Refinancing and Divorce

Unfortunately, some couples need to figure out what to do with their home and mortgage when splitting up.  I recently spoke with Lara Blake at LaSalle Financial Services, ( about this and below are some of her suggestions to alleviate headaches in the future. Please note, this is general information, not legal advice. Each person should discuss their particular situation with their legal and financial advisors.

Here is what Lara had to say:

I usually have a few refis each year that coordinate the timing of the close of the refinance with the dissolution of the marriage.  That way the spouse that signs the quite claim has not relinquished ownership without also being released from the obligation of the loan.  Plus, they don’t have to worry about the ex making late payments that will prevent them from rebuilding a new life and buying a new home for themselves, or with someone new in the future.

As difficult as it may be to consider the prospect of a mortgage while finalizing divorce it is very important to consider the ramifications of not doing so – especially to the party that is going to quit claim off title.

As long as the departing borrower remains on the loan, any subsequent late or derogatory mortgage payments by the spouse that remains in the property, will be reflected on their future credit report(s).

It is optimal if couples can work together through the process in a cooperative manner and initiate the process that will refinance the loan into the spouse’s name (who will retain ownership and possession of the property), so that once the departing spouse sign’s the quit claim, the refinance can close.  This prevents the spouse who will relinquish ownership from the property, from remaining bound to the loan.  In addition, it will protect their credit should the spouse who retains ownership make any late payments or even default on the loan.

If the spouse that retains ownership, makes late payments and the departing spouse has not refinanced off the loan, those late payments (by their ex) will quite possibly prevent them from being able to qualify for a loan in their own name.

Many couples that work through divorce mediation, time the refinance so that it closes (taking the departing spouse off the loan and title) within days of the departing spouse signing the quite claim deed relinquishing their interest/ownership in the home. Refinancing is the tool which qualifies the spouse that will remain in possession while removing the departing spouse from the loan, while title records ownership into the name spouse that will retain ownership through the close of the refinance.

Insurance Stories

True Insurance stories by Byron Taylor of AIS Insurance in Oakland (names were altered to protect clients identities, you can contact Byron at for superior service.)

John K.* was resting comfortably in the bedroom of his Lakeshore Avenue apartment when the methodic sound of dripping water caused him to stir.  Thinking he had left the faucet on in his master bathroom, John rolled out of bed and trekked through familiar darkness toward the intermittent plopping sound.  He was only able to make it half way across the room before it hit him; a drop of water on his head, and then another.  At first he thought it was something else until his bare foot sloshed into a puddle where dry shag carpet used to be.  John quickly flipped on the light and soon discovered the water was dripping from the fire sprinkler nozzle on the ceiling.  Amused, John chuckled to himself and casually hopped on his dry foot toward the bedroom door en route to the kitchen for a bucket and a paper towel.  John opened the door and uttered a string of expletives not fit for print after seeing the threshold to his bedroom was now a make shift shore to the easily one inch deep water that had accumulated over the course of 4 hours in his living room, hallway and kitchen.  John had officially suffered his first insurance loss.

Let’s be honest, it's no secret that most people hate insurance.  Over the years the concept of personal coverage has been co-opted by the image of greedy businessmen working in a windowless back room of Evil Incorporated.  More often than not, the average American seems to think insurance is a scam, a scheme or any other euphemism associated with separating you from your money and getting nothing but a big fat bill in return.  And while it may be true that most of us will go through life without ever experiencing property damage or loss, isn’t it good, not to mention smart, to have coverage in place just in case you do?  Let's go back to the example of John K. who is still standing at his bedroom doorway, mouth agape like one of those Scream Halloween masks.  The following day John would learn the unit upstairs had sprung a leak in the wee hours of the morning and it would be an indefinite length of time before an at-fault party could be determined and the resulting losses addressed.  In the meantime John was stuck with thousands of dollars in personal property damage and no one was stepping up to help.  It was then John remembered he had bought renters insurance months earlier as a way to help reduce his auto insurance premium.  John made one call and his insurance company sent a team of adjusters that very same day.  John was even further relieved he had coverage once it was discovered that his hip 1970's era apartment was an asbestos playground and it would now have to be gutted to the studs.  John dodged a very expensive bullet because his insurance carrier packed his family up, paid for his temporary living expenses and he was soon able to move into a new place and carry on with his life.  That's the happy ending we all want.  Now let's look at the flipside.  Dick M.* purchased a new house and went to see his insurance agent hoping to keep a few bucks in his pocket.  More concerned with money instead of his client’s best interest, his agent offered George a landlord policy which only covers the house itself and pretty much nothing else.  Thinking the chances of a total loss were slim to none, Dick agreed and signed on the dotted line.  Over the years to follow, Dick would pat himself on the back over the thought of saving so much money and beating the system, that is until the day an electrical short in the garage caused his beloved home to burn to the ground with everything in it.  Dick filed a claim and was able to get his home rebuilt, but when he inquired about the over $150,000.00 in personal property lost in the fire, his agent broke the terrible news that there was no replacement coverage because he didn’t have the right kind of policy.  Dick was left with only a house and not enough money to fill it with the things that make it a home.  The expensive lesson to be learned here: don’t be a Dick.

