The recent financial meltdown created a housing crisis that has depreciated home values throughout the United States. As a result, millions of homeowners now have underwater mortgages where they owe more on their mortgages than their homes are worth. A fiscal nightmare, the problem has acutely affected many couples contemplating divorce.
Before the downturn in the housing market, the division of a couple's assets often centered on what was done with the home. Couples often used to argue over who was able to keep the property since it represented stability and the opportunity to build equity. If they chose to sell the home, the profits could be divided and serve to equalize the property division.
Today, however, many divorcing couples are finding the home an albatross, and often neither spouse wants to have the burden of owning an undervalued property. In many parts of the U.S., values have shrunk so low that the home cannot be sold. Without the ability to use the equity in the home as an equalizer in the division of assets, settlement negotiations can be more challenging.
Options Available
There are, however, several options available to divorcing couples in this situation. These include sharing joint ownership of the home, or renting the property until the housing market rebounds. The couple could also elect to give ownership of the home to one spouse and factor in the negative equity in the overall marital property division. Another option is called a short sale. This is where the couple sells the home at a loss and negotiates with their mortgage lender regarding how the loss will be split between the parties and the bank. Unfortunately, short sales do usually negatively impact a couple's credit.
If you are facing divorce and have an underwater mortgage contact an experienced family law attorney. A lawyer can discuss the available options with you and work to find a solution that meets your families' needs.
