Tag Archives: partner

Structured Finance Journal Launch

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I am excited to be part of the launch of the Structured Finance Journal (SFJ), a double-blind, peer-reviewed publication dedicated to advancing the practices within the structured fixed-income markets. The press release continues,

SFJ is more than just a platform for publishing research—it is a collaborative effort led by an esteemed editorial board and guided by a distinguished advisory council, ensuring the highest quality and relevance of the work we publish.

In tribute to the highly respected but now defunct Journal of Structured Finance, formerly edited by Mark Adelson, we believe in the power of original research to drive practical applications and foster innovation in the field. SFJ is designed for professionals who are dedicated to contributing valuable insights that will help shape the industry’s future.

We invite submissions from industry experts and academics alike. If you have research that offers fresh insights and practical implications, we want to hear from you. Manuscripts should be between 2,500 and 3,500 words, excluding abstracts and references, and must be original work that has not been previously published or is under consideration elsewhere.

In line with our commitment to integrity and transparency, any use of AI tools in your manuscript should be limited to mechanical tasks like editing or citation management, with full disclosure required. Our strict guidelines ensure that only high-quality, relevant, and ethically produced research is featured in the journal.

Submissions must adhere to the Chicago Manual of Style (CMS) for formatting, with specific requirements for typography and content organization. We encourage authors to carefully structure their work, starting with a clear and concise title and abstract, followed by a compelling introduction, organized headings, and a well-rounded conclusion. Exhibits should be properly sourced, and permissions obtained for any previously published material. Details may be found on our online submissions platform.

Join us in advancing the structured finance industry by sharing your expertise and research. Submit your manuscript today and contribute to the growing body of knowledge that SFJ proudly supports. Please contact Elen Callahan at elen.callahan@structuredfinance.org with your questions and interest.

I am excited to join Elen Callahan and the other members of the Editorial Board in this venture:

Mark Adelson, Independent Consultant Content Director, Portfolio Management Research

William Black, Founder and Principal, Black Analytics

Nicole Byrns, Founder and Principal, Dumar Capital

Chun Lin, Managing Director and Head of U.S. Residential Mortgage Modeling, Bank of America

Debra Lofano, Partner, Alston & Bird LLP

Phillip Millman, Advisor, Federal Housing Finance Agency

Tim O’Neil, Managing Director and Head of Canadian Structured Finance, Morningstar DBRS

David Reiss, Clinical Professor of Law & Research Director of the Blassberg-Rice Center for Entrepreneurship Law, Cornell Law School & Cornell Tech

Jeff Schwartz, CFA, Securitized Products Investor

The Mortgage After a Spouse’s Death

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photo by Dr. Neil Clifton

BeSmartee.com quoted me in What Happens to My Mortgage When My Spouse Dies? It opens,

We would like to help by answering the question of what happens to your mortgage when your spouse dies, and we’ve asked several experts to chime in.

It’s bad enough when your spouse dies, but to also worry about what will happen with your mortgage only adds to the turmoil. We would like to help by answering the question of what happens to your mortgage when your spouse dies, and we’ve asked several experts to chime in.

When You Are on the Deed

If you and your spouse took out a mortgage loan together, you would then be responsible for paying the mortgage by yourself if your spouse dies. ”If the surviving spouses’ name is on the mortgage, they are now responsible for the entire mortgage,” says Randall R. Saxton, a Madison, MS, attorney. But you have inherited your spouses’ half of the home, which typically means you don’t need to change the title.

Your partner’s passing doesn’t disqualify the mortgage or let the lender call it in immediately, using a ”due-on-sale” clause. Such clauses let mortgage lenders demand the entire mortgage be paid if a new owner assumes the mortgage, or they take the house back. But the Garn-St. Germain Depository Institutions Act of 1982 prohibits lenders from using the due-on-sale clause when your spouse dies. But you would need to be able to handle the mortgage payments on your own to keep the house. ”While the lender cannot automatically foreclose due to the death of the mortgagee, they will be able to foreclose if the surviving spouse is unable to pay,” says Saxton.

Saxton has a suggestion: ”I always recommend life insurance policies, which would enable the surviving spouse to either pay off or maintain the payments of the mortgage.”

When You Are Not on the Deed

If you are not on the mortgage deed and your partner dies, your partner’s will should determine whether you get the house. If your partner didn’t have a will, your spouses’ assets will be distributed according to your state’s intestate laws.

Typically you, as the surviving spouse, will get your spouses’ assets after all expenses, such as funeral expenses and other debts, are paid. If there are enough assets in the estate, the mortgage will be paid. ”The estate will pay off the mortgage during probate,” says Aviva S. Pinto, CDFA, a wealth advisor at Bronfman E. L. Rothschild in New York City. ”If there are not sufficient assets to cover all debts, the house will have to be sold to pay off the debt,” says Pinto.

If you have children, your share is split with them. ”For example, if there is only one child of the deceased, the surviving spouse will own 50 percent of the property, and the child will own 50 percent of the property,” says Saxton. ”If neither [of you] pay the mortgage, the lender will be able to foreclose.”