The most important rule of thumb for any form of property insurance should always be coverage over price.  Saving a few hundred dollars every year will mean nothing if you don't have enough to repair or replace your home in the event of a covered loss.  If you absolutely have to save more money, consider a slightly higher deductible that will not cause a financial hardship should you suddenly need to pay it.  You will also want to avoid filing excessive property claims as this could potentially limit your options if you ever wanted to switch insurance companies in pursuit of a better rate.  Once you are ready to purchase property insurance, you should always shop around for the best coverage to premium combination.  You can also ask your family, friends, or even your realtor to refer you to a trustworthy insurance provider.

And for those of you who still think insurance is some kind of unholy rip off, think about that secure feeling you have every time you leave your home, or that deep relaxing breath you take right before drifting off to sleep at night.  That dear reader is called peace of mind.  And that is what property insurance buys you.  I suppose it would make you feel better if you could touch insurance or watch television while it curls up on your lap.  But insurance is not warm and fuzzy, and you shouldn't want it to be either.  Insurance should be formidable and serious and be able to protect you when you need it the most.  You should leave the cuddling to your cute puppy dog that is peeing on the power strip behind your new flat screen LCD TV which is now going up in flames as you read this.  But not to worry, your insurance will cover that too.

You're in escrow, now what?

Over the last two weeks, I have been actively working with four sets of home-buyers who have each had some pretty intricate files.  For example, a few weeks ago I had home inspections on a stellar mid-century home in the El Cerrito Hills, (photos coming soon.)  During the inspection contingency period, we had half a dozen inspectors through the property at the same time.  It was a revolving door coupled with a time crunch as we had to move quickly to investigate the condition in a short time period (By the time the inspectors were available, we only had a few days left in our inspection period). The roof inspector, the chimney inspector, structural engineer and seismic contractor were there at the same time, grabbing my client Susan or Greg to update them on their findings. A few days later and by the time my clients removed their inspection contingency, (the period of time agreed upon to fully investigate the property and neighborhood.) they felt completely comfortable with the property's condition. This is not to say they had a flawless property, but that they had a property whose flaws they understood. So what happens after you have a home inspection?: A few things. You can remove your inspection contingency, if you feel completely satisfied with the condition of the property and secure in moving forward with the purchase. You can remove it subject to a repairs or seller credits. You can cancel your contract if there are serious issues and you are uncertain about the value or condition of the property. With another client, we had a hiccup during the financing contingency period.  However in the end, after hours of strategizing with my clients and their lender, we were able to successfully resolve the problem and close escrow on time.

When it comes to financing it is always the buyers choice on who to use for financing the property, be it a mortgage broker, credit union or bank.  I strongly suggest working with someone with a proven track record of success who is local.  In the situation above, I was able to contact this professional after hours in emergency situations to resolve issues and set a game plan.  In this case, if the mortgage lender was out of the area  or in a different time zone, this task would have been extremely difficult.  Additionally, because of my on-going working relationship with this mortgage consultant, there was a huge incentive for her to resolve this file with a positive outcome. (She knows client satisfaction keeps her on my recommended service provider list.)

There are two finance contingencies: appraisal and loan. The appraisal contingency should always give a buyer ample time to have an appraiser in the house, write their report and submit it to the underwriting department at the financial institution that is funding the loan. For example, say you are offering $500,000 on a house and you are obtaining 20% down conventional financing. The house will need to appraise at $500,000 for the lending institution to agree to finance the property.  If the house does not appraise at the price your offered, you can either: renegotiate the purchase price so the 20% down ratios work with the appraised value, cancel your contract, (as long as you have an appraisal contingency), or bring extra money to the loan to satisfy the difference in value. The loan contingency is the time period allotted to obtain a satisfactory appraisal, get loan approval from the financial institution that is funding your loan after further review of your finances and the house.  When you get pre-approved for a loan before you write an offer, you are screened by the mortgage consultant or broker to see that you meet specific guidelines for a loan.  Once you place an offer and it is accepted, then both the borrower and property is scrutinized before you have loan approval.

I am so happy that my clients were able to purchase the homes that they really wanted.  I hope the above information gives you some clarity into the process. If you have more questions, I am happy to talk.

Here are Some Tips to Protect Yourself from Identity Theft

1. Buy a cross-cut type shredder and be sure to shred all personal and card info, especially approved credit applications. 2. Be careful of "Dumpster Diving." Make sure that you do not throw anything away that someone could use to become you.

3. Be careful at ATM's and using phone cards. "Shoulder Surfers" can get your "Pin Number" and get access to your accounts.

4. Cancel all credit cards that you do not use or have not used in 6 months. Thieves use these very easily - open credit is a prime target.

5. Put passwords on all your accounts and do not use your mother's maiden name. Make up a fictitious word.

6. Empty your wallet of all extra credit cards and social security numbers, etc. Do not carry any identifiers you do not need. Don't carry your birth certificate, social security card, or passport, unless necessary.



what is needed to get pre-approved for a home loan?

