It is fairly common for married couples to purchase a home but only list one person on the mortgage while both are included on the deed. However, what happens when the spouse listed on the mortgage dies? Is the surviving spouse who is listed on the deed responsible for paying back that mortgage? A recent court case addresses this specific question, but first, let’s look at some background information on why this situation occurs to begin with.
Why Spouses Might Not Be Listed on Mortgages
If a married couple is buying a home together, why would one spouse not be listed on the mortgage? There are actually a few common reasons why this occurs. First, one spouse may qualify better for a mortgage on his/her own. For instance, if the other spouse has a low credit score, then it may negatively impact the loan to include his/her name. Secondly, sometimes people simply prefer to include a single name when the income for one spouse is more than sufficient to qualify for the loan. Lastly, listing one spouse may help a family qualify for a mortgage program that has income limits. These are just a few examples. There are certainly other possible scenarios.
Mortgage vs. Deed
A mortgage is a legal document that lends money against a property in exchange for title. It also gives lenders the right to foreclose on a property should the borrower default on payments. A deed defines who legally owns a property.
So, the person listed on the mortgage is the one responsible for paying the debt, but both spouses listed on the deed are legal owners of the home. Therefore, technically, the spouse who is listed on the deed but not the mortgage owns the home but doesn’t have an obligation to pay the mortgage debt. It is for this reason that most lenders require the names on the deed to match the mortgage.
The Case of Wells Fargo versus Comeau (Nov. 2017)
In this recent Massachusetts court case, William Comeau was listed on the mortgage but both he and his wife were listed on the property’s deed. When William passed away, Wells Fargo (the mortgage lender) attempted to make the wife responsible for the mortgage debt. They were not successful in doing so. Wells Fargo made an additional mistake in failing to file a claim against the decedent’s estate within the one-year statute of limitations for probate cases. It’s unknown whether they would have had any success had they done so.
Surviving Spouses Responsible for Mortgage Debt?
So, when we ask, “Are surviving spouses responsible for mortgage debt not in their name?” the answer right now appears to be, no. This is certainly an interesting case for Massachusetts Real Estate Law. It will be even more interesting to see if another case comes up where the lender files a claim within the appropriate time frame and if they have any success in probate court. In the meantime, Massachusetts home buyers should not be surprised if lenders no longer allow spouses to be listed on the deed but not the mortgage. They may require that both names appear on the mortgage even if only one spouse applied for the loan itself.