Federal law prohibits lenders from demanding immediate repayment of a mortgage just because a couple divorces or a spouse dies.
DEAR DAVE: You recently answered a question from a man in divorce and told him he would be held liable for the mortgage on the house he takes on his wife unless she refinances the property on her behalf only. My ex-husband is about to give me his stake in our house too, but does our lender even need to know we’re getting a divorce? If the bank finds out, can the bank order that I pay off the loan in one lump sum?
ANSWERS: The lender must be informed of the impending change of ownership, but federal law forbids him to request the immediate repayment of the loan in a lump sum.
Virtually all mortgage contracts today contain a clause that obliges the borrower to notify their lender if a change of ownership occurs. The plan that your future ex-terminator will demand his share of the home from you is covered by this regulation, as you will then no longer own 50%, but 100% of the property. Call your bank’s customer service department to see if you need any formal documentation.
The Federal Garn-St. However, the Germain Depository Institutions Act of 1982 expressly forbids the bank from demanding that you repay the loan simply because of your pending divorce. It also prohibits lenders from demanding immediate full payment in certain other circumstances – including the death of a co-owner if the survivor stays in the home, or transfer of property to a money-saving living trust if the owners persist in the home .
Of course, if you fail to make the monthly mortgage payments on time, the lender reserves the right to require you to repay the loan immediately in a single amount and then initiate foreclosure proceedings. But you don’t have to worry as long as you keep your payments up to date. Talk to a qualified attorney for details.
* * *
DEAR DAVE: We have some nasty oil stains on the cement floor of our garage, and all the scrubbing we’ve done wasn’t enough to get the stains out. Do you have any ideas on how to get rid of them?
ANSWERS: Perhaps the best, and safest, method is to sprinkle store-bought cat litter on the stains to soak up any excess oil. After sweeping, add some hot water to a cup or two of dry dish detergent or laundry detergent and use the resulting paste to scrub the stains with a stiff brush before rinsing the stains with a garden hose.
If that doesn’t work, you can spray the stains with a commercial oven cleaner and then start scrubbing after you’ve let the foam sit for a few minutes. Remember, however, that most oven cleaning sprays contain potentially dangerous chemicals. So keep kids and pets away from the stains you’ve scrubbed, then rinse the area thoroughly.
* * *
DEAR DAVE: My wife and I are interested in starting the kind of low cost housing foundation you wrote about recently so that our children can inherit our home quickly when we die instead of spending a lot of time and money in probate. But if we were to set up a trust, would we have to file the trust documents with the courts or with the state?
ANSWERS: Probably not. A trust is essentially a private document, so there is no need to report its formation to the courts or other authorities. And unlike a joint will, details of a trust you create will not be seen by the public after your death – an important benefit if you want to protect your last wishes from prying eyes.
Some states have laws that technically require the registration of a newly formed trust, but none of them have ever imposed a penalty on those who ignored such a requirement. Judges also refuse to put aside a trust created by homeowners who leave their property to their children or other heirs, provided the trust was formed when at least one co-signer had the mental capacity to sign it.
* * *
DEAR DAVE: My wife and I found a condo that we would like to buy. We are concerned about making an offer, however, as the homeowners association’s charter gives the board a “right of first refusal” to purchase any home for sale. Is that a common purpose? Do we need to worry?
ANSWERS: Your concerns about granting the board the right of first refusal to purchase the condominium are justified.
A growing number of HOAs across the country are calling for such rights. At first glance, the trend seems harmless: many buyers think it is simply allowing the board to vote on an offer that a person could make when an owner finally decides to sell.
Unfortunately, some associations are now accused of having used their right of first refusal to wrest costly concessions from the sellers or even to sort out prospective buyers who simply do not please the board. Most lenders are aware of these potential issues, and some will no longer fund units in a development that is covered by an HOA’s first denial.
A lack of widely available funding could also affect the eventual resale value of the unit as prospective buyers could potentially be forced to pay “all cash” to close the deal – and would likely ask for a hefty discount on the home’s asking price in order to to do that.
Our Straight Talk About Living Trusts brochure explains how even low- and middle-income homeowners can now enjoy the same benefits once only available to the wealthiest families. For a copy, send $ 4 and a self-addressed, stamped envelope to David Myers / Trust, PO Box 2960, Culver City, CA 90231-2960. Send questions to the same address and we will try to answer them in a future column.