorce to get to 2 years.

2upon presentment” is a good idea because the execution of certain documents at time of loan closing is often very time sensitive. The lending industry with its minimum and maximum numbers of days for this and that does not wait on a court’s order like “execute within 3 days or 7 days of presentment…”

3 ”The property shall be listed for sale with a duly licensed real estate broker having sales experience in the area where the property is located, provided further that the real estate broker shall be an active member in the Multiple Listing Service with the [Local] Board of Realtors.” While this may sound reasonable, it is still a formula disagreement and maybe disaster. I advise that the attorney recommend one of our divorce / real estate professionals or someone who is savvy with these matters, not just a real estate agent who happens to be available and willing. Such a person may well be qualified. But, the idea is that the realtor should know his/her way around divorce and even receivership. And, there is great benefit to naming that realtor at the time of final divorce with some proviso that another can be retained if he/she is not available at the time.

4 "On the application of either party…" Two things about receivers. Depending on the case, it could be advisable that the decree “leap-frogs” over the real estate agent phase and goes right to receivership appointment. It is the receivership that really puts teeth into the requirement to refinance by date certain. Moreover, the real estate agent and the receiver can be the same person. There is no conflict of interest. Any person or professional can act unethically. But, there is no inherent conflict between a realtor who seeks the highest and best price for their customer’s property and that same realtor who acts in the interest of the court. That is, there is nothing in acting in the interest of the court that compels an agent to act against the interest of the homeowners. One would have to exercise bad motives or judgment or ethics to achieve that dubious characterization. [Please retain an ethical receiver who operates in the interests of the court but not against the interests of the homeowners or the marital estate. See my thoughts about receivers on my blog at]

























Noel Cookman, The Mortgage Institute 2019

Got this email in the middle of the night. I love these questions and the learning opportunity they afford.

From: Divorcing in Washington State
Sent: Thursday, June 6, 2019
Subject: Read your blog. Need advice on divorce buyout

Noel, I read your blog and am reaching out because I am going through a very contentious divorce settlement. Let me give you the bullet points.

My ex-spouse wants to buy me out and keep the house which is fine by me. However right as we were about to sign and finalize a buyout of $40,000, she pulled out last minute after applying to refinance the loan. The appraisal the bank gave was far lower than the independent one we had done a month or so earlier. So now she is reconsidering how much the house is actually worth and is influencing her decision to negotiate lower.

Independent appraisal done in April valued the home at $550,000

Bank refinance Appraisal done just last week valued the home at $500,000

On Zillow it's $555,000
On Redfin it's $530,000

The relevant balance when it comes to our remaining mortgage as it pertains to me is $436,000

So we did the thing you mentioned a lot of people do, took these numbers and subtracted.

550,000 - 436,000= 114,000 in net equity

divided in half =57,000 (my share)

I took it down to $40,000 to factor in hypothetical closing costs, brokers fees, etc. I thought this number was more than reasonable but I would love to get your opinion on how to zero in on the most accurate number for the net equity of the house.

I would argue that the banks appraisal is not true market value for what we would sell the house for, they will always appraise on the lower end because it's in their best interest. So, do you have any insight as to what is closer to the true value and net equity of the home and how we can reconcile the huge differences in these numbers. Also if you have any advice on what a fair and equitable buyout would be given the numbers I just gave you. I live in Washington a community [property] state. I appreciate what you do!

I have attached the two separate appraisals that were taken. One is from the Bank she is refinancing the loan from. The other is from an independent appraiser that she picked out herself.

Divorced in Washington State


Dear Divorced in Washington State:

Thanks for writing. I love addressing these questions and conundrums (or is that conundra?).

Only one of these is an appraisal – the one which client is the bank. The other is a CMA (Comparative Market Analysis). It is not an appraisal. Both are opinions. But, one is the opinion of a professional appraiser as a report to a lender to which it has an obligation to make a fair report. The realtor’s opinion is the price at which she hopes to list the property for sale but, in no manner, reports as an actual value. That’s one reason customers pay hundreds of dollars for one while the other is free.

In raw terms, only the lender’s appraisal has significance in terms of what can be financed. In other words, Jane Smith [not her real name] may be a wonderful person but the bank/lender is lending their money and Ms. Smith is not.

I do not mean to be flippant. I am just giving you the reality of the situation through the eyes of a lender.

As well, it is actually NOT in the bank’s best interest to appraise a property lower than it is truly worth. This harms their balance sheet on the asset side and, if they sell the loan on the secondary market – and virtually every mortgage lender prepares their loans so that they can sell those loans on the secondary market – it is to the benefit to have a defensible appraisal at the highest rationally-calculated value…it means that loan has a stronger equity position or performance potential – that is to say, the more equity a homeowner has in their property, the less likely they are to default on the mortgage debt.

