HUD loan/refinance

[Oergss]

I have a martial agreement stating i am to release my ex spouse from liability or refinance by a certain date. I had a modification done so there’s a partial claim that has to be paid off with the refinance. Can i still buy out my X? My home does have equity but i know there are strict guidelines with having a partial claim and i believe no cash can be taken but what about the left over equity?

[PaulD CPA]

Hi Oergss, thanks for your question.  I am not a lawyer, but I've been through a similar situation and can share what I've learned...  I essentially had three options:

1. Refinance the mortgage in my name only

2. Get mortgage servicer to release my ex-wife from liability

3. Sell the house by the court ordered date or face continued litigation costs

I found that the least costly option was #2 - Release of Liability.  That required me to submit a request to release my ex-wife from liability and complete a mortgage application again, just like when we originally purchased the house.  The lender's underwriting people then re-evaluated my creditworthiness based on just my income and expenses alone.  Fortunately, I was approved and they agreed to release my ex.   The only cost for this was a fee of 1% of the mortgage balance.  This fee is not tax-deductible. 

You may want to consult an attorney to for legal advice that's specific to your situation.  If the potential cost of that is a concern, look up the Legal Aid Society for your area / county for volunteer attorney guidance.

[Oergss]

Thank you for sharing that.

I applied for a release of liability however, due to a loan modification, the investor guidelines do not allow for this. I’m trying to see if I can take out a personal loan, and pay off the HUd loan and then just deal with monthly payments with my credit card, if I can reapply for the release of liability then. 

[PaulD CPA]

Your plan makes sense to me Oergss.  You may want to contact your mortgage servicer to speak to someone who routinely processes releases to ask their opinion of whether that's likely to work out as you hope.  It seems that they'd factor that new personal loan or credit card payment into your debt-to-income ratio, which could exceed their underwriting guidelines. 

I empathize with your situation and wish you success in getting this matter resolved !