The Case of the Missing Owelty Language
Circa Fall 2018
Marriage of 20+ years is ending. Marital Residence worth $500,000 is free and clear of mortgages and is to be awarded to husband subject to a buyout to wife of her interest in the property.
The knowledgeable and studious Traci Hutton represented wife and wrote Owelty language in the decree; drafting, as well, the Special Warranty Deed with Encumbrance for Owelty of Partition. As it turns out, she is not only knowledgeable but had attended my seminar on Owelty Agreements and Liens and their proper use. So, she knew full well exactly what to do and what would be needed.
Husband’s attorney however did not like the Owelty language and its provision. So, they fought back and insisted that the language be taken out and that no conveyancing subject to Owelty be recorded.
[Incidentally, I hear that a lot – “I don’t like…” as if one’s likes or dislikes matter. The lesson here is that property interest as specified in a divorce decree is unconcerned with the likes and dislikes of attorneys, judges and courts. Moreover, when someone wants money - that is, when a homeowner needs to finance a buyout to a former spouse, it is the lender and its title agency that determines whether decree language is sufficient. It is those with the money who decide what they like. It’s also known as the Golden Rule – he who has the gold, makes the rules.]
You know how it is – in order to pacify an opposing client and their obtuse, obstinate attorney, one often accedes to a demand so long as there is no harm to one’s client. After all, the buyout was required in the decree. It was just the mechanism (the Owelty) about which there was disagreement. So, the divorce was finalized without appropriate Owelty language. Traci warned opposing but all she could do was hope that by some miracle, husband could perform.
So, the husband proceeds to get his financing only to find out that he can’t get the deal done – the Owelty language is not in the decree and the Special Warranty Deed did not properly encumber the property with an Owelty of Partition. So, both parties re-hire their lawyers, go back to court, motion for new trial is filed, the lawyers spend hours on the phone and in conference with the lender and the title company trying to “get it right” – all to reconfigure the decree to make it conform to what Traci had advised in the first place.
Here’s the real tragedy – husband’s attorney has known about me for over a decade now. Only God knows how many of their clients have either lost the house, couldn’t qualify to refinance the house, missed out on one of my money-savings solutions (and I REALLY do have strategies like that) or just languished in dead-loan zone – not to mention the other side who no doubt has done without in many situations…all because their attorney steadfastly refuses to offer their clients real financing solutions. It’s right under their noses. I have attorneys from Houston and San Antonio and Austin and now, California, who refer their divorcing clients to me. And I get financing for divorcing clients all over Texas and other states may times solving problems no other lender knows how to solve – yet, my mortgage bank office is under the shadow of husband’s attorney’s office and not a peep.
Here’s what should have happened. Yes, sometimes, we need to determine what should have happened so as to avoid problems in the future.
The most important thing is that husband should have been working with me. I’ve got plenty of money (that is, access to plenty of money) and I know how to get people through the intersection of divorce and mortgage financing.
Here’s a good time to correct a common misconception. Many lawyers will be neck deep in negotiations, they will hit a snag about the house and its financing (buyout, qualifying to get the ex-spouse off the mortgage, etc.) and it will hit them – “Let’s call Noel, he can solve these problems.” In other words, they wait until there is a problem to think of me. I’m the fixer, the problem-solver. True enough. But, here’s what you need to know:
If husband had called me, his loan would have been approved (fully underwritten, including the appraisal and full credit underwriting AND THE TITLE WORK with clear instructions to the attorneys on exactly how the decree needs to read and what deeds must be prepared) BEFORE FINAL DIVORCE.
It would have been done right the first time. No going back to court. No modifying the decree. No motion for new trial. No hours on the phone with the lender and the title agents. NO UNHAPPY CLIENTS paying more fees for re-doing what should not have to be re-done.
Divorce Lending Done Right. We guarantee it.
Kudos to Traci Hutton for getting it right. Incidentally, you should direct your loan closing to Traci’s title company if you can. She knows her stuff.
There’s more. Even if/when the decree has not been properly structured, there is still a strategy that I use to avoid motion for new trial, modification, extra work and problems for the attorneys. It requires simple agreement between the parties which, in this case, would have been a foregone conclusion inasmuch as they were simply trying to do what they had agreed to do anyway. Remember, it was the mechanism (the Owelty agreement and lien) which was not present, not a disagreement about the settlement which presented.
Here is what we would most likely have done. We would have drafted a Deed of Trust to Secure Owelty of Partition which husband would have signed; a Special Warranty Deed with Encumbrance for Owelty of Partition (or a Corrected Special Warranty Deed with Encumbrance for Owelty of Partition if a Special Warranty Deed had already been filed) which wife would have signed and closed the deal. We do this under the principle that agreement of parties trumps almost everything. In many situations, parties can agree – after final divorce – to create an Owelty interest, reduce or increase the amount of that Owelty interest, cancel an Owelty interest. It’s not always simple but, generally speaking, we don’t thrown in the towel just because the decree was not worded properly.
Please don’t mistake – it’s NEVER a good idea to leave such things in a divorce, no less, to the assumption that the parties will agree afterwards. As we often say, “they ARE getting divorce, you know.” So, we all should strive to include these matters in the settlement language (decree language). All I’m saying is that all is not necessarily lost if the decree is insufficient regarding the buyout (Owelty language).
Makes sense? If not or if you need further explanation, join my Platinum Inner Circle (info coming) and email me or text me your question.
Thanks for reading.
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