Here is a question I received today from the talented Mary Crossett of Albin Roach. (You can see Mary's page here.
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:
Mary M. Crossett, Attorney at Law
5665 North Dallas Parkway
Frisco, Texas 75034
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.
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.
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
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 - this tutorial was very helpful. From what I read above, it appears that the non-purchasing spouse would be required to sign on the deed of trust in a refinance. Is that how your lenders would handle it? Do you have any special language that you like to see within the deed of trust to distinguish the two parties from one another. Under the standard form without any customization I usually see them both listed as the borrowers. Thanks!
question is that i am now working for a new company. they do not require the spouse to sign the mortgage. it is kind of bleek that there reasoning is that according to 50 A6 it states"owner" and does not refer to the spouse. can you please shed light on this for me. thank you so much Texas loans
Thanks for writing. Are you a borrower? Or are you the spouse of the borrower?
Any refinance loan in Texas, including any cash-out loan, will require spousal joinder (signature on deed of trust). For the 50(a)(6), spouse's signature is required on a form (the 12-day disclosure) in the application packed as well.