As a foot note to the preceding paragraph, the appraiser is no longer the “bank’s appraiser.” Home Value Code of Conduct and the Dodd-Frank Wall Street Reform Act which incorporated this measure into its new 2,300+ page bill (2nd in size only to the Obamacare Affordable Care Act….if you care to know) built a “fire-wall” of sorts between the bank/lender and the appraiser. That wall of separation comes in the form of an appraisal management company (AMC). This effectively means that the bank has no influence over the appraisers’ statements of opinion. Communication between the bank and the appraiser is nearly a crime – it is a crime if the bank tries to influence the appraiser’s opinion of value. You can imagine the pro’s and con’s of this provision. So, it’s fairly certain that the bank is not manipulating the report of value.

But, the central issue – in my view – is one of negotiation and value. Value is not what an appraiser says an asset is worth; it is the highest price that a rational person will pay for that asset as sold to them by another rational seller.

So, you’re in a negotiation. Here is a strategy that I recommend be used with prudence and good timing and ONLY if it can be done sincerely (i.e., without bluffing) in divorce-related buy-outs. If your wife is offering a certain price that you think is too low based on your assessment of the value, ask her “do you truly believe that this is a fair price.” Let’s say she is offering $50,000 as a buyout to you. (I’m literally just pulling a number out of the air so don’t take the math literally). And, let’s say that you believe $75,000 is more reasonable given your assessment of value. So, if your wife believes that $50,000 is fair, turn the tables. Say “I’ll take the house and buy you out for $55,000…that’s more than a fair price for you because you get a $5,000 bonus…it’s a no-brainer, right?”

Now, she has committed to what she claims is a fair price; and, you are working within her framework of opinion of value.

However, if you just simply do not want the house at a price of $55,000 for her equity (let alone $75,000) you have to deal with the reality of value to you – for example, if you have reason to believe that the antique bicycle in your garage is worth $200 even though it needs restoration, you might let it go in a yard sale because you don’t want the hassle of restoring it, storing it or moving it. You are effectively “paying” $100 to offload the hassle of restoring/storing/moving the bicycle.

The key is not to play your hand too early and reveal that you think $75,000 is a fair price. She just might turn the tables on you.

So, here is the proper way to calculate equity in my opinion. First establish the difference between equity and ACCESSIBLE EQUITY. This is based on the idea that if your house sells for $100,000 and you owe $50,000, you will not walk away with $50,000. There are transactional costs (title policy, realtor commissions, filing fees, etc.). As well, if you refinance in a buyout, the conventional lender will lend no more than 95% of a home's value. So, you can rarely if ever "access" the entire value. So, I use the 95% method which almost mirrors the math if an owner sells their property.


Bank's/Lender's appraised value $500,000 X 95% = $475,000
Less the mortgage balance of $436,000 = $39,000
Less the finance costs (let's just pretend it's 1999 and call it $5,000) = $34,000.
Then, divide it how you please. The math is simple at that point.

That's not to your advantage I understand. But, even if you do not factor the 95% (keep in mind that there is no law that enunciates the formula) you get

Bank's/Lender's appraised value $500,000
Less the mortgage balance of $436,000 = $64,000
Less the finance costs of (again, let's pretend) $5,000 = 59,000
Divide it how you please.

Hope this helps even though the news is probably not to your liking. And, the numbers are hugely different depending on the VALUE. The fact is, we have to live with the realities of financiers - how much money they will lend; as well as the rules by which these lenders must play.

Thanks for writing.

Noel Cookman
America’s Premier Divorce-Lending Specialist
601 W. NW Highway † Suite 200 † Grapevine, TX 76051

My Approval-Assessment.

Read on. If you don’t already know or haven’t seen one, I’ll tell you what it is.

Take this magical tool with you to your next mediation. This might be the most important and valuable tip I've ever given.

How much time do you (and a few other professionals and clients) spend in mediation talking about the house, who can get it, who can finance it, if they can buy the other one out, exactly how would it be structured, how best to secure money interest, etc.?

You and I both know that I could teach a thousand Owelty courses and, still, no one around that table could give definitive answers to those questions. At least not until a proper loan application has been taken and an Assessment has been presented by me.

Only then does anyone know for sure.

I can turn those two hours of wasted time into 5 minutes. How?

Try this on your next mediation. Tell your client to call me at least 10 days prior to mediation. Preferably earlier – there’s no downside to starting early, early, early. (More work for me – less anxiety on everyone else). Candidly, if I can, I would rather take the call the night before rather than after the fact. But, get them hooked up sooner than later.

