How a Certified Divorce Lending Professional Can Be a Valuable Asset to Your Divorce Team

We sit down with Certified Divorce Lending Professional, Manya Williams, to discuss how a lending professional can identify strategic solutions for creating desired outcomes using legal and tax codes, while working directly with the professional divorce team. In this episode, Manya covers the following:

• How a CDLP can identify conflicting objectives between the proposed divorce settlement agreement and mortgage guidelines and requirements. 
• The dangers with relying on income awarded through the divorce settlement to qualify for a new mortgage.
• Just as the IRS has specific tax rules for divorcing clients, there are specific mortgage lending guidelines specific to divorce situations as well
• The mortgage interest deduction is one of the biggest benefits for carrying a mortgage 
• Potential tax liabilities for spouses who retains the marital home when the departing spouse is required to make the mortgage payment.
• Understanding the difference between ‘Income” and “Qualifying Income” for mortgage financing purposes.
•    …and much more!

If you would like to speak with one of our family law attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

If you're interested in getting in touch with Manya, you can do so by emailing her at manya@manyawilliams.com or calling her at 541-429-3229.

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

Transcript

Intro:
Welcome to Modern Family Matters, a podcast devoted to exploring family law topics that matter most to you. Covering a wide range of legal, personal, and family law matters, with expert analysis from skilled attorneys and professional guests, we hope that our podcast provides answers, clarity, and guidance towards a better tomorrow for you and your family. Here's your host, Steve Altishin.

Steve Altishin  
Hi, everyone. Welcome to our broadcast. I'm Steve L. Titian, Director of Client partnerships at Pacific cascade legal. And I'm here today with certified divorce lending professional Manya Williams, to discuss how a divorce lending professional fits into part of your divorce team. On your how're you doing today?

Unknown Speaker  
I'm great. Thanks so much, Steve. Thanks for having me on today. Really appreciate it.

Steve Altishin  
I appreciate you coming on. So before we start going, you can just kind of tell us a little bit about yourself.

Unknown Speaker  
Sure. As you mentioned, my name is Manu Williams and I am a certified divorce lending professional. And that is a mouthful. So really what that means is I would explain that as what is it not? So if you think about in terms of a context of a divorce, you have a family law attorney, and how are they different than a public personal injury attorney, or a tax planning attorney or a bankruptcy attorney. So there are mortgage brokers there are lending professionals, and then there are certified divorce lending professional, and we often are referred to also as divorce mortgage planners. That means that I am specialized in the puzzle pieces trained extensively in the implications and intersection of tax planning, property disposition, family law, and lots of other things that go into a divorce settlement.

Steve Altishin  
This is perfect today. Years ago went through the mortgage process. And it can be stressful. And I would imagine that it's it's even more stressful and more complex when a divorce gets involved.

Unknown Speaker  
Yes, divorce is by nature of very cash hungry and energy hungry process. And what divorcing homeowners and divorcing spouses often think that divorce is is the separation of a marriage. But what divorce really is, is the unraveling of the structure of property, have assets of liabilities of taxes, and all of the other structural pieces that go into a partnership, because marriage is a licensed partnership. And so if we can start to really tease out what divorce is, I think that'll give a better per view and bird's eye view and to how to prepare for the process of divorce and how all of these key elements and two people on the team can really support the two people going through the process of a divorce because it really is a journey.

Steve Altishin  
That that's really, really cool. It fits with a lot of times our attorneys will tell clients that divorce is the unraveling and changing of relationships. And that's basically like what you're saying, you know, you're sort of that Lego taking it apart and putting it back together again. And that's great. So yes, you told us what divorce lending, first of all, is? And how would you say you then you fit into that team?

