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Dealing with a mortgage in a divorce

Divorce commentators are increasingly pointing to one aspect of marital dissolution in Florida and across the country that is often quite different for separating spouses these days than it was formerly.

Namely, that is this: Until the recent and lingering recession, couples often argued over the specific property division question of who would get to keep title to the home. In the past couple years, though, the argument has increasingly shifted to the question of who will continue to be responsible for paying down the mortgage.

The reason for that is encapsulated in one short and tidy expression: underwater mortgage.

What that means is this: Owing to plummeting house prices, a home in which a couple formerly had more equity than debt has now seen that situation reversed. Many homes are now worth less than what a couple owes on them, even though they might have been paying the mortgage for many years and been far above water at one time.

What do you do about that during a divorce?

"It's a very difficult issue," says Carl Palatnik, the head of the Center for Divorce and Finance.

Palatnik recommends dumping the mortgage post-divorce, if at all possible, for several reasons. First, a couple that has obvious issues continues to remain financially connected, and to a very large investment. Second, and regardless of any agreement the couple makes for only one of the former spouses to remain on the hook for the mortgage, a lender won't be bound by that and will continue to look to both for payment.

Refinancing is an option, but that comes with its own set of risks (it's complicated by the present financial climate; it costs money to do).

Selling might ultimately be the best option for many couples, but that, too, comes with a caveat for some: If the house is underwater, the lender's approval for a short sale will likely be necessary to close the deal.

Source: Fox Business, "How to divorce your mortgage" Marcie Geffner, Jan. 27, 2012

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