Then, at mediation, take my Approval/Assessment (in print form) that basically says 7 things:

  1. Client is approved for financing (if there is a net buyout, only you, the client and I know that maximum buyout for which they are qualified – you don’t want to give that away but you do want to know it as a maximum amount)
  2. Client’s loan has been processed AND UNDERWRITTEN and approved subject only to final divorce. <this is NOT a mere pre-approval
  3. Exactly how to structure the buyout.
  4. We can close by date certain or within 5 business days of final divorce.
  5. Ex will have his/her buyout monies by [date].
  6. We’re waiting on the other side!
  7. Boom Shakalaka!

Then, you just resist the temptation to take a victory lap around the conference room or do the happy dance on the table. It just wouldn’t be seemly.

Yes, this works for informal agreements, kitchen-table negotiations, written settlement offers, that meeting you have in the side room before going before the judge, just about any meeting-of-minds in a negotiation.

Here’s the secret, and we’ve been doing it for so long now it’s hard to remember that it’s totally counterintuitive to the entire lending industry. We underwrite what the settlement is going to look like, not what it is at the moment of application.

The hockey great, Wayne Gretzky, was asked the secret of his magical skills. Let me paraphrase just a tad….

“I never go to where the puck is (or has been),” he said, “but where it’s going to be.”

That’s what mortgage people would have to do in order to help divorcing folks. But, for some reason they don’t. It’s almost as if there’s an unwritten rule – don’t help folks until it’s too late.

I started pushing the envelope 17 years ago and tried doing things that everyone else said couldn’t be done. Well, I actually started “pushing the envelope” when I was about 2 years old and my mother had to play piano for my dad’s small Pentecostal church in Staunton, Virginia. No one wanted to baby-sit me during the worship-music part so she threw me in the “play pen” and put it right beside her on the platform. I spent our “worship” time climbing in and out of the play pen and generally distracting the worshippers. I was told that they eventually had to put barbed wire around the top of my play pen but I’m not so sure about that…sounds like a bit of an exaggeration to me even though my friends swear it’s probably true.

Be that as it may, I’m an incurable “envelope-pusher.” I can’t stand to accept things as they are just because that’s the way they are. Sure, it gets me into trouble. But, when it comes to my customers – your clients – it saves them from trouble. [I also have little tolerance for trying stuff – like socialism and collectivism - just because it seems novel to some or because I want to experiment with other people’s lives and livelihoods. Ooops. Did I just get political?

Now, I’ve always told you that I will not market to you in these newsletters; but, rather, I will always give you usable information that will truly help you in your divorce cases. Mostly, I show you how to turn that white paper into green money.

But, honestly, I can help you and your clients so much more if I am just connected with them. This isn’t marketing – this is the reality of settling cases and finalizing divorces wherein clients get what they need and their housing and finances are not a mess.

I don’t know any other way to truly give valuable help to you for your cases. I really must be connected with your clients and/or opposing if I am to make sure the home financing is done properly, effectively, to the highest benefit of the home owner (borrower) and much sooner that anyone else could do it…not to mention IF anyone else could do it.

We can put an end to financial devastation triggered by divorce at the point of housing. There’s really no sense in any of it happening…at least happening because divorced parties were not connected with the right peeps.

As I tell you in the seminars,

…the bad news is that there are hardly any qualified Divorce-Lending Specialists who can work the magic; the good news is that I happen to know a guy.

Write me and let me know how I can help you. I really like hearing from you and enjoy getting answers to your questions.

Noel Cookman

Today’s question comes from the awesome Lori DallyLori Dally ( of the great Seltzer & Dally


Hey Noel:

Hope you are doing well! I had a quick question I was hoping you could answer for me. I have a client who's wife's name is solely on the mortgage. He is wanting to keep the house, but his wife obviously wants him to refinance into his sole name. They are self employed and are behind on filing taxes (haven't since 2013) - so that is an issue to him getting a loan.

He claimed he talked to the bank and they can "add" him to the loan - that doesn't seem correct does it? My thinking is the only way to remove her from liability is to sell the house or refinance it. Do you have any creative solutions?


Lori E. Dally



Great to hear from you.

Your instincts are right. “adding him to the loan” doesn’t really accomplish what you want – totally removing wife from liability.

Our “creative solution” would start with getting them to file taxes, calculating the debt (if any) to the IRS and, then, calculating the monthly payment they work out with the IRS as it must, then, count as a monthly debt service in his debt ratios. If the divorce settlement splits that in any way, it would obviously help them both in financing, Without the divorce settlement assigning debt service as a percentage or dollar amount to each party, the entire payment would count against each of them…sort of double-counting.

Selling might be the quickest solution. Maybe they will make enough in the transaction to either pay or settle payment to the IRS??

We’ll be happy to walk with them through this so that they can be better positioned to purchase a house…as early as possible.

Sorry…no magic bullets.

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


Follow up Question:


Awesome - thanks for the quick reply. Is it even possible to just add him to the loan?


