Monday, March 3, 2008

Spouses need to sign mortgages

Loan officers in Iowa and Illinois please take note: Spouses need to sign the mortgage. We just had a closing go awry because the loan officer told the married borrower that her husband did not need to sign the mortgage. No matter how many times we try to make it clear, if a person is married, except in certain rare circumstances, the spouse needs to sign the mortgage. And anyone who signs a mortgage should be signing a Truth in Lending Statement as well as a Notice of Right to Cancel if it is a refinance of your residence.

This is especially true in Iowa, where the mortgage is VOID if not signed by both husband and wife. V-O-I-D. As in, it has no effect, means nothing, rubbish, bird cage liner. Wells Fargo found out the hard way recently when they were not allowed to foreclose their mortgage lien because the wife did not sign the mortgage. They came in pretty cocky with all kinds of fancy legal theories why they should be able to foreclose anyway. The judges said nope. Only they used a few more words than that. And no it does not matter that you are in the process of getting a divorce, legally separated, or even just generally annoyed with your spouse.

What I think trips people up is that there are three different things we are talking about here:
  1. Who is in title, or who owns the property? Only the individuals named on the deed own the property.
  2. Who owes the money? Only the individuals who sign the promissory note owe money to the lender.
  3. Who signs the mortgage? The more the merrier from the lender's perspective. Everyone who owns the property MUST sign the mortgage. Everyone who signs the note should sign it. The spouse(s) of everyone who owns the property MUST sign it. Signing the mortgage does not mean you owe money. It only means you agree to give up your rights to the property if the payments are not made by whoever signed the note.
On the bright side, if you are in Iowa, and you were married when you took out your mortgage, and your spouse did not sign the mortgage, there is a real possibility you have a free house. And we would be happy to help you out with that, if you like.

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