Lender Foreclose Mortgage On Homestead When One Of Spouses Did Not Sign The Mortgage?

A married couple came to see me about a foreclosure on their homestead. The man bought a Florida homestead where he lives with his wife. There is a judgment against the husband. He paid cash for the homestead in order to protect the purchase proceeds. The husband used his own money and no marital funds to buy the house.

The husband also had previously  borrowed other money from a private party which he had invested in a business venture. After the homestead purchase, the private party demanded, and the husband agreed, to execute a mortgage on the homestead property to secure repayment of the debt. The private lender was concerned that the judgment creditor would levy upon all the husband’s non-exempt assets and interfere with repayment of the loan.

Although the entire family lived in the house the private lender did not make the wife not sign the mortgage document. The husband has failed to  pay note payments to his private lender under the terms of their note and mortgage agreement. The lender has foreclosed. The husband and wife want to know if they can defend against the foreclosure because the non-debtor spouse did not join the husband on the mortgage deed.

The wife has a homestead interest in the property even though her name is not on the title as a co-owner and she did not contribute any money to buy the property. Any family member of the homestead owner can claim a protected homestead interest as long as the family member has not voluntarily abandoned the property.

The Florida Constitution says a person can sell or mortgage his homestead with the joinder of his spouse. Since the spouse did not join the mortgage deed it seems that the mortgage did not create a recorded lien on the property.

There are other arguments for the private lender. He could argue that he deserves to hold an “equitable lien” on the homestead. A court may place an equitable lien on a homestead property whenever required to achieve fairness and equity. An equitable lien would be binding on the non-debtor spouse even though she did nothing wrong in this case. On the other hand, equitable liens are usually granted when wrongfully obtained money was used to buy or improve a homestead. In this instance, the money loaned by the private lender was not traceable in to the purchase of the homestead because the husband used separate funds to buy the house. I do not think an equitable lien is appropriate in this case.