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

• 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.

Steve Altishin
Hi, everyone. Welcome to our broadcast. I'm Steve Altishin, 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. Manya, how’re you doing today?

Manya Williams
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, can you just kind of tell us a little bit about yourself?

Manya Williams
Sure. As you mentioned, my name is Manya 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 professionals, 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 I went through the mortgage process, and it can be stressful. And I would imagine that it's even more stressful and more complex when a divorce gets involved.

Manya Williams
Yes, divorce is by nature a 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, of 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 purview and bird's eye view into how to prepare for the process of divorce and how all of these key elements and key 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’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 fit into that team?

Manya Williams
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 we can use that analogy of two different types 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 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 a 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 certified in divorce lending can give just 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 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 — is 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? 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, a couple of these things could be done and in a couple 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 nullifies really the whole portion in the settlement agreement.

And then the final stage is the home equity solution. This is where we get to advise 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 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 generally. And a lot of times there'll be settlements and discussions about one or the other. Because, you know, how do you then come in 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 getting the house ready to sell. So do you work with all of those people as well?

Manya Williams
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 ECOA, which is a federally regulated body, there is no fee to engage with a mortgage professional.

So this consult 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 specialists, 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 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 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 wrap up with that thought. Step five is closure. That's the options. That's when people are trying to negotiate.

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

Manya Williams
Yes, yes. So that goes back to 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 guidelines to each type of income.

So there's income that is earned, meaning you receive that income through a job. That's qualifying income. You receive that income through rental income. That's qualifying income with its own specific set of guidelines. You can have passive income and business income, self-employed income. So those all have their own set of guidelines.

When it comes incident to divorce, that income type starts to get broader and more dialed in. So maintenance is an income, but it's temporary maintenance. If it's written this spouse is receiving maintenance from a settlement or MSA perspective, that's all well and good. That satisfies one spouse’s direction to satisfy and meet the needs of another spouse. 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, it 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 in when they start and when they stop.

For child support, if you have a child that's 16 and they're going to be 18, that's not three years. There has to be specific language in the MSA stating 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 verbiage and 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 shared joint account at Chase but you never switched over? So the bank statements need to match the marital agreement to a tee.

So the more detail that's placed — “spousal support will come from Chase bank account XXX and start on this date” — super simple, super straightforward, no problems with the guidelines.

So these things are really difficult to change once you're in the closure part of the process because generally the settlement agreement sometimes has even been filed at that point. Fine for the divorce. Not great if you're trying to get a mortgage.

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 mortgage deductions and all that kind of stuff.

Manya Williams
Yes, I do. So, sometimes, you know, I do come into the later stages. Stage Four that we talked about or even post settlement. 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 at 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, again, going back to that puzzle piece visual, you know, what are all of these pieces 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,” 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 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, 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.

Steve Altishin
Oh my gosh, we just blasted through 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, it's wonderful. Then they say there's a divorce decree written and they bring it to you afterwards. And you say, “Well, how did they say that?” I imagine your desire to see that decree, even though you've been involved in it, before it's actually signed?

Manya Williams
Yes. I mean, if there is any question, I believe know your options. You know, even if you're 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 endpoint in sight.

If you have options and you have clarity, you're going to be able to build a plan, step by step, brick by brick. So while people want to 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 day. What did you do the night before? Yeah, that's when your day starts.

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

Manya Williams
Yeah, yeah. So I consider myself a guide by someone’s 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 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 opportunity for it all. You know, you don't have to limit yourself and feel trapped.

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

Manya Williams
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 at manya@manyawilliams.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. “Clarity is a superpower.” You have a little bit of it, I gotta tell you right now. So thank you again for being here with us today.

Manya Williams
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.