Author(s): Tara Velting, Ann Stuursma

Therecession is a very bad time to get a divorce. The divorce rate in 2009 fell 4% after rising to 7% in 2007. Many are waiting to divorce until the housing market rebounds , somewhat. For most people seeking a divorce, the biggest assets generally are ` retirements accounts and their home and its equity. However, according to Moody‘s 31.8% of homeowners with a first mortgage are “underwater”, meaning that their homes are valued at less than what is owed on the mortgage. While parents used, to want to keep the house for the stability and continuity for the children, now one or both want to “run” away from the house.

However, running is not necessarily easy. One spouse may have a difficult time yrefinancing. Both spouses are equally liable forthe entire mortgage even if only one party is living there. There are also some alternatives.

1. Wait it out. Own the propertyjointly and defer sale of the house later.
2. Rent the house until the market recovers somewhat. Both spouses move out but cannot move forward until the house sells.
3. Consider a short sale by selling the house for less than the mortgage amount. The bank must agree to this process. The downside is that the * bank may give the former owners a 1099 with the amount of the forgiven loan, causing income (phantom) to the parties, taxable by the IRS. lt may also gravely hurt credits scores.
4. Loan modification is another option for some loans and tenders. The interest rate could be lowered and/or the number of years Iengthened causing the monthly payment amount to be reduced.
5. Deed-in—Iieu can be negotiated with the lender and the owners deed their property directly to the lender, avoiding the foreclosure sale.

For more information, contact Ann Stuursma and Tara Velting.