The REALLY BIG Reason to Connect With Us Early in the Divorce Process

You know how I’m always saying to get your clients started on their mortgage loan as early as possible in the divorce process…connect them to me NOW?

Is that a real thing? Am I merely trying to create the urgency that marketing gurus talk about.

Probably some of that. But, that’s not the real reason getting started early is important.

Jane Goodness (not her real name) was about to finalize her divorce. The attorney had connected us; so, we had an advantage. Your client and I ALWAYS have an advantage when we start early.

In this case, it was so critical because Jane would literally have been living on the street with her 3 sons in a matter of a few months had she not been connected to us EARLY.

And, I’m not bragging to say it, because it’s true – but, had she contacted nearly any other mortgage professional, bank or loan officer, she would still have lost her house. You’ll see why in a second.

Jane had found a house being built by a spec and tract builder. It was March when she first called me. The divorce was to be final in July. The house would be ready at the end of November.

The problem was her child support. It was enough to qualify her but, the metrics were wrong.

Metrics? Yes – the 2 Main Metrics: History of Receipt (called “Pay History”) and Continuance (for how long will the support continue?).

Those metrics are 6/36.

6 months and 36 months.

Pay History required for mortgage approval (to count the income as “qualifying” income) is 6 months receipt. Unbroken. Precise. Clear record of the payer paying child support on time every month for the previous 6 months before closing.

Continuance is 3 years or 36 months (not 35). That is, the support has to continue for 3 years.

That’s pretty much all you hear from the standard mortgage pro. Even the “divorce-lending” experts.

First of all Pay History problem. With the divorce finalizing in July, support payments were slated to being on the first of August. Let’s see – August, September, October, CLOSE IN LATE NOVEMBER. That gives us ONLY FOUR months of child support history.  Not enough.

Our Simple Solution. Read this. It’s pure magic. It’s how we create “qualifying income out of thin air.”

Husband begins paying child support in March. Immediately after our first call.

Well, that sounds easy. But, what payer in a divorce is going to pay before they have to? Not many, right?

Hold on. Here’s how the payer begins paying immediately without it costing them a penny. Let’s say the support is $3,000/month. The couple simply finds $3,000 of household expenses that the payer has been paying anyway – the house payment, the car payment, whatever. Make it add up to $3,000

Payer pays payee (in this case husband pays wife), marking the memo line (check or online ACH) as “SUPPORT.”

The payee (receiving spouse) pays those same household expenses that they identified (the $3,000 in this example).

It’s a pass-through. And, it’s perfectly legal. In fact, it mirrors in principle exactly what post-divorce finances will look like in this regard.

Lawyers, there is no particular need to write that into some Rule 11 Agreement. Why? Because in our world of mortgage financing, things come down to documentation. The guideline says “document 6 months of receipt…”

There is a guideline in Freddie Mac (but not Fannie Mae, FHA or VA) that requires such payments to have been ordered. If you do codify this arrangement, please check with me so I can make sure the language passes underwriting muster. Remember, that’s the substance of what we do – synchronize the divorce settlement with the mortgage approval.

See how we do not change the substance of an agreement but will often structure it so that your client qualifies for their mortgage loan!

NOTE: It’s also important that the payer pays from their own account (sole and separate). And, equally important that the payee receives the funds into their own account (sole and separate). Call for exceptions and what if’s. But, call early. 😊

So, now we will have March through November child support documented for 9 months, 3 months more than the required minimum of six.

Whew. Problem solved.

Not quite. We still have to verify CONTINUANCE. It must continue for 36 months.

The problem is that when the divorce is final (July) and especially when Jane buys the new house (November), the 3 boys will have finished the 9^th grade and will have turned 15 years old.

You immediately recognize that the children are within 3 years of standard emancipation. That means that their support will NOT continue for 3 years.

What do you do? Try to get dad to pay support for an additional several months? Good luck with that.

Nearly all mortgage professionals assume that the 3 years’ continuance guideline applies to either the date of final divorce or the date of closing (most common assumptions).

But, many years ago, I learned that we had to read everything in a guideline. And, then we had to ask questions, often pushing back on long-held assumptions and even challenging the interpretation of some guidelines. (I’ve caught HUD/FHA misinterpreting their own guidelines, clearly misinterpreting their own handbook. I just saw a squirrel so I’d better not chase that one right now).

Here’s what the guideline says about CONTINUANCE.

This is a powerful secret for divorcing folks. And, if the mortgage professional would just pay attention AND TAKE THE APPLICATION AS EARLY AS POSSIBLE, tens of thousands of additional divorcing folks could qualify for a mortgage.

…3 years from DATE OF APPLICATION.

Look at Jane’s case.

• 3 years from final divorce will not work because it will terminate in 34 or 35 months. Yep. Fannie don’t fudge.
• 3 years from date of purchase will definitely not work because only <30> months remain. Not even close.

But Jane’s WISE LAWYER told her to call me well before final divorce. And, we had her make application for the loan immediately, THUS ESTABLISHING AN EARLY START DATE FOR CONTINUANCE OF CHILD SUPPORT.

Why don’t mortgage peeps think this way? Why doesn’t everyone think like this?

All we have to do is read. And, allow ourselves those “AHA” moments.

Then, the only question to the underwriting lender is – Do you abide by the guidelines or do you have “overlays?” We avoid lenders who allow themselves to tighten up the guidelines per their own whim < they’re called “overlays.” Nothing less than “if the guidelines state it, we do it” will work.

Jane and her 3 sons got the house. They had Christmas in their new home. And, they skipped all the drama.

One more BIG THING.

Starting early with the loan application is COUNTERINTUITIVE to almost everyone – you and your clients. You all are used to applying for a mortgage loan and closing it within 30 - 45 days.

I had to flip the script on that whole process if I could guarantee you guys - before final divorce - that I would close that loan.

So this is not their fault or yours. It’s just the nature of things And, it’s bad advice banks have been giving for years.

“Get your divorce final, bring us the decree and let’s see what we can do. Your credit looks fine.”

That’s what banks and lenders still tell divorcing folks. And, that’s the way many so-called “divorce-lending” experts handle their files. They don’t get all the work done before final divorce so that the decree and the loan match!

My 25 years of experience at this tells me that most people who otherwise could qualify for divorce-related mortgages are denied or put into horrific terms because an expert – like the old man here – was not involved early enough.

I wish I could tell you to call anyone who claims to be a divorce-lending specialist, professional or expert; and has 3 or 4 letters after their name with a seal of certification. But, that’s almost as much of a crap shoot as telling you to just call your bank and see what they can do. It won’t work.

Be like Jane. Apply EARLY.

Be like Jane’s attorney.

Connect your clients with me early…like RIGHT NOW.

It’s never too early.

HELP ME FLIP THE SCRIPT and DISRUPT THE MORTGAGE INDUSTRY.

Thanks for reading. Let me know if this helps.