Saturday, November 26, 2011

spousal waiver versus having the non-vested spouse simply sign the mortgage

In Pennsylvania and some other states, a spouse may not be vested in title but may have marital rights to real property.  In these circumstances, when the marital rights may take priority over an insured mortgage, the title agent may require that the non-vested spouse sign the mortgage.  Their signature on the mortgage does not make them a borrower.  It simply allows the mortgage lien to be put into a position on the public record which has priority over their marital rights.

Why do title agents have this requirement?  Well, if a foreclosure takes place, the mortgage lender must be able to enforce their lien authority and take possession of the property.  If there is a spouse whose rights take priority over the mortgage, the lender can be blocked in court.

We deal with one local bank whose lending rules call for a spousal waiver form rather than having the non-vested spouse sign the mortgage document.  We argued against the use of the spousal waiver form because, even if recorded, it may not be discovered at a later date during a foreclosure thus creating the possibility of a title insurance claim by the lender.

We offered a compromise by agreeing to use the form but including it as an exhibit with the mortgage document when recording rather than recording it as a separate document.  A title searcher working for a foreclosure attorney might miss a separately indexed document but they will surely find the mortgage being foreclosed upon.  The local agreed and so we have been able to move forward insuring these transactions by including the spousal waiver as an exhibit in the mortgage document.

This has lead to numerous objections by Recorder of Deeds offices who get confused and think that we want the spousal waiver indexed.  We don't.  We want them to consider it a page in a mortgage and we ask for no additional notations on record.  A few counties have refused to record our mortgage in this way and we have asked them to cite a statute which would support their refusal.  They can't and so they always record the document.  I have had to speak with the a couple of solicitors who always support our position and instruct the ROD to record the document with an exhibit.  I am including this information for the benefit of those who would like to use the method of recording a spousal waiver as an exhibit but meet with opposition.  Stick to your guns.  You will prevail.

So, in wrapping up I think it's better to have the non-vested spouse sign the mortgage document.  It's the easier method but if your mortgage lender objects and wants a spousal waiver, then I highly recommend that you record it as an exhibit and not as a separate exhibit.  In this way you do your part to avoid a claim if the property ever goes to foreclosure and in the end that's what we do for a living.  We do our best to avoid creating future problems for our insured lenders and consumer.  ;)

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