Unknown Speaker  
Sure. So if we think of that puzzle piece analogy, where we have taxes, where we have real estate, where we have mortgage, where we have assets and liabilities. So these are all assets, the marital home, sits at the center of all of those things that sits at the center of potential capital gains, tax estate, retirement planning, income when you're separating assets, and you're separating income. And so it's not a linear path. It has stages. And this is why oftentimes, I see when divorcing spouses come to me kind of second to working with someone else or going it alone. They often get led astray. Because when you don't look at the process as a set of puzzle pieces that center around the marital home, if you go to just a traditional generalized mortgage broker and when can we use that analogy of two different type of attorneys. So if I'm going to a bankruptcy attorney for divorce, then I'm kind of getting misdirected, so to speak, I'm getting treated by a generalized mortgage broker as a transaction versus as a plan. So we want to consider that there are steps in the divorce process, particularly as it comes. And as applied to the the marital home. And I wanted to take a moment to talk about those different stages, because I think this will really set the tone for us going into a little bit more detail around this process. So if you consider stages of the divorce, mortgage planning or the divorce process as it pertains to the marital home, step one is vetting the house, what does that mean vetting the house is? What is the value of your property currently? Or what will the value be projected to be at the time that you will go to potentially make a decision whether you go for a refinance, which we call home equity buyout, one of the spouses buys out the other person's equity, meaning like a refinance situation, or what will happen if you keep it, or what will happen if you sell it. So these are the three kinds of options. They don't have to all happen immediately. But you can either go get oftentimes people know when you're buying or selling just outside of a divorce situation, you look to get an appraisal, for financing, oftentimes. But you can get a broker price opinion. So someone like myself, that's a certified and divorced lending can give just a an evaluation, kind of a desktop broker price opinion, that just means I look at the properties in the area, I have some tech stack available to me, and I can give a conservative range. That's just like in stage one, if we're talking about step one, we can also engage with a certified divorce real estate agent that can give a certified market analysis that's also known as a CMA. So those are the two things that are really good to know that you don't have to spend the money and you don't have to get an appraisal right away unless there's something specific. So that's vetting the house, what are is the valuation, what are the taxes, all of those things, step two is really qualifying your income. Qualifying the delineation between qualifying and non qualifying income is is it consistent and stable. And that is different, oftentimes incident to a divorce than it is from a guideline perspective, from a lending perspective, what underwriters and what investors look for the banks look for to offer loans, different than if it's not incident to divorce. So you really want to make sure that you're thinking and engaging a professional around qualifying income very early on in the process. And I would even say and venture to say, before you even consider divorce, so start to look at your spending habits start to look at your two years of tax returns. If you can't get tax returns, there's ways to order tax transcripts for free. So this is step one and step two, step three is analyzing consumer debt. What are your liabilities? You know, and working with a divorce mortgage planner, we have access to credit reports, that means we have access to the liability, the debt side of the sheet. So maybe before you even think about getting a divorce, you improve some of your credit history, there's ways to look at the debt side of the balance sheet and say, hey, you know this, a couple of these things could be done and in a couple of months time this situation could really change. The other really key advantage and that makes a lot of impact is sometimes there's ghost liability. So you're going through the divorce process, which we know is not always super fast. And one of the spouses takes on a second or a third loan against the marital property, unbeknownst to the other spouse. So the settlement agreement gets written because attorneys, mediators or even financial planners don't have access to this information from the debt side of the sheet on the credit report. And these things pop up like ghost debts and so that disqualifies and it's nullifies really the whole portion and the settlement agreement. And then the final stage is the home equity solution. This is where we get to advise homeowners divorcing homeowners about their options. So I will say that, over 50% of the time, I would venture to say 80% of the time, people are working with attorneys or mediators or support team professionals about what their home equity options are not having done any of the first three steps and writing settlement agreements, you know, in that vein, so this is where we really see the pitfalls of the process. And by this time, people are tired.

Steve Altishin  
Yeah. So tell me if I'm right, part of what you're doing is because you're right. In many, many cases, the house is the biggest asset, it's the house and the retirement plan. And General and a lot of times, they'll be, you know, sort of settlements and discussions about, you know, one or the other. Because, you know, and so how do you then you come in, I take it and and look at all this. And then do you actually work maybe with the attorney, or with the financial person, or like you said with the realtor, because there are gonna be costs in, in getting the house ready to sell. And in? So do you work with all of those people? as well?