Lori E. Dally



No. But, that wouldn't solve the problem anyway. The mortgage company might give her a release of liability form but only after he qualified on his own. If he could qualify on his own, he could refi the debt and wife would have the lien/loan paid off not just a piece of paper saying that she might be released from the liability.

Noel Cookman

My Follow Up Thoughts:

No “magic bullets” but a few ideas.

1. Husband still needs to make application sooner than later…and definitely before final divorce. Here’s why:

2. You (and any attorney) would need a realistic time line expectation of how long it will take before he can actually close a refinance transaction and, therefore, get wife removed from liability. There are many elements that go into a loan approval; and, no one is well-advised to do their own qualifying. Moreover, most lenders will not even begin this process until the divorce is final. Then, it’s too late for you to include deadlines and remedies in the decree.

3. We get a client started on his/her mortgage application so that we can deliver to you – the attorney – an assessment with a realistic projection of a closing date. I see it as my responsibility to provide you with the information you need to include workable time-lines in the decree. What good does it do to require financing within 6 months if it will actually take 9 months or longer for the home owner to qualify? You might as well know in advance rather than throw things “to the wind.”

4. If we are working with both clients (one for refinancing the existing mortgage and the other for buying a new home), then we can advise on many things including that thorny issue of the debt to the IRS being factored into their debt ratio (don’t forget about that all-important debt ratio and the famous “ATR – Ability To Repay”).

5. Even though wife will certainly want to know that the existing mortgage liability will not hang out there forever (well, 30 years seems like forever), all is not lost. If the decree properly assigns the mortgage debt to husband, then wife can qualify for her own mortgage financing while EXCLUDING that mortgage debt from her qualifying ratios…even though it still appears on her credit report. Again, not all lenders know this or allow for it. We do. It’s really a standard underwriting guideline that lenders have the option of employing in their customers’ loans.

Here's Lori Dally's and Sarah Seltzer's awesome firm:
Seltzer & Dally, PLLC.
3617 Hulen Street
Fort Worth, Texas 76107
Tel: 817.887.9206
Fax: 817.977.9256

After my Tuesday Tutorial last week, a great attorney and friend emailed me…

“The spouse is required to execute the DOT to avoid any homestead claims if they reconcile and he moves in and then she defaults. I’m not saying he would prevail on the homestead claim, but what a hassle. I’d take the case to stop a foreclosure.”

I responded:

Lenders and title insurers don’t care because a vendor’s lien is superior to homestead interest.

To which he responded:

“You kid yourself if you think judges understand the difference in liens, but they all understand homestead, or think they do. I could buy nine months staving off the foreclosure.”

So, I responded with my treatise which I have named

“What Happens When You Stop a Foreclosure.”

I continue my correspondence:

As you have probably discerned, quickness of mind is your strong suit and not mine.

You have given me feedback these past few years – and, knowing how valuable an attorney’s time is, I sincerely treasure that feedback and instruction. I often muse that you had to explain partitioning property during a marriage about 3 times over lunch that day and then in a series of emails over the next several months. If you would help me and become a mentor of sorts to me, I would like to have the equivalent of a law degree by the time I retire (around age 95). I don’t want to practice law (as I fancied when I was quite a bit younger). I just want to know what I’m talking about.

An attorney was quite pleased to tell me one day (at the Family Law Section luncheon where I was speaking) that he had filed bankruptcy on his client’s behalf so as to stop a foreclosure. I remember that it didn’t sit well with me but I had no immediate response. But, I have mulled it over many times – this idea of “stopping foreclosure.”

In the legal world, it sounded like a clever move – something that stopped a big bank from taking someone’s house from them. The classic scene - little guy stands up to the big guy. Yet, as a financier who deals with people and their credit at times well after such a scene has played out, I knew that a legal “win” was actually a net loss. The homeowner, ultimately gained nothing and lost much. That is, the only benefit of stopping foreclosure is to simply forestall for a few more months that which is inevitable – the occupant has to move out of the bank’s house. And I ask myself - is moving out in October truly preferable to moving out in March? I suppose it depends on a few other considerations.

Here are a few things that happen when a foreclosure is delayed:

1. The borrower’s credit worsens. Think about it. Each month, the mortgage shows one more month late. First, it’s 30 days late, then 60, then 90, etc. It would be better for the credit of the borrower if he could get the bank to take the house and sell it after only one late payment than to pile up 4 months or 6 or 9 or 12 months of late payments. These late payments are disastrous to credit scores and rating; and, each month that the mortgage is late again adds even more months to the length of time required for the borrower to recover. Because of credit scoring, it’s not a one for one – it could take several months for scores to recover from just one 30-day late payment and certainly from a 120+-day late payment. In other words, four months of late payments in a row, totaling 120 days late will substantially lower the borrower’s scores. But, that borrower’s scores will not rise again to their pre-foreclosure level just because they make 4 on-time payments in a row. We don’t know the precise metrics but, credit scoring projects (the effects of) a bad pay history into the next 12, 24 and 48 months and even longer.

