Here are the Tools in the Owelty Documents Tool Kit

The Divorce Decree
The Owelty Deed of Trust
The Special Warranty Deed with Encumbrance for Owelty of Partition
The Owelty Real Estate Lien Note
The Release of Owelty Lien
The Proceeds Allocation Letter
The Check Written to You ?

There is still confusion and misunderstanding about exactly what an Owelty is, how it is created and – most importantly – how it is converted to cash in the hands of the grantee.

The previous article dealt with the Divorce Decree. The authority or “legal document” which establishes Owelty interest can be cited in only one of two documents – either the decree or in the Owelty Deed of Trust (the subject of this article).

However, an Owelty Deed of Trust cannot violate a decree. It can only perfect what is already in the decree or, in some cases, extend or clarify what the decree does not disallow. That’s a double negative for a reason. In other words, if a decree has not explicitly disallowed the elements of an Owelty (awarding, divestiture, legal description of property and a dollar amount for interest), a subsequent Owelty Deed of Trust can be created by agreement of parties.

Let me say it another way.

• If the decree has established an agreed Owelty interest, the Owelty Deed of Trust will, subsequently, provide a recording of that interest in property records.
• If the decree has NOT established an agreed Owelty interest – and if conveyancing of interest has NOT already taken place, the parties can subsequently establish an Owelty interest by both agreeing to the same by the signing of an Owelty Deed of Trust by the grantor/homeowner; and, the signing of a Special Warranty Deed with Encumbrance for Owelty of Partition by the “departing” spouse (recipient of Owelty proceeds).
• Sometimes, even if conveyancing has taken place by the filing of a Special Warranty Deed, an Owelty can be created between parties and the loan insured by a title company IF the title company can clearly see that a conveyancing WITHOUT Owelty interest had been improperly filed, that the court and the parties had intended to create Owelty interest. This is most certainly not a good legal or procedural strategy. For, who can predict whether or not a future attempt to create an Owelty interest would be successful? And, if they could, would they not go ahead and create the Owelty interest in the decree as it is intended?

Nunc Pro Tunc Divorce Decrees
Let me say a word here about nunc pro tunc divorce decrees. I discovered this little Latin miracle several years ago when one of my files required the financing of a buyout but no Owelty had been created.

The idea is to, of course, avoid nunc pro tunc if at all possible. It’s kind of embarrassing. Nunc pro tunc is Latin for we screwed something up and, red-faced, though we are, we are going to tell the judge that it was a typo and he/she will roll their eyes and ask if everyone is on board and allow a corrected divorce decree to take the place of the originally entered divorce decree...and hope to heck that the judge doesn’t see that substantial changes have been made.

I may not have quoted exactly from Black’s Law Dictionary but that’s the gist of it.

I used to appeal to the possibility of a nunc pro tunc any time the 30 day “modification” period had passed (in Texas, the parties have 30 days to file motion for new trial and then another so many days to enter a different decree, 75 - 105 days, I think) and we needed to create an Owelty lien. We now have the option to simply agree between parties to create or change an Owelty interest. So why would we ever attempt to use a nunc pro tunc decree to create an Owelty? So long as the creation of the Owelty did not do damage to the decree terms, we can use a simple agreement of parties after the fact [of final divorce] rather than rely on nunc pro tunc. But, if the title insurer is not satisfied that the decree does not at least disallow the parties from creating an Owelty (in the future), it may accept only the entry of a nunc pro tunc decree as properly establishing an Owelty interest.

For the most part, however, agreement of parties works magic. In the case of divorced parties, it seems silly (even ludicrous) that they might agree on anything – they are, after all, DIVORCED. However, it’s easier than in many other situations since both parties are incentivized – the receiving party (grantee of Owelty Deed of Trust) is getting money; the paying party (grantor of Owelty DOT) is getting the preferred and favorable financing (from none other than your truly) and putting the matter behind him/her many times under a court order/judgment.

Here’s the dealio folks – if you are calling me in on your cases, you never have to worry about all this hullabaloo. We’ll get it right from the start…or at least at the point of entry of final decree. Our S.O.P. is to have everything ready so as to close the loan and pay the Owelty proceeds within 4 – 10 days of final divorce. No nunc pro tuncs, no post-divorce creation from thin air of an Owelty, no problems getting DIVORCED PEOPLE TO AGREE WITH EACH OTHER…it’s done, settled and solved.

It’s become a joke I know but it’s true – there are only 10 digits you need to know for all your divorce-home-financing questions:

972-724-2881

That will solve all your problems. It can even cure depression, gout, pink eye, arthritis, hypertension, congestive heart failure and cognitive decline. ?

So, what is the nature and function of the Owelty Deed of Trust?
When filed in property records, the Owelty DOT perfects the Owelty lien on title. One could say that the Owelty lien is not truly created or “in place” until the Owelty DOT is filed notwithstanding its being cited in a divorce decree. The decree merely states the agreement to establish an Owelty interest. The Owelty Deed of Trust actually establishes it.

What are the elements in an Owelty Deed of Trust?
There are many recitals and extraneous information which I have seen appear in Owelty Deeds of Trust. Without regard to whether or not such information is superfluous, I shall concentrate on the only requisite elements in an Owelty Deed of Trust without which (any one or more of them) the document would simply not be an Owelty Deed of Trust. They are:

• Name of Grantee or Beneficiary (person to receive the funds) and Address
• Name of Grantor (person incurring the debt and lien on property) and Address
• Name and Address of Trustee
• Amount of Lien and Terms of Payment
• Legal Description of Property

Ancillary elements in an Owelty Deed of Trust include:
General Provisions, Trustee's Duties, Beneficiary's Rights, Grantor's Obligations, Note(s), Prior Lien(s) (including recording information), Other Exceptions to Conveyance and Warranty.

What about the procedure of drafting the Owelty Deed of Trust, having it executed and filed? I cover this later. Suffice it to say here

• The Owelty Deed of Trust would be filed in property records ONLY after final divorce decree is entered.
• The Owelty Deed of Trust would typically be executed at the same time the parties sign the decree. Leave the effective date blank. (Our title agent fills in the effective date which is the date that the Owelty DOT is filed…more on that later).
• Interestingly, sometimes, the Owelty Deed of Trust is not absolutely required if there is a clear Owelty lien [that is created] in the decree and if the Special Warranty Deed with Encumbrance of Owelty of Partition is executed. This becomes a title company decision. It’s not a big deal because the borrower of the refinance loan (which includes the Owelty interest buyout) can execute the Owelty DOT at his/her closing, the title company being the entity which prepares it.

There you have it. One more installment of Everything A Texas Divorce Lawyer Needs To Know About Mortgage Financing.

Thank you for reading.

Noel Cookman
America’s Premier Divorce-Lending Specialist
office 972-724-2881 † mobile 817-454-4555 † fax 866-295-0567
601 W. NW Highway † Suite 200 † Grapevine, TX 76051