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Wife has 3 judgement liens against her for accounts held in her name only. We live in Tennessee, which is NOT a community property state but we do have marital property rights meaning that if we divorce my wife is entitled to a portion of the interest in the property even if she is a non-titled spouse because it was aquired during the marriage. Liens would not attach to the property until it was divided and assigned by divorce court.
My credit is excellent, job history great and I have an above-average salary - in short, I am well qualified for a conventional mortgage in my name alone. We just built a new home on land I owned outright so we are in a very good LTV position as well. Everything was on track to get the construction loan refinanced into the perm mortgage but the title company pulled up my wife's judgements and are refusing to issue title insurance until we settle those debts. Without going into a lot of detail as to why, we do not wish to fork over a single penny to the lienholders and don't feel that we should be required to do so considering that she will not be on the mortgage nor title and therefore will not own any real property to which the liens can attach. In Tennessee she DOES have to execute the deed of trust only to waive her marital interest in the property should I default on the loan and force a forclosure. It is my understanding, however, that executing this document does not create any ownership rights to a 'non-titled spouse.'
I spoke with the title company's co-owner/attorney this afternoon and he is adamant and unwavering in his position that my wife's judgement liens are a liability and WILL attach to the property ahead of the mortgage due to the maritial rights and homestead issue (which I understand is only an issue in bankruptcy proceedings.) He even suggested we increase the loan to cover paying off the judgements at closing which makes me wonder if he's not in cahoots with the bank, collection attorneys or both. He said that anything we did to try to get around this could be construed as a 'conveyance to defeat the claims of creditors.' Mmmkay. I'm already the sole owner of the land we built the house on and used as collateral; why is this legally any different and exactly how are we trying to defraud anyone? My wife hasn't owned property in years - not a car, not a bank account, nothing - so keeping her off this mortgage and deed isn't exactly a new manuver.
Any one out there have experience or can offer an opinion with this kind of situation? I'm hoping this is a judgement call that can vary between title companies and that our bank will allow us to use a different firm. If not, we need to be looking for a new bank ASAP!
Thank you for the reply, NY Annie. I intend to contact a few attorneys in the morning regarding the matter. Just wanted to be well armed with information and maybe settle my mind a bit so I can sleep tonight.
Talk to a different title company. He is looking at the title insurance aspect, not the loan. The title insurance clearance is something most buyers are not even aware of.....I knew name searches were done on the buyers, but didn't know the spouses were included.
Thanks SmartMoney. We weren't expecting this hiccup either as my wife isn't on the deed to the land, either, and we made it very clear that she wasn't to be on the mortgage or title, period. One would think that if the liens attached simply due to matter of marital interest it would already do so to the raw land...
I've heard of this happening before when a non-title spouse had a judgement. You can try another lender, but it may be tough to find conventional mortgage/bank lenders who will overlook her liens.
FYI - Raw/unbuilt land isn't usually a target for creditors because no one lives there and it's hard to resell. It also doesn't show up as the defaulter's address on their credit report.
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