2. The balance of the loan continues to grow. Interest and minimal principal payments accrue along with legal fees which can easily be in the thousands. There are firms, as you know, that specialize in pre-foreclosure loan servicing. It’s a science…and a costly one to the borrower. And, additional to those fees are the ones to the attorney who has “stopped foreclosure.” So a regularly amortizing loan becomes a negatively amortizing one, immediately – with additional fees on top of that. To put it colloquially, each month foreclosure is stopped, the deeper the hole which is being dug.

3. For most cases, when a mortgage is 4 months down, it’s considered – in the mortgage credit world – a foreclosure anyway. Foreclosures, then, start a time line of 3, 4 or up to 7 years (depending on the program) before which an applicant will not be lent mortgage money. It doesn’t matter if the borrower catches up late payments and fees and begins paying their mortgage on time after that. Many, if not most, lenders have this “overlay” in their underwriting guidelines. It’s not required by Fannie or Freddie that it be viewed as a foreclosure. But, even the lenders that would waive the seasoning requirement (3, 4, 7 years after foreclosure) require that a very good description of “extenuating circumstances” be given. Divorce, by the way, is NOT considered an extenuating circumstance. Losing one’s job during the aftermath of the 2008 financial crisis IS an extenuating circumstance and even named specifically by Fannie Mae as an acceptable explanation of financial difficulty. Again though – this does not remove the disastrous looking credit report or raise scores, it just gives underwriters the ability to approve loans once the borrowers’ scores have ascended to an acceptable level but still have these negative events showing on their credit report.

May God and the Texas State Bar forgive me if I have veered off into giving legal advice or instruction. I confess that I am completely unable to do that. But, I have tried to give you the view from the world of credit, from the real world of actually trying to finance people’s home (purchasing and refinancing) – the view from “the trenches” so to speak. That’s what was going through my mind that day in Frisco when the attorney was touting his legal maneuver of “stopping foreclosure.” I was thinking about the disastrous looking credit report and how long it would take for his client to recover and be able to get financing again.


My friend responded with…

“My pleasure, Noel. There could be many reasons to stop a foreclosure; more time to sell, more time to find a new job and catch it up, more time to find new housing. Usually when someone is on the verge of foreclosure, credit score is the least of concerns. Also, credit can be repaired. Foreclosures and BK are forever although they do come off the credit report eventually.”

Now you see why I am so fond of this gentleman.

My only rebuttal to his last point is that there is no difference between credit in need of repair and foreclosures/bankruptcies on the credit report. Those things ARE what constitute “credit in need of repair.” Other things (like late payments) for sure. But, the reality is that the many late payments that precede a foreclosure are so devastating to the credit profile and scores it is very conceivable that it takes years to recover…perhaps the same number of years which foreclosures and BK’s need to season.

At least my friend has an eye for helping folks in need which I’m sure is the ethos behind “stopping foreclosure.” Just thought you guys would like to know what happens in the credit world when such things are triggered.

Mary Crossett 01

Mary M. Crossett

Here is a question I received today from the talented Mary Crossett of Albin Roach. (You can see Mary's page here.

Hi Noel,

I’m sorry to bother you, but I have a client who has agreed to sign all necessary documentation so his soon-to-be ex-wife can purchase a new home. However, the one caveat in our temporary settlement agreement, attached above, is that husband is not required to co-sign on the loan. The mortgage company is requesting that he sign the deed of trust attached above. His wife has signed the note separately. Is the document attached above in accordance with out settlement agreement on the right? I believe so, but just want to confirm before advising my client either way. The relevant bullet point on the right is #25. As always, thank you so much for the help!

Relevant text in Temporary Orders:

  1. With the exception of co-signing the loan. [Husband] agrees to fully cooperate and execute any documents necessary for [Wife] to obtain financing and complete the purchase of a house. [Husband] further agrees that such house shall be awarded to [Wife] in the divorce and agrees to sign and execute any documents necessary to confirm such award of property to [Wife]. The Parties agree that [Wife] shall be solely and exclusively responsible for payment of the mortgage on her new home, and [Husband] will not be required to co-sign on any loan obtained by [Wife].

Mary M. Crossett, Attorney at Law
Albin Roach
5665 North Dallas Parkway
Suite 200
Frisco, Texas 75034
214-423-5100 (Phone)

I am dealing with two questions in this post. First, Mary's direct question - is husband bound by the temporary orders to sign the Deed of Trust as wife's lender is requiring? Or, is the Deed of Trust an obligatory "loan" document covered as an exception in the phrase "co-signing the loan?" Then, I address the fact that the lender is requiring something that is commonly thought to be a legal requirement - spousal joinder on the Deed of Trust in Texas due to Texas's community property laws - but is, in fact, NOT a legal requirement.

