Refinance During Divorce?

Q: I'm going through a divorce, and I want to take my name off the mortgage as co-signer so my husband will assume all the payments. How can I make this happen?

A: Unless your husband can qualify on his own to refinance the property this will be very difficult. From the lender's point of view, it made the loan based on the fact that there were two co-borrowers to rely on to make the payments. There is no upside for the company to release you from that and very few will. Even a divorce judge cannot force the lender to release you from a contract that you signed. And while judges do often order the spouse retaining the home to refinance and get the other partner off the loan, if a lender won't approve the transaction there isn't a lot you can do about it.

Should your husband be unable or unwilling to make the payments, the bank could exercise its option to come after you for the arrearages--even if you aren't living in the home. This is one reason that divorce is a leading cause of bankruptcy and / or foreclosure.

The new Making Home Affordable programs may allow your husband to refinance or modify the terms of the loan if the lack of equity or income is your chief obstacle. There is very little "official" information regarding the dropping or replacement of co-borrowers on these transactions. And there are blogs everywhere about this that contradict each other. I suggest calling your servicer and giving it a try. If there is no way to get yourself off the loan, I suggest selling the property for your own financial protection.