The Non-Titled Spouse (Part 2: Whose Obligation Is That Mortgage Anyway?)

Not all spouses are equally creditworthy, so it is not unusual to see one spouse be the sole obligor for the debt on a homestead property.  This does not, however, relieve the non-debtor spouse from the responsibility of signing the mortgage.

The Florida Constitution does not allow an individual to encumber homestead property without the joinder of the spouse, even if the spouse is not in title.  For a mortgage lender to have a valid first lien interest in a homestead property both spouses must sign the mortgage, even if: (i) both spouses are not in title, or (ii) only one spouse is the obligor under the debt.

What happens if the non-titled, or non-borrowing spouse fails to sign the mortgage?  Should the lender have to foreclose, then that spouse can raise their hand and say “not so fast – your interest is inferior to mine, and you cannot foreclose your lien.”  A sticky wicket at the very least.

Luckily for the non-titled, or non-borrowing, spouse, a conventional Fannie Mae/Freddie Mac mortgage anticipates just this situation, and specifically addresses the rights and obligations of that party in Section 13 of the uniform mortgage instrument, which states that: “any Borrower who co-signs this Security Instrument but does not execute the Note (a “co-signer”): (a) is co-signing this Security Instrument only to mortgage, grant and convey co-signer’s interest in the Property under the terms of this Security Instrument;  [and] (b) is not personally obligated to pay sums secured by this Security Instrument…”

Knowing this is particularly important at that awkward moment when parties are mid-divorce, yet one spouse has elected to buy a new home utilizing mortgage financing.  Just because the parties may have filed for dissolution does not mean the other spouse’s potential homestead right in the new property is extinguished.  It is only when the ink is dry on the final judgement that this is the case, so the challenge is in having to explain in the midst of the acrimony that the other spouse’s signature is required on the new mortgage, yet it is merely an acknowledgement and not a debt obligation.

As you can see, there are plenty of nuances to the concept of constitutional homestead and how that relates to financing a real estate purchase, so I encourage you to seek the counsel of an experienced real estate attorney should you encounter any hiccups with recalcitrant spouses come closing time.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

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