Your Mortgage Lender Should Offer Help

No matter your particular situation, if your partner dies, you should contact your mortgage lender as soon as possible. They can help guide you on what will happen and your options. ”The Consumer Financial Protection Bureau has recently issued a rule to provide more protections to the survivors of a homeowner,” says David Reiss, professor of law at Brooklyn Law School. ”The rule gives widowed spouses some help in dealing with mortgage issues at a difficult time.”

Here are some specifics on how your mortgage lender can help, according to Reiss:

1. Mortgage servicers have to tell the widowed spouse about the documents that are necessary to confirm his or her status as a successor in interest to the deceased spouse.

2. Servicers are also required to provide many of the same notices and documents to the surviving spouse who is a successor in interest that the deceased spouse would have received.

Millennials Coming Home

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I was interviewed on Voice of America’s American Café in a story, Millennials Coming Home. The story touches on many of the themes that I blogged about last week. VoA sets up the show as follows:

A new study says that more American young people are moving back home after college than ever before. VOA’s American Cafe host David Byrd talks with three experts about this trend – how did it start, where is it going, and what does it mean?

You can listen to the edited podcast here and the complete interview with me here.

 

Mommy, I’m Home!

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cartoon by Mell Lazarus

The Pew Research Center has released For First Time in Modern Era, Living with Parents Edges out Other Living Arrangements for 18- to 34-Year-Olds (link for complete report on right side of page). This report adds to the growing literature on changes in household formation (see here, for instance) that have taken hold in large part since the financial crisis. There are lots of reasons to think that the way we live now is different from how we lived one generation, two generations, three generations ago.

The report opens,

Broad demographic shifts in marital status, educational attainment and employment have transformed the way young adults in the U.S. are living, and a new Pew Research Center analysis of census data highlights the implications of these changes for the most basic element of their lives – where they call home. In 2014, for the first time in more than 130 years, adults ages 18 to 34 were slightly more likely to be living in their parents’ home than they were to be living with a spouse or partner in their own household.

This turn of events is fueled primarily by the dramatic drop in the share of young Americans who are choosing to settle down romantically before age 35. Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner, whether a spouse or a significant other. This type of arrangement peaked around 1960, when 62% of the nation’s 18- to 34-year-olds were living with a spouse or partner in their own household, and only one-in-five were living with their parents. (4, footnotes omitted)

The report found that education, race and ethnicity was linked to young adult living arrangements. Less educated young adults were more likely to live with a parent as were black and Hispanic young adults. Some of the other key findings include,

  • The growing tendency of young adults to live with parents predates the Great Recession. In 1960, 20% of 18- to 34-year-olds lived with mom and/or dad. In 2007, before the recession, 28% lived in their parental home.
  • In 2014, 40% of 18- to 34-year-olds who had not completed high school lived with parent(s), the highest rate observed since the 1940 Census when information on educational attainment was first collected.
  • Young adults in states in the South Atlantic, West South Central and Pacific United States have recently experienced the highest rates on record of living with parent(s).
  • With few exceptions, since 1880 young men across all races and ethnicities have been more likely than young women to live in the home of their parent(s).
  • The changing demographic characteristics of young adults—age, racial and ethnic diversity, rising college enrollment—explain little of the increase in living with parent(s) (8-9)

It seems like unemployment and underemployment; student debt; and postponement or retreat from the institution of marriage all play a role in delaying young adult household formation.

My own idiosyncratic takeaway from the report is that, boy, the way we live now sure is different from how earlier generations lived (look at the graph on page 4 to see what I mean). Moreover, there is no reason to think that one way is more “natural” or better than the other. That being said, it sure is worth figuring out what we are doing now in order to craft policies to properly respond to it.

Protecting Seniors’ Home Equity

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photo by Ethan Prater

The Consumer Financial Protection Bureau has issued and Advisory and Report for Financial Institutions on Preventing Elder Financial Abuse. The Report defines elder financial exploitation as

the illegal or improper use of an older person’s funds, property or assets. Studies suggest that financial exploitation is the most common form of elder abuse and yet only a small fraction of incidents are reported. Estimates of annual losses range from $2.9 billion to $36.48 billion. Perpetrators who target older consumers include, among others, family members, caregivers, scam artists, financial advisers, home repair contractors, and fiduciaries (such as agents under power of attorney and guardians of property).

Older people are attractive targets because they may have accumulated assets or equity in their homes and usually have a regular source of income such as Social Security or a pension. In 2011, the net worth of households headed by a consumer age 65 and older was approximately $17.2 trillion, and the median net worth was $170,500. These consumers may be especially vulnerable due to isolation, cognitive decline, physical disability, health problems, and/or the recent loss of a partner, family member, or friend.

