Assuming equal paychecks, no savings, H & W both on title and mortgage acquired during marriage, 2 kids, equal obligation to cc debts, no obvious custody problems on either side, H & W each unable to make the full mortgage payment individually…
what normally happens to an upside down house?
What if H decides to try to keep the house with help from a third party but can’t or won’t refi to get W off the papers?
[Not my family involved here]
[Community Property State]
Basically, W wants out and to be free from entanglements, but H’s intent is not clear.
My ex and I had a similar situation. The divorce agreement said we would sell the house and evenly split any profit/loss. If he had wanted to share the house with someone else, he would have needed to arrange for them to buy the house from us, if that makes sense.
But the current wife needs to be very careful here. I trusted the ex, when he said he would take over the payments so he and the new SO could live there (take them over until he secured financing, I mean). He made a few payments, got things caught up, and demolished the inside of the house in order to remodel. Then he and SO broke up, he bailed on the now-demolished house, and it went into foreclosure. I ended up declaring bankruptcy because there was no way to get out of that huge loan on an uninhabitable house. They need to have a firm, legally enforceable agreement, and both of them need to be very aware of the current and ongoing status of the loan and payments.
The divorce agreement should spell everything out. If neither can afford the place on their own, then the “simplest” solution is to short-sell or do keys in lieu of foreclosure, both of which trash their credit but are better than an actual foreclosure.
Depending on whether California is a recourse of non-recourse state, that would affect things as well. If recourse (i.e. the bank can come after you to get the difference), then you do NOT want one ex to continue living in the house while the other ex is still on the mortgage. If the resident ex quits making the payments, the one who moves out could be on the hook to for them. Not a good scene.
They could sell the house, if they have enough cash to make up the shortfall. I suspect they don’t however.
If they go for short sale or keys-in-lieu, and it’s a recourse state, the divorce decree should state where that difference is coming from. Presumably half from each of them. The bank won’t care about that, however - so each partner should make damn sure the other one has the scratch ready. Maybe put it in an escrow account or something.