Unknown Speaker  
Question? Yeah, I love this question. So if you think about what I just shared as steps, there are stages associated with each step. So if you think of someone like myself as a divorce mortgage planner, ideally, and then the best practices would be to come in at step one, which is the consulting phase. So because marital class is protected, under eCola, which is a federally regulated body, there is no fee to engage with a mortgage professional. So this console phase can happen way before the couple decides what to do. That would be like 100%, gold star gold star do that even though. But even if it doesn't, it can be after the attorney has been engaged or the mediator, or sometimes people do a kitchen table. It's called a pro se, divorce where they get the paperwork and they start to negotiate amongst themselves, this could be a great time to engage with someone like myself, or alongside an attorney. So I work alongside attorneys, certified financial planners, certified divorce, financial analysts, mediators, family specialist, so one or all, Step two would be the analyze phase. So even if you were in analyze, in theory in the divorce process, you could still fold me in into that process. Step three is the negotiation. We're getting a little far down the line, right negotiation is happening at step three, which is the qualifying the income part, step four is step four is the debt analysis. That's the option space. So you want to make sure that you know what your options are having qualified the income and know what all the full debt is. So step five is closure. And I'll just, you know, wrap up with with that thought is Step five is closure. That's the options. That's when people are trying to negotiate. Yeah.

Steve Altishin  
It's, you, you you hit on an area that I know we've talked about a lot, and it can sound confusing, and even short of, you know, backwards. Income and qualifying income. Well, can you let's talk a little bit about that. Because I mean, why is it all my income, qualifying income or when is my income, not income?

Unknown Speaker  
Yes, yes. So that goes back to the step three of qualifying the income for something to be qualifying income means it needs to be consistent, and it needs to be stable. So in the eyes of the underwriter, that's the person that reviews the guidelines for each bank. We call them investors for each loan program, and when they consider what is consistent and stable, there are specific guides Add lines to each type of income. So there's income that is earned, meaning you, you receive that income through a job. That's qualifying income, you receive that income through like rental income. That's qualifying income with its own specific set of guidelines, you can have passive income, and we can business income, self employed income. So those all have their own set of guidelines, when it comes incident to divorce, that income types start to get broader and more dialed in. Right. So maintenance is an income, but it's temporary maintenance. If it's written this person, this spouse is receiving maintenance, from from a settlement, an MSA perspective, that's all well and good, right? That that satisfies one spouse's direction to satisfy and meet the needs of another spouse is direction totally fine. But in the eyes of a guideline, maintenance is not qualifying income, because it's not consistent and stable, it ends it has a finite date. And for something to be considered consistent and stable and has to have a three year continuance from the time of the settlement agreement. And then you can drill into it even further. So when we think about child support, and spousal support, or alimony, they're interchangeable words, they have to be specific and when they start, and when they stop for child support, if you have a child that 16, and they're going to be 18. That's not three years, there has to be specific language in the MSA, stating, you know, you will receive child support for this child because they're going to college or something very specific to that extent, that would require child support to go on past a certain age. So like verbiage language becomes very specific and where it's written, alimony is the same. When did it start? When is it going to continue through for at least a three year period? And then where's it coming from? Is it coming from your joint account? Have you been paying it from your like shared joint account at Chase, but you never switched over? So that the bank statements need to match the marital agreement to a tee. So the more detail that it's placed, spousal support will come from Chase bank account, x x, x and start on this date. Super simple, super straightforward. No problems with with the guidelines. So these things are really difficult to change, you can see and like the closure part of the process, because generally the Settlement Agreement sometimes is even been filed at that point. Fine for the divorce. Not great if you're trying to get a mortgage.

Steve Altishin  
Yeah, yeah. And as you're going through those, one that kind of jumped in my brain, it because there's a lot of issues involved in it is retirement income. And it's not uncommon in these days of 401k days, and even IRAs to get some of the other spouse's retirement income. And I imagine there's, that's not something that you can just do anyway you want without talking to somebody like you first

Unknown Speaker  
100%. And again, there are reasons and tax implications. So these things are not, in theory done in a vacuum, like the tax professional isn't working in a vacuum. When when there's marital property that needs to be, there needs to be some options for so it may be tax advantageous to get a lump sum, let's say at a certain date. But you also want to consider what is the age of the divorcing spouse, whether that is receiving or sharing the 401 k or IRA? There's lots of implications for that in terms of qualifying income, and what percentage can be used, and those don't always line up. In the ideal. There's ideal in the real to what the tax advantages, but you can structure it in such a way. Let's say it's more advantageous from a tax perspective, to either do a quadro or a lump sum, and the person wants to be just free of the other person. Normal, totally acceptable, understandable, but we can then set up a living trust a revocable living trust for the purposes of a lender and a guideline to show consistent and stable income.

