It's an unfortunate fact of our work at Howard Law, P.C., that foreclosure and divorce often go hand in hand. Our San Bernardino foreclosure defense attorneys know money troubles can strain a marriage, and the costs of a breakup can often create money troubles. However, the court order that ends a marriage creates legal rights just like any other, and that can create barriers to a foreclosure if there's a right that conflicts with the lender's. That was the case in Benefit Bank v. Rogers, a foreclosure case in which the lien in favor of William Morgan's former wife was found primary, putting Marilyn Rogers ahead in priority of Benefit Bank, the mortgage holder. The lien was security for spousal support Morgan owed to Rogers until 2015. The Arkansas Supreme Court agreed that the divorce court had authority to create this primary lien.
Rogers and Morgan divorced in November of 2007 with an agreement that each would own one of the marital homes, but that Rogers would have a lien on Morgan's home and 27 acres of land in South Sebastian County, Ark., as collateral security for 7.5 years of spousal support payments. The lien was duly created. In 2010, Benefit filed for foreclosure against Morgan for a mortgage created in 2008, claiming its lien had priority. A bench trial found that Rogers had the priority lien and Benefit was or should have been on notice, since hers was created first. It also agreed that Morgan was in default and awarded Benefit $308,676.55 plus late fees, interests and attorney's fees--but no right to foreclose to collect that money. Benefit appealed the finding that its lien was secondary.
The Arkansas Supreme Court again sided with Rogers. On appeal, Benefit argued that the divorce court lacked authority to impose her lien, because the spousal support came in monthly payments rather than a fixed amount. It also noted that Arkansas courts have ruled that spousal support payments cannot constitute a lien on real estate. The high court agreed that its own precedent has consistently said an order for spousal support cannot constitute a lien. However, it said, those cases involved involuntary imposition of a lien, whereas this case involves a voluntary agreement as part of a divorce decree. Using the same reasoning, the court also disagreed that monthly payments cannot create a lien; those cases apply when the lien is created involuntarily. Additionally, it said, the support expires, meaning the debt is not a continuing general decree. After finding a few more of Benefit's arguments meritless, it upheld the trial court.
Vincent Howard and our Irvine foreclosure defense lawyers are pleased to see that the rights of the ex-wife are upheld here in favor of the bank's. Though the lender has rights--it did, after all, receive a judgment for the debt owed to it--it was not permitted to push ahead of Rogers in line to enforce those rights. This may seem like an academic distinction to Morgan, the owner of the home being foreclosed. However, as long as he continues making his support payments and Rogers has no reason to enforce her lien, he may be able to stay in the home. (It's also worth noting that spousal support payments can be modified to account for changed circumstances, whereas mortgage payments are notoriously difficult to change.) Though divorce can complicate a mortgage problem, Vincent Howard and our Temecula foreclosure defense attorneys urge clients to come to us to look for solutions before getting worried.
If you're facing default or foreclosure and your lender or loan servicer is declining to help, you should call Vincent Howard and the experienced attorneys at Howard Law as early as possible. You can reach us toll-free at 1-800-872-5925 or send us a message through our website.