Often times people are a little apprehensive about going through the pre-approval process.  Frankly, we all are a bit afraid of credit scores and we hope that we will be approved for an amount that we want.  The following is a typical need list.Every case is different, but this is what is typically needed to get pre-approved for a home loan.

A typical need list for salaried borrowers looks like this: We need copies of - 1.  Most recent 30 days of consecutive paystubs 2.  2008 and 2009 W-2s 3.  Liquid accounts (checking, savings, money market, stock, etc.).  Most recent two months consecutive statements.  ALL PAGES of each statement please - the lender will require this. 4.  Retirement accounts (401k, IRA, etc.).  Most recent statement(s).  Again, all pages of each account please. 5.  Valid Driver's License or Passport If a borrower owns a rental property, or is self employed the lender will also call for: 6.  Most recent two years (2008 and 2009) 1040s (federal tax returns), all pages and schedules. If a borrower is a partnership. 7.  Most recent two years K-1s and partnership returns (in addition to personal 1040s). If a borrower is a corporation. 8.  Most recent two years corporate returns (in addition to personal 1040s)

How is the Economy? Let's Check In,

Senior Mortgage Consultant and Branch Owner of RPM Mortgage in Berkeley, Chet Gohd's market update:

We saw some encouraging news this morning with the Fed's Beige Book report, its somewhat of a glass half-full scenario with a hole in the bottom of the glass ..First the CNN report, then the Chet update;

The economy has shown signs of stabilizing or modestly improving in recent weeks, according to the latest Federal Reserve snapshot of regional economic conditions. "Reports of gains in economic activity generally outnumber declines," the Fed said Wednesday in the latest edition of its Beige Book. "But virtually every reference to improvement was qualified as either small or scattered." The Beige Book, published 8 times a year, is a summary of economic conditions in the central bank's 12 districts. It precedes, by about two weeks, the central bank's scheduled policy meeting at which interest rate movement is discussed. The housing market and manufacturing activity, which have been improving since the summer, were two bright spots in the October report. However, commercial real estate remains a concern, with all 12 districts reporting weak or deteriorating conditions in that sector. (end of story).  For example, the section at Home Depot where they sell "For Lease" signs is sold out and on back order!

It's often challenging to see much improvement on a day-to-day basis. It's easier and usually more reliable to use the data coming from various metropolitan areas throughout the country where the measurements can be weighed and scaled. We are in a complicated situation here..The Fed realizes that they see improvements but they are very small and thus we are vulnerable to falling backward( as opposed to falling forward). For this reason, they are not looking to pull the stimulus infusions back just yet but also may no longer be exploring new forms of stimulation as any program needing governmental approval has to compete with the healthcare debate, a war against terrorism and a midterm election next year.

Get Property For $5000 in Oakland? What You Should Know About Auctions.


I am hearing from many people that they are itching to buy a house via auction.  One friend told me that they were going to buy a house in Oakland this year for $5000.  He said that he did not care about the condition of the house or the neighborhood.  I understand, buying a piece of property for 5 grand is enticing.  If houses were available to purchase for $5000, I would buy a West Oakland Victorian and renovate it back to its turn of the century glory.    Here are a few things you should know about buying property via auction.

There is no Department of Real Estate regulations of auctions, nor separate regulations of auctioneers who conduct real estate auctions.  If the auctioneer is selling real property the auctioneer must be a licensed broker or work with a Department of Real Estate licensed broker.

To buy a home via auction you MUST have adequate financing lined up before bidding as the purchase agreement usually does not contain a financing contingency. (a period a time in which you can back out of the contract if you can not cement financing.)

When buying a home via auction you will not be provided with any reports or disclosures regarding the property condition.  For example, the foundation could fail and the roof could be long overdue for replacement. Unfortunately an inspection contingency period will not be a part of the part of the purchase contract.  A time period in which you can back out of the deal if you are not satisfied with condition of the house.

Typically bidders who purchase homes via auction are professional investors, they are not folks looking to buy a home to owner occupy.  They are investors who know all of the potential pitfalls regarding the process When you are bidding on a foreclosure via auction you could be bidding on just the junior or second mortgage that has been foreclosed.  For example the starting bid on a home is $40,000.  You bid on this property and win the home for the $40,000 amount.  However, unbeknown to you, there could be a senior loan or mortgage attached to this property for an additional  $300,000, where you are now responsible for paying it off in full in order to actually own the home.  How horrifying would that be to think you are purchasing a fixer upper home for $40,000 and realize you are now on the hook for $340,000!

I wouldlike to hear from you!  Do you have a positive auction experience in the Bay Area?  Let me know.

Fannie Mae and Freddie Mac Suspend Foreclosures for Homeowners

Freddie Mac and Fannie Mae have directed their network of providers to suspend foreclosures and evictions proceedings from November 26th, 2008 thru January 9, 2009. The Streamlined Modification Program is scheduled for December 15th allowing delinquent borrowers who qualify to re-negotiate the terms of their loans to lower payments to no more than 38% of borrowers gross income.

Eligibility is determined by several factors: Homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home's current value, live in the home on which the mortgage was taken and have not filed for bankruptcy.

For more information, click here.