Steve Altishin  
judges create cool, yeah. Yeah, really cool idea.

Unknown Speaker  
Yeah. And no one needs to figure this out alone, like people are trying to feel bad, because they don't know this or afraid to ask their attorneys and their attorneys are specialized in what they're specialized in. They're not reading lender guidelines all day long and watching the market. That's not what they're doing. They may be for personal reasons. You know, well,

Steve Altishin  
if that makes sense, you're, what you do to make the Morgan situation better, and what they do to make all of the other legal, better, and what the five finalists better, I can see where you always have to be talking, then something that you might want to do in one case that someone would say, well, legally, this is going to cause this problem. So back to the actual mortgage itself. We had talked about earlier, different kinds of mortgages, or ways to treat the mortgage. And I know that you wanted to talk a little bit about loan assumptions, because hot topic, hot topic, and there's pros and cons are a hot

Unknown Speaker  
topic, whether you're going through the divorce or not. So let's bring the elephant in the room because it's no secret that we have a high increasing interest rate environment have had for at least since last summer, coming off of like historically unprecedentedly low. So everyone just went full tilt one way. So if you have a low interest rate, and I get this question often, how can I keep that and people are scared, they're uncertain around, you know, they don't have the clarity oftentimes of what they're spending or what their tax returns have said. So they're coming in again, at this stage for Stage five part of the process and trying to hold on for dear life to this interest rate that they have on their mortgage. So there are ways to assume a loan, those are going to be very specific and depend on the willingness and the terms of the loan. So what we're talking about right now is original loan terms, you cannot assume a loan if you if your equity is underwater, meaning you owe more than the value of the house, some of that we're just on the cusp of that because we had just astronomical appreciation of home values. So if we're talking about the original terms, and again, this is something that you would want to like look at with a lending professional certified divorce mortgage planner, ideally, because this is all going to be in your documentation, you still would need to qualify for the loan like you would be need to be able to show that you could pay it, but you're not then engaging in a refinance scenario. So it would be up to the willingness of the lender and your original terms. There's two types of loan assumptions. And they're simple. And then there's a different, there's a non simple, but essentially, what that means is there's one buy Novation and then there's two other types. The first two other types allow you to assume the loan, but the other party is like essentially a cosigner, that liability doesn't go off of their balance sheet for at least 12 months, and then potentially not even. But it gives them like legal kind of there. It's a legal assumption. So they're not like legally responsible. The other type is just fully assumed or through innovation. And essentially, what that yields is the release of the liability on the balance sheet of one of the parties. So it's a full release. And there's different ways to qualify, and write letters, and they're very specific and too, so don't, don't call your lender and ask them if you can assume a loan. Don't do that. Call someone first that understands how to do this, because there's definitely steps in the process and you want to first again review the documentation that you have.

Steve Altishin  
Do you ever get involved then in the kind of other part of the mortgage is the person who's getting the house like whether, you know, you really want to get the house in terms of I know, there's tax implications, there's the you know, mortgage deductions and all that kind of stuff.

Unknown Speaker  
Yes, I do. So, sometimes, you know, I do come into the later stages. Stage Four that we talked about or even post, I'm working with a client right now that's post settlement. And we're looking at options. So they're not due to sell the home until mid year? And what would the options be? When the home sells thinking about valuation, that time thinking about interest rates at that time thinking about what has already been agreed to in the settlement agreement? How we can structure that how can that be incident to divorce? How can we treat those liabilities? What's the best timing because sometimes, then you lose the, you know, 250,000 per person exclusion for capital gains tax. So really like, again, going back to that puzzle piece, visual, you know, what are the all of these pieces? You know, and what are those implications? And so what is the best timing, not just rate, not just, I found the home of my dreams, and I want it, you know, not just I need to get out of this home as quickly as possible. I'm afraid I need to sell it. You know, there's a lot of there's a lot of elements. So this is really about strategy, like you asked about tax implications. I mean, again, I would engage a tax professional at that point, especially when it's at the end stage or post filing where there's a court order, you know, it's been filed with the courts, it's, the divorce is complete, in the eyes of the court, then at that point, it's like, well, what do you want to do for the next chapter? You know, how do you want to plan? How do you want to maintain? Do you want cash flow? Do you want to build wealth? Do you want tax savings? How do we look at all of those pieces from the settlement agreement, to kind of start to build into the next chapter of your life? So I love that part as well. Oh, my gosh,

