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The Orlando Sentinel picked up a terrific BankRate.com story this weekend about failed marriages and the mortgages left behind.

"Divorce is one of the leading causes of foreclosure today," says William Martin, a lawyer in Lowell, Mass., who specializes in real estate. "The other major cause is a catastrophic health event."

Health problems can leave a family unable to make regular monthly payments and turn a mortgage into a financial burden. Divorce can turn a mortgage payment into a financial weapon. Though a divorce decree can end or nullify a marriage contract, it cannot end or nullify a loan contract.

It is easier to break a marriage contract than it is to break a mortgage contract.  That's pretty powerful stuff. 

I have witnessed this issue on several occasions.  A family splits up, and while the paperwork is being filed, emotions run high and the battles are frequent.  Neither the husband nor the wife pay attention to the family bills (or choose to ignore them out of spite), and then the real financial chaos begins.

Most married couples jointly signed on their mortgage, their credit cards bills, and utilities.  It shouldn't surprise you, therefore, that divorcing couples tend to emerge from divorce proceedings with heavily damaged credit ratings because neither party wanted to cover the other's "expenses" during the separation period. 

Even when payments are court-ordered, bills still go unpaid because people can be people, at times. 

When bills go unpaid, it's a bad thing. 

When mortgage bills go unpaid, though, it's a disaster! 

After 90 consecutive days of non-payment, the lender files for foreclosure with the county and then both parties to the divorce officially enter a World of Hurt.

• Credit scores plummet
• Interest rates on credit cards increase
• Home loan eligibility over the next 3-7 years is severely hampered

When divorcing couples ignore mortgage payments in a game of Chicken, both parties are playing with fire and probably don't even know it. 

Once a foreclosure process begins -- even if you "settle up" and keep your house -- the default history follows you forever on your credit report, and on your title report.

During divorce proceedings, the usual resolution is that one party keeps the home and remortgages it in their name only, dropping the other party from the mortgage obligation and the title. 

This process is incredibly simple and pain-free -- but only if both parties have maintained their strong credit rating throughout the divorce.  If the credit is damaged, the mortgage can't be reworked and the divorce proceedings can grow more contentious.

Therefore, the most efficient and least costly approach is to address the mortgage early with your divorce attorney and reach a common sense agreement that benefits both parties. 

Ignoring the mortgage out of spite is a foolish game in which both parties lose.

Source
Divorce ends a marriage, but the mortgage lives on
Bankrate.com, April 23, 2006
http://www.orlandosentinel.com/features/home/orl-mortgage2306apr23,0,3191875.story?coll=orl-shoppinghg-headlinesforthe

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.