Divorcing homeowners face a variety of challenges when dividing real property, particularly
when one spouse wishes to retain the marital home. Understanding the legal protections offered
under the Garn-St.
Germain Depository Institutions Act of 1982, the concept of a Legal Simple Transfer
Assumption, and the role of becoming a successor in interest is crucial in these situations. These
provisions, combined with recent amendments by the Consumer Financial Protection Bureau
(CFPB), provide important safeguards and rights to divorcing spouses who need to assume or
manage existing mortgages. A Certified Divorce Lending Professional (CDLP®) can guide
divorcing homeowners through these often complex processes, helping them make informed
decisions about mortgage obligations and access to information. This article will clarify the key
protections and benefits under the Garn-St. Germain Act, the role of a successor in interest, and
how a CDLP® can assist.
Understanding the Garn-St. Germain Act and the Simple Transfer Assumption
The Garn-St. Germain Act protects homeowners from a lender's ability to enforce a due-on-sale
clause in certain situations. Normally, a due-on-sale clause allows a lender to demand full
repayment of a mortgage when ownership of the property changes. However, under Section
341(d) of the Act, specific transfers of ownership are exempt from triggering this clause,
including when a property is transferred between spouses or as part of a divorce settlement.
This means that if one spouse is awarded the marital home in a divorce, they can assume
ownership without the risk of the lender demanding immediate repayment of the mortgage.
This process is called a Legal Simple Transfer Assumption. However, it's important to note that
this type of assumption does not release or change the legal obligation of the original
borrower(s). The original parties on the mortgage remain liable unless a formal qualifying
assumption or refinance is completed.
UNLOCKING PROTECTIONS FOR
DIVORCING HOMEOWNERS
HOW THE GARN-ST. GERMAIN ACT AND SUCCESSOR RIGHTS
SAFEGUARD YOUR MORTGAGE
WRITTEN BY JODY BRUNS, PRESIDENT DIVORCE LENDING ASSOCIATION
05 DIVORCE REAL ESTATE & MORTGAGE JOURNAL