Steve Altishin  
we just blast it to 30 minutes, we're almost out. But I do want to ask you one more question. I ask a lot of professionals this, okay, they got a settlement you've been with it all is wonderful. Then they say there's a divorce decree written. And they bring it to you afterwards. And you say, Well, how do I how did? Why did they say that? I imagined your desire to see that decree? Even though you've been involved in it before it's actually signed?

Unknown Speaker  
Yes. I mean, if there is any question, I believe, know, your options, you know, even if you're going to your set and agreeing to what you're going to agree to, there's always an advantage because we don't know where life is gonna go, you know, clarity is a superpower, no matter what you're doing clarity is a superpower confusion is just that you're going in a million directions, with kind of no end. No end point in sight. If you have options and you have clarity, you know, you're you're going to have be able to build a plan, step by step, brick by brick. So while people want to, like end the process, and be over and build the next chapter, the next chapter is built on the foundation from the chapter before it. It's kind of like a great, great day. What did you do the night before? Yeah, that's when your day starts.

Steve Altishin  
Yeah, yeah. It's that's a great analogy. You don't want to buy a house that, you know, without checking to see how it's been handled before you buy it. I mean, it's the same kind of thing. You know, I love that.

Unknown Speaker  
Yeah, yeah. So I consider myself a guide by by someone side, I'm not the sage on the stage. I don't know everything. But I know a lot when it comes to the structure and guidelines. And I also have worked with a lot of clients, hundreds of clients, and I know some of the patterns, you know, of negotiations. And I also understand the rise and fall of the stages and the steps. And I love to be part of a team. And so there's there's opportunity for it all, you know, you don't have to limit yourself and feel trapped.

Steve Altishin  
Yeah. Yeah. And, and that's, that just, you're given such great advice. Before we leave. I do want to give you an opportunity. If someone wants to talk to you or get a hold of you, how can they get ahold of you?

Unknown Speaker  
Absolutely. I would encourage. I'm going to give my phone number that's the quickest way to get in touch with me. You can text me you can call me at this number 949-276-6996 You can also find me on social media Manya m a n y A like Tanya with an M. and last name Williams all one word. You can find me on LinkedIn, you can find me on Instagram. And you can also email me Manya at Manya williams.com. I welcome any questions and calls.

Steve Altishin  
Thank you so much. And now we are dead out of time. So thank you for bringing us just this depth of knowledge and making it clear. That's not an easy thing to do there make clear that clarity is a superpower. Do you have a little bit of it? I gotta tell you right now. So thank you again for being here with us today.

Unknown Speaker  
Thank you so much for having me, Steve. I really appreciate it. Have a wonderful day.

Steve Altishin  
You too. And I want to thank everyone else for joining us today. If anyone has further questions on today's topic, obviously you can get ahold of Manya but you can also post it here and we can get you in touch with Manya. So until next time, stay safe, stay happy and be well.

Outro:
This has been Modern Family Matters, a legal podcast focusing on providing real answers and direction for individuals and families. Our podcast is sponsored by Landerholm Family Law and Pacific Cascade Family Law, serving families in Oregon and Washington. If you are in need of legal counsel or have additional questions about a family law matter important to you, please visit our websites at landerholmlaw.com or pacificcascadefamilylaw.com. You can also call our headquarters at (503) 227-0200 to schedule a case evaluation with one of our seasoned attorneys. Modern Family Matters, advocating for your better tomorrow and offering legal solutions important to the modern family.