How does divorce affect foreclosure?

A divorce proceeding generally does not delay a foreclosure action.  If someone does not pay their mortgage loan, then the lender’s remedy is to initiate a foreclosure action that results in a public auction or the transfer of the property to the bank.  Just because there is a divorce action does not relieve the borrowers of the obligation to pay their mortgage.

 Mortgage lenders generally consider divorce to be a legitimate hardship when considering a short sale, as divorce can adversely affect the finances of both parties.  A mortgage that was easily paid by two income-earners may not be affordable for just one person.

If the divorce decree grants ownership of the house to one person, then it is easy to transfer the deed into that person’s name.  However, if the divorce decree also stipulates that one party has to be released from the obligation to pay the mortgage loan, there is a possibility that the other party is unable to refinance or pay off the loan.  If one party defaults on the loan but both parties remain as borrowers, it is futile to show the mortgage lender the divorce decree.  The lender’s right to foreclose and report the delinquency to the credit bureaus supercedes the divorce decree.  In other words, lenders and joint creditors are usually not bound by a divorce decree.

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