Cognitive impairment is a key factor in why older adults are targeted and why perpetrators succeed in victimizing them. Even mild cognitive impairment (MCI) can significantly impact the capacity of older people to manage their finances and to judge whether something is a scam or a fraud. Mild cognitive impairment is an intermediate stage between the expected cognitive decline of normal aging and the more serious decline of dementia. Studies indicate that 22 percent of Americans over age 70 have MCI and about one third of Americans age 85 and over have Alzheimer’s disease. (8-9, footnotes omitted)

The CFPB recommends that financial institutions consider

  • training staff to recognize abuse;
  • using fraud detection technologies;
  • offering age-friendly services; and
  • reporting suspicious activities to authorities.

These recommendations are a step in the right direction, although they offer no panacea. As the Report acknowledges, even if financial institutions report suspicious activities to government authorities, there is no guarantee that they will be acted on. But if these recommendations are publicized, they may deter some predators who think that they can act freely within the fog of their victims’ cognitive decline. And a few well-publicized prosecutions of relatives, caregivers and advisors who violate the trust that was placed in them would help to spread the message that ripping off senior citizens is no easy path to riches.

Going It Alone on Your Mortgage

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walking alone

WiseBread quoted me in When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse. It opens,

You and your spouse or partner are ready to apply for a mortgage loan. It makes sense to apply for the loan jointly, right? That way, your lender can use your combined incomes when determining how much mortgage money it can lend you.

Surprisingly, this isn’t always the right approach.

If the three-digit credit score of your spouse or partner is too low, it might make sense to apply for a mortgage loan on your own — as long as your income alone is high enough to let you qualify.

That’s because it doesn’t matter how high your credit score is if your spouse’s is low. Your lender will look at your spouse’s score, and not yours, when deciding if you and your partner qualify for a home loan.

“If one spouse has a low credit score, and that credit score is so low that the couple will either have to pay a higher interest rate or might not qualify for every loan product out there, then it might be time to consider dropping that spouse from the loan application,” says Eric Rotner, vice president of mortgage banking at the Scottsdale, Arizona office of Commerce Home Mortgage. “If a score is below a certain point, it can really limit your options.”

How Credit Scores Work

Lenders rely heavily on credit scores today, using them to determine the interest rates they charge borrowers and whether they’ll even approve their clients for a mortgage loan. Lenders consider a FICO score of 740 or higher to be a strong one, and will usually reserve their lowest interest rates for borrowers with such scores.

Borrowers whose scores are too low — say under 640 on the FICO scale — will struggle to qualify for mortgage loans without having to pay higher interest rates. They might not be able to qualify for any loan at all, depending on how low their score is.

Which Score Counts?

When couples apply for a mortgage loan together, lenders don’t consider all scores. Instead, they focus on the borrower who has the lowest credit score.

Every borrower has three FICO credit scores — one each compiled by the three national credit bureaus, TransUnion, Experian, and Equifax. Each of these scores can be slightly different. When couples apply for a mortgage loan, lenders will only consider the lowest middle credit score between the applicants.

Say you have credit scores of 740, 780, and 760 from the three credit bureaus. Your spouse has scores of 640, 620, and 610. Your lender will use that 620 score only when determining how likely you are to make your loan payments on time. Many lenders will consider a score of 620 to be too risky, and won’t approve your loan application. Others will approve you, but only at a high interest rate.

In such a case, it might make sense to drop a spouse from the loan application.

But there are other factors to consider.

“If you are the sole breadwinner, and your spouse’s credit score is low, it usually makes sense to apply in your name only for the mortgage loan,” said Mike Kinane, senior vice president of consumer lending at the Hamilton, New Jersey office of TD Bank. “But your income will need to be enough to support the mortgage you are looking for.”

That’s the tricky part: If you drop a spouse from a loan application, you won’t be penalized for that spouse’s weak credit score. But you also can’t use that spouse’s income. You might need to apply for a smaller mortgage loan, which usually means buying a smaller home, too.

Other Times to Drop a Spouse

There are other times when it makes sense for one spouse to sit out the loan application process.

If one spouse has too much debt and not enough income, it can be smart to leave that spouse out of the loan process. Lenders typically want your total monthly debts — including your estimated new monthly mortgage payment — to equal no more than 43% of your gross monthly income. If your spouse’s debt is high enough to throw this ratio out of whack, applying alone might be the wise choice.

Spouses or partners with past foreclosures, bankruptcies, or short sales on their credit reports might stay away from the loan application, too. Those negative judgments could make it more difficult to qualify for a loan.

Again, it comes down to simple math: Does the benefit of skipping your partner’s low credit score, high debt levels, and negative judgments outweigh the negative of not being able to use that spouse’s income?

“The $64,000 question is whether the spouse with the bad credit score is the breadwinner for the couple,” says David Reiss, professor of law with Brooklyn Law School in Brooklyn, New York. “The best case scenario would be a couple where the breadwinner is also the one with the good credit score. Dropping the other spouse from the application is likely a no-brainer in that circumstance. And of course, there will be a gray area for a couple where both spouses bring in a significant share of the income. In that case, the couple should definitely shop around for lenders that can work with them.”