Hi Mary,

So good to hear from you. You are NEVER a bother.

In my assessment, husband’s joinder on the Deed of Trust does not violate the temporary orders (#25). The term “loan” can be taken very precisely or in general. In general, “the loan” could mean any documents related to obtaining a loan which would, then, include the DOT. (Husband, in this case, is referred to by the lender as a Non Purchasing Spouse - NPS; and, there would be a couple of other documents on which lenders would typically require his signature. But, these are non-obligatory documents just the same).

However, technically speaking, “the loan” is the promissory note” – the actual loan advanced by the lender to wife. In my mind, it is clear that the orders anticipated ancillary, non-binding, non-promissory-note documents that would typically be signed by spouse.

Therefore, the course of action contemplated in the temporary orders is entirely logical – he joins on the DOT at time of purchase and then “un-joins” at time of final divorce with the Special Warranty Deed.

Of interest, if we were doing wife’s loan, we would NOT require spousal joinder - i.e., we would not require husband to sign the Deed of Trust or any other document at closing. And, if the purchase closed with the title company of our choice, neither would the title company require it. It is the stuff of legend and myth that Texas law (statue, rule or constitution) demands spousal joinder in the purchase of a primary (soon-to-be homestead) residence. Yet, most lenders and title agencies still tell folks that “it’s the law.” They are gradually discovering that, indeed, it is NOT the law.

It is always a pleasure to communicate with you. Thank you for writing.

Noel Cookman

Well, that answers the specific question. But, what about my assertion that the spouse is NOT required - BY LAW - to join on the Deed of Trust? You lawyers will, understandably, need a little more than my word for it.

Here is an excerpt of the treatise I prepared for my mortgage bank (legal department, underwriters and credit managers) which resulted in a change of policy from requiring "spousal joinder" to no longer requiring it.

NPS Joinder Not Required on Homestead Purchase

It is a common misconception that a Non-Purchasing Spouse (NPS) must join on the Deed of Trust in the purchase of a primary residence (aka, “homestead”). Still, the majority of title company employees will insist upon it and most real estate professionals will repeat this misconception; although more and more are becoming aware of the law, case law/precedent and the simple reality that neither the Texas Constitution nor any Texas law actually requires spousal joinder in a purchase transaction.

The following attorneys and title insurance underwriters are consistent about one thing – NPS signature is not required in a purchase transaction of a primary residence (or that which will become a homestead property).

Marty Green, Polunsky Beitel Green

On a purchase, there is not any legal requirement that the spouse join in the granting of the lien, irrespective of there being a Rule 11 Agreement in place.  The Rule 11 agreement simply allows the parties to characterize the property as separate property so that the parties know how the property will be treated for purposes of the divorce.

Here is the legal analysis on why spousal joinder isn't needed in Texas on a PURCHASE:

From a legal standpoint, both signatures are not required in Texas to validate a purchase money lien securing homestead property. Cannon, et al v. Texas Independent Bank, Court of Appeals of Texas, 6th Dist., No. 06-98-000175-CV, 8/5/99. Either spouse alone can encumber the homestead for purchase money if that spouse alone takes title to the property. Leach, et al v. First Fin. Resolution Partners, Inc. et al Northern District of Texas No. 3:97-CV-0541-0, 7/11/97. The legal theory is that the vendor’s lien takes precedence and is created prior to the homestead vesting in the borrower or the non- purchasing spouse. Farmer v. Simpson, 6 Tex. 303 (1851). Borrowers acquire their homestead rights after, not before, the purchase money lien has been attached, and the lien continues to be good no matter what factual events later occur. It is irrelevant that the borrower or his spouse intends to use the property as homestead and makes those intentions known to the lender. The homestead rights still will not attach until after title is acquired. Jones v. Male, 26 Tex. Civ. App. 181, 62 S.W. 827 (1901). Even an implied vendor’s lien arising in a divorce decree in favor of the selling spouse is superior to the purchasing spouse’s claim of homestead. McGoodwin v. McGoodwin, 671 S.W. 2d 880, rehearing denied (Tex. 1984). In addition, because a vendor’s lien is a lien for purchase money, the lien holder is entitled to enforce it and the deed of trust given with it through foreclosure proceedings notwithstanding any homestead claim and such foreclosure will be proper regardless of the property’s status as a homestead. Gregory v. Sunbelt, 835 S.W. 2d 155, rehearing denied (Tex. App. – Dallas 1992).

Marty Green, Attorney, Polunksy Beitel Green Attorneys at Law

Principal and Attorney in Charge - DFW Operations
214-691-4488 ext 203
5956 Sherry Lane, Suite 1610 | Dallas, TX 75225-6531


Kelly Dean Bierig, Fidelity National Title Group

Yes, a purchase money lien (vendor’s lien) will have priority over a possible homestead interest claimed by a non-purchasing/non-borrowing spouse.

