By having your client sit with a mortgage planner during the formation stages of the settlement strategy you can get an accurate picture of what your client will be able to afford, be it for refinancing the current residence or to purchase a new one. This will have a big impact on the direction of your settlement strategy.
Unfortunately many attorneys do not get involved with the mortgage process because they see it as a matter of course and it is what it is. However, if the divorce attorney takes an active roll in their client’s mortgage and takes the time to understand how it impacts their client’s cash flow and overall net worth they can and will do a better job negotiating a property settlement agreement for their client.
For instance, what if they negotiate a settlement wherein their client retains the house and then they discover that their client can’t afford to keep the house. Selling it changes the dichotomy of the finances which may have tax implications and the settlement that took so long to reach may have to be re-opened? This wastes time and money.
Many times a mortgage planner will discover that the client cannot afford to remain in the current residence and that of course will impact your approach to settlement discussions. A mortgage planner will analyze the income and assets (as you think they might be post divorce) and come up with what your client can afford. Once you know the answer to this you will be in a better position to negotiate for keeping the home or selling it.
There are two other big benefits in starting with a mortgage planner months in advance of the settlement discussions. One benefit is that you can use the information on affordability as a red herring to get something else during the negotiations. The important thing is to “know” the financial impact to your client before you begin settlement discussions. Of course there also may be a big emotional tie to this issue so the sooner you ferret out this issue the better for you and your client.
Another big benefit is to begin with a credit review. The majority of people going through a divorce have their credit destroyed either out of spite or ignorance. By having a mortgage planner run a tri-merged report they will be able to find out if there are any issues with your client’s credit which could dramatically impact the ability to get a new mortgage and of course it will also have an affect on the monthly payments. In addition, by running a credit report you can see if the other spouse has run up any of the credit cards unbeknownst to your client. You will not be able to see if they opened any new cards in their name but any cards with your name attached to them will show up on your report.
As you can see there is a lot to gain in having your client consult with a mortgage planner at the onset of your discussions with your new client. Additional benefits are having an ally to help deliver bad news to your client when they can’t afford to stay in the house that they want to keep for emotional reasons. In summary, form a relationship with a quality mortgage planner you know and trust and use their services to do a better job for your client and make your life easier.
About the Author: Dave Muti, JD, RMA is the author of Mortgages: What You Need to Know and a Senior Mortgage Planner with Millenium Home Mortgage, LLC located in Parsippany, New Jersey. Dave can be reached at info@mortgageswhatyouneedtoknow.com.
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