Educated Advice/Opinions Please

[Payback]

If anyone has an educated opinion on this dilemma I would love to hear a reply. My wife and I (soon-to-be ex-wife) bought a house in California about 2 1/2 years ago for $400,000 with zero down. She has recently left me for another man, moved out of state and expects me to sell the house now. The area that I'm living in has many, many homes for sale that are not selling. Money was getting tight just before she left and we refinanced the house and took about $30,000 in cash on top of the refinance to keep us afloat. We have split that money. The house has not been listed yet. I'm quite confident the house will have to be sold for less than the 400,000 we originally paid for it. Add the $30,000 and real estate commissions and we are going to be upside-down once the sale is completed, whenever that happens. Here is where it gets interesting. We were able to get the refinancing based on an appraisal value $482,000 which is a joke, it's just a number on a piece of paper, no way will the house sell for anywhere near that, I just know it. I'm pretty mad about her breaking our marriage vows and leaving me for another man in part and because finances were getting tight around here. I've been told that I can "give" the house to her using a "Quit Claim Deed" which I intend to do very soon. I can do this "Quit Claim Deed" without her knowledge, consent or signature in the county I’m living in. Basically I'm going to walk away and leave her all of the debt which will be incurred if and when the house sells, not to mention the huge mortgage which will now be 100 percent her responsibility in the meantime. I've been told that if she tries to sue me a judge will laugh her out of court saying something along the lines of "he gave you the house worth $482,000, what's the problem?" The only asset she has is a car. What will happen to her/what are her bankruptcy options? What could happen to me? I have no assets either except three cars. I’m hoping she will be able to basically file for bankruptcy to clear the debt.

[HHM]

A couple things...1st, regarding the sale of the house, it's highly unlikely the mortgage company will sign off the Deed of Trust if you do not get an offer that atleast pays off the balance of the mortgages. However, if faced with a sale, or foreclosure, they might. But you will have to negotiate this with the bank before finalizing the sale of the house.

Quite Claim Deeds do not transfer the debt. So even if you did this (which would probably be a stupid move, for other reasons), if your name is on the mortgage, you are still a responsible party.

I don't have a lot of time right now, so I will save posting other comments for later.

[SinkingFast]

The Quit Claim Deed confers "ownership" which has nothing to do with the loan against the house. The Deed/Title denotes ownership where the mortgage denotes financial responsibility. The 2 are not one and the same. If you're on the mortgage, giving your ex full ownership of the house will not relieve you of your fiduciary responsibility to the Lender.

You might be able to negotiate with the Lender to allow you to do a "Short Sale". That's where you sell the house for less than you owe.

Generally speaking, you have to have 1 mortgage on the house. Short Sales typically don't get approved when there's more than one Lender involved. Also, you need to have been actively marketing the home for a minimum period of time with no offers to purchase that would pay the mortgage in full.

Even then, negotiating a Short Sale is very much like applying for the mortgage to start with. Only in reverse. You have to disclose all income and expenses just like you did when you originally applied for the loan.

Short Sale can be a slippery slope if you've had the loan less than a year or 2. If you recently got the mortgage, you could be setting yourself up for charges of taking the mortgage under fraudulent pretenses by your Lender. And you would be handing the Lender the evidence against you. Even after you apply, there's no guarantee the Lender will agree to accept your proposal.

[Payback]

[SinkingFast]

This information gives a whole different spin to the picture.

It's not uncommon in a refi situation, for one spouse to become the financially responsible party. When we refi'd, Hubby worked and I was a SAHM. After the refi, Hubby was totally responsible for the debt of the mortgage, BUT, my name was still on the Deed from when we originally bought the house.

So your advisor may be correct. You may have no financial responsiblity for the house. If that's the case, there may be no reason you cannot take your name off the Deed/Title and be free of the burden of the house.

Perhaps, you might do a little sleuthing at the Court House. Take a look at the Deed/Title. See whos name(s) are on the Deed as Recorded and whos name(s) are on the lien against the Deed/Title.

[no_it_all]

Because I have not held a legitimate job for many years

The guy she left you for...does he have a job by any chance??

[Payback]

The guy she left you for...does he have a job by any chance??

[SinkingFast]

Stay At Home Mom.

[HHM]

On a side note, you said the house was in California, correct? California is a community property state, (which also means community debt), so it may not matter that you didn't sign anything with the mortgage when you refi'd, and it may not matter if you quite claim the deed. You would be a responsible party.

However, your best bet is to see a lawyer; because honestly, after the way you described it, this "person arranging the refi" does not sound entirely on the level.

[Spartan]

Ha Ha, yes he does and it's one of the reasons she left ME.......

I am glad you still have a good sense of humour.

[bige1030]

I'll have to check and see who's now on the lien against the Deed/Title; it (the re-fi) is just now being completed.

Did the divorce finalize before the refinancing did? If so, and she is the only one signing on the refinance contract, she is the only one who is responsible - you could then quit claim the house over to her. If your name is on the contract (but not your signature), you might have to sue to take it off, though.

[Payback]

Update:

Well, it's been a long time and I've been in the clear for long enough to know for sure that I succeeded in putting the upside down house in her name only, the new refinance loans were in her name only too. The house foreclosed about 11/08 and a new owner was in it 7 months later (for 270K).
She was quite upset about it, but I figure why should both of our credit ratings get ruined? Plus it was very a satisfying payback for her infidelity.
BTW, when I said I had not held a "legitimate" job, I meant I couldn't use it to qualify for the refinance. I was the main breadwinner, but I don't pay taxes...can't/won't prove my income...The initial loan was easier to qualify for, stated income etc.