The relevant Texas case is Skelton v. Washington Mutual.

Kelly Dean Bierig,
Underwriting Counsel, Fidelity National Title Group
8750 N. Central Expwy., Ste. 950
Dallas, TX 75231
Direct Line: 214-346-7184
Mobile: 469-831-3430
Toll Free: 800-442-7067


Well, there's your Tuesday afternoon Tutorial. Please write me with any questions having to do with anything related to Divorce and Home Financing.

Noel Cookman

I’m putting this on my blog because it is NOT an advertisement. This is serious stuff.

From the beginning of this newsletter, I have resolved to ONLY write and send it ONLY when I had substantial information that would help you as a family law practitioner. Candidly, I always have more ideas for you all than I have time to write about. But, I have held to my commitment.

Today, I do not break that commitment so much as come up to the boundaries of it. But, you will see that I am still keeping to only transmitting information that is helpful to you in your family law practice.

You see, for the past several months, I have received so many phone calls and emails from attorneys and potential customers who truly needed me….weeks and months (and sometimes years) ago. So, when they called, they were either in a big rush or worse, in dire straits because the terms of their divorce had already been agreed and, sometimes, the divorce already finalized.

I don’t know a less “commercial” way to say this, but...

Virtually every one of your clients needs to have a conversation with me BEFORE their final divorce. Sure, I can fix some problems after final divorce; but, not always. And, there is always extra expense in doing so….or worse, after extra expense, still no finance transaction to be had.

To review, here are the 9 people who need to speak with me:

  1. Every client who owns a home
  2. Every client who intends to purchase a home in the near future (0-4 years).
  3. Every client who DOES NOT have enough money to pay cash for a home purchase.
  4. The “high net worth” client who DOES have enough money to pay cash for a home but is too smart NOT to borrow cheap mortgage money. (People with that much money are usually smart enough to invest their money at rates of return that far exceed what they pay for mortgage money).
  5. The well-connected client who tells you he/she can just walk into their bank and get what they want (impressive-sounding, but not true when it comes to home financing)
  6. Clients who DO NOT have enough liquid cash to buy out their spouse’s interest in the marital residence.
  7. Clients who DO have enough liquid cash to buy out their spouse but are too smart to use their cash. (See #4)
  8. Every client who is absolutely sure that they qualify for a mortgage. (Never a good idea to qualify one’s self for mortgage financing).
  9. Every client who is pretty sure that they DO NOT qualify for a mortgage. (Equally bad idea to DIS-qualify one’s self for mortgage financing as well).

There are probably a few more. But, I’ll have to start where I can.

With about 80,000 divorces per year in Texas, we can safely conclude that about twice that many citizens are divorcing. (There are roughly two parties in each marriage that ends in divorce - pause...laugh/snicker).  Let’s consider that 62% of those own homes - the current home-ownership rate in Texas. That’s right at 99,000 divorcing homeowners. (I have totally left out the 38% who do not own homes and even a certain number of those who wish to own a home but do not presently own). Let’s just concentrate on the 99,000 who jointly own 49,500 homes.

How many of them need to have a conversation with me?

The tendency of many attorneys is to think about connecting their client with me IF a problem comes up. Problems like:

Here’s the easy part for you. Assume that every one of your clients has a problem – THEY ARE GETTING A DIVORCE! Do not even entertain thoughts like:

I cannot even tell you how fallacious those imaginations are in the home finance world.

Don’t assume anything other than – you have to get your divorcing client connected with me somehow.

Here’s the NON-Commercial (self-effacing) part: If, for whatever reason, you don’t want to get your client connected with ME, at least get them connected with some Divorce-Lending Specialist.

No. I don’t know any that are as good as I am. But, there are some who are, at least, trying. (OK, I am allowed some levity). So, at least, let’s give divorcing Texans a shot at

And, while we’re at it – what about getting lawyers paid through home financing? Yep! Ask me about that one. Seriously! Ask.

At a certain point, it’s not about me – it’s about getting divorcing Texans prepared for proper home-financing that will accommodate their divorce settlement and enable them to be in the best financial situation possible.

I’m serious. There is no downside to getting divorcing clients connected with a Divorce-Lending Specialist.

Thanks for reading…and for taking action.

Noel Cookman - 972-724-2881;

Don't Make The Mistake of Assuming a Client Qualifies for Financing

Based on Lots of Equity in the House

A family law attorney gave me this idea. “Noel,” she says (allow me to paraphrase), “a lot of us assume that if there is a lot of equity in a house then financing is a slam dunk…we just assume it can be done.” This was in response to bad news (which is never final or ultimate with me) I had given her about a client who had applied for financing. The disqualifying features of this client's loan were credit and debt/income ratios or, as the CFPB likes to call it, ATR (the Ability To Repay).

