Are non-vested spouses obligated as borrowers?

Hi!!! 
I found your email address through a Google search I had made regarding being non-vested on a mortgage and what exactly that means. 

I was married for the second time in 2011.  At that point, my husband had a house and a mortgage.  Last year, we re-mortgaged.  He stayed with the same bank and took a slightly higher interest rate than what is out there today by doing a re-mortgage for the same $ amount, without any fees and no points.  At that point, he told the bank he was now married.  I co-signed the paperwork and believe I am listed as non-vested on his mortgage.  I'm still not 100% sure what that means for me???  Now he is thinking of doing a totally new re-mortgage with a different bank for a lower interest rate, however, this time he would like to add a line of credit he has to the mortgage and possibly some other debt HE has.  Of course, he wants this to be a joint mortgage, but I have some concerns.  As a quick background, I left my first marriage with debt and finally am back on my feet again.  I don't want to go there again as I am almost 50.  He says this will help both of us because it will give us a lower interest rate and free up money for us.  I'm having difficulty trying to have him see my concerns.  I don't really want to assume additional debt.  Anything you could suggest? 

Thanks, 
M

Good question, M.  

If you are asked to sign the NOTE, you are a "borrower" and thus obligated to repay the debt.  That's the question to ask. Is the lender expecting that you will sign the NOTE?  If the answer is no, then they will have you sign the mortgage and perhaps a couple of other documents as a non-vested spouse just as you did the last time.  These documents simply allow the lender to place a lien on the property that takes priority over your marital rights.

A lender wants first position in the event of the worst case scenario, a foreclosure. They do not want you to have the ability to stop the process.  So, you'll be required to grant permission for the lien but you would not be required to be a "borrower" for this purpose unless your husband needs your income to get the new loan.

Diane

unrecorded spousal waiver

There's just no wiggle room to use unrecorded spousal waivers. We have to either have the spouse sign the mortgage to validate the lien or attach a recorded spousal interest subordination to the instrument. The only alternative is to use an unrecorded spousal waiver with an exception in the loan policy for the spousal interest and I just can't think of a lender that wants an exception for spousal interest, can you?

Underwriters are just paying too many claims on these cases that go to foreclosure. The unrecorded documents are too easily lost when lenders go out of business or do a poor job of maintaining their files. That along with title agents going out of business so nobody has a record that the spouse waived their marital rights.

The spouse may conveniently forget signing the waiver and there goes the validity of the mortgage lien. Poof!

query: non-borrowing spouse rights

I have to limit my response to PA. Spousal rights vary from state to state.

Pennsylvania is not a community property state. We don't have dower rights in Pennsylvania. Theoretically married individuals can buy and sell property on their own without their spouse.

Our divorce law, however, mucks up title because a party in a divorce action can make a claim that marital property was used to purchase, maintain or improve the real property. These potential marital rights must be dealt with.

The specific query speaks to the rights of a non-borrowing spouse. To that end, I am limiting my comments to matters of creating a valid lien for the mortgage lender.

To create a valid mortgage lien in PA, the title agent will require that the non-borrowing spouse go on record approving the mortgage. This can take the form of a recorded spousal waiver, subordination of marital rights or simply signing the mortgage instrument.

If the spouse signs the mortgage, we add language amending the instrument so that the purpose of the signature is clear. We want to preserve the note integrity so the "co-mort" clause as we like to call it clarifies that the spouse, the co-mortgagor, is not a borrower on the note.

These procedures are used whether or not the non-borrowing spouse is vested in title.

Some lenders - particularly FHA lenders - will not allow these methods. They maintain that the FHA requires that the non-borrowing spouse relinquish all ownership, including marital rights by deed. I don't really like this arrangement however, if the lender makes the requirement a written condition of the mortgage and the borrowers accept the terms, we'll prepare the deed.

I do wish the FHA would reconsider this position. It would make more sense to preserve marital rights and simply permit the mortgage to go on record with priority over the marital rights. I file this wish in the box that says "There's the real world and there's the world of mortgage underwriting."