Protecting Women from Mortgage Disaster

Calling all women! There’s a little known fact that can have devastating consequences if you’re not adequately protected. If your name is not on the promissory note along with your husband’s when a mortgage loan or refinance closes, you’re potentially jeopardizing your financial security, and will have no defense against a possible foreclosure.

Jason Biro, author of Saving Your American Dream and founder of the nonprofit organization Saving Your American Dream has seen this devastating situation occur far too many times.

“The person on the note is the only one who’s legally obligated to pay back the loan,” Biro says. “This fact becomes very important during foreclosure.” If a marriage breaks up and there’s ill-will between the spouses, or if a husband is overseas on military duty, is sick or elderly and unable or unwilling to manage the household finances, a woman who’s having trouble paying her mortgage won’t be able to negotiate a mortgage loan modification if she’s not on the promissory note, and faces the risk of foreclosure.

Taking care of mortgage business

Biro advises his clients to take the following steps to ensure that this scenario never happens to them.

     Step 1. Get your name on the note. If you and your spouse are applying for a home loan or mortgage refinance, make sure that your name is on the promissory note, as well as on the mortgage. Whose income and credit profile is the bank or mortgage broker using to qualify you? If you have too much debt, or not enough income, the bank may only use your husband’s assets and work history, which will result in his name alone appearing on the promissory note.

     Step 2. Find out if you’re on the promissory note. If your loan has already closed, review your mortgage or refinance documents to see if you’re on the note. If you can’t find it, contact your loan servicer to get a copy of the documents. You may need to be persistent, or pay a small fee. Get it now when all is well, so you’re protected in case your marriage hits the rocks or your husband’s health goes seriously awry.

If you’re not on the note, the only option you have is to refinance your mortgage. This can be expensive, but it’s very important, and if you can do it now, the expense will be offset by historically low interest rates.

“If you have poor credit and are worried about being approved for the loan,” advises Biro, “ask your broker to run a score improvement analysis, which will show how much your credit score will increase by correcting errors, paying down and/or closing accounts, or resolving other credit issues.” Then, take the necessary steps to make sure you’re on the note.

There is, however, one silver lining to not being on the promissory note. If the bank forecloses on your property and you don’t want to save your home, you can walk away without any damage to your credit profile. It’s an ironic twist of fate if you don’t want to save your property. But most women and children would prefer to stay in their homes and keep living their American dream.