It is at this lawyer’s bidding that I write this article. The solution for that particular case? See the last paragraph.

A few things to keep in mind when trying to evaluate a client’s ability to obtain mortgage financing. Well, there really is only one thing to keep in mind…

972-724-2881 (and let me handle it).

But, other than shameful promotion of what I do, here are some elements to keep in mind:

There are 5 + 1 elements to mortgage loan approvals that have been constant. Have a passing knowledge of these features and you will know a whole lot about why some people get loans and others do not. They are:

1. Credit patterns – which measures the willingness to repay debt
2. Income Stability – which measures the ability to repay debt
3. Ratios (Loan To Value; Debt) - which measure the relative risk of lending on a property to a borrower
4. Property – which measures the worthiness [not just dollar value but condition, type, etc.] of the lender’s collateral (collateral makes mortgage money relatively cheap)
5. Money to Close – which measures whether or not a borrower can consummate the transaction and has “reserves” to cover a certain amount of payments (usually 2 months or, at the most, 6).

6. Compliance – which is the “not-without-which;” it doesn’t qualify the applicant but there is no legal way to advance the loan without it.

Takeaway: If one assumes that a large amount or percentage of “equity” in a property (#3, low LTV ratio) automatically qualifies a prospective borrower, one ignores 4 other equal and critical factors in loan approvals.

Here’s something else to keep in mind, especially in divorce. Notice that there is no “asset-only based” lending in the above list of qualifying features. That is, even if a person has a certain amount of money, this still does not qualify them to repay the loan. People are often frustrated by this like the guy who told me “Good grief, I have $350,000 in the bank, does the lender really think I can’t pay this $100,000 mortgage;” to which I replied “how does the lender know you will not buy a Lamborghini and drive off into the sunset if you wake up and decide you don’t want to spend your money on house payments?”

The borrower has to have the ability to repay the loan.

Moreover, the lender cannot accept that the financed property has a lot of equity in lieu of the borrower’s ability to repay the debt. That’s called predatory lending and, on the other side of the deal (when lenders are foreclosing on said property) all of the sudden lenders become the devil because they took advantage of borrowers just so they could scoop up a property with a lot of equity that they turn around and sell for a profit. All that is, of course, ridiculous. But, if you were paying attention in 2008 and after, you heard this quite a bit; and the villain? Lenders who lent money to people who allegedly didn’t have the ability to repay it.

So, now it’s a matter of law. It's commonly referred to as ATR - Ability to Repay. And it makes a huge difference in who gets loans and who doesn't.

I cannot take the space herein to explain the pros and cons of collateral based lending and asset based lending. Suffice it to say for now – it doesn’t really exist though I hope it makes a come-back under prescribed conditions.

Here’s what I’ve seen in the past 15 years working at the intersection of divorce and mortgage finance. Income stability is the factor that requires the most work. Credit can be fixed in nearly all cases; although, it could take up to 2 years or so for some dire situations to be rectified.

But, establishing the right debt:income ratio is one of the biggest tasks. I say ratio because, everything is relative and expressed in percentages in mortgage qualifying.

Fortunately, that’s one of my specialties.

The income stability issue is related to the ratios. But, it is substantive, not mathematical. That is, not all income is considered “qualifying” income in mortgages. So, before we consider income we have to establish the source and type – the stability of the income – its substance.

Here are a few guidelines that illustrate that concept:

- Part time income is only considered qualifying if it has been received for two years and from the same job
- Income after a “job gap” (think stay-at-home mom who goes back to her prior profession) often has to be received for 6 months before considered qualifying.
- Support income that is ordered in a decree that expires before 3 years is not considered qualifying.
- Support income that has not been received (and documented) for 6 months is not considered qualifying.

This is a good time to let you know that you can host a CLE accredited presentation at your firm, practice group, bar association, family law section meeting. The course on Owelty Liens is always requested. But, the one on Credit and Mortgage Qualifying in Divorce is equally important and helpful. It will arm you with some great information at the mediation or negotiation table.

Call or email Elizabeth Duane to schedule this or any of our CLE-accredited presentations.

Elizabeth Duane

That’s enough for now. I’ll write more about this in just a bit. Thanks for reading.

Last Paragraph - the solution to the initial problem: At least for me, it's simple. We begin fixing the credit. This takes some work but we've become adept at predicting about how much time it will take. Even the worst situations can "climb out of the whole" within about 2 years. Then, I outlined how to structure the child and spousal support and recommended a documentation regimen that provides what we need for loan conditions. Mix, Stir, Shake, Monitor Progress. Close Transaction in about 6-12 months.

You can always contact me with questions at 972-724-2881 or at

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