Steps to take when an 'ex' meddles with a home refinancing

Posted2/8/2013 5:14 AM

Federal law prohibits a former spouse from gaining access to the other's current credit report, even if it involves the refinancing of a home they once owned together.

Q. My divorce settlement was approved by a judge six months ago, and part of the agreement requires that I refinance our longtime home in my name only so I can pay off my wife's half-share of the equity in the house. After applying for the refi, I learned my ex-wife ordered a credit report on me just a few days before the refinance deal was going to close and the credit bureau furnished her with a copy. Was that legal? What can I do?

A. Technically, the credit bureau broke the law set by the federal Fair Credit Reporting Act. The law says that bureaus, banks and other institutions can furnish credit reports only to an ex-spouse or other third parties that have a "permissionable purpose." But you are trying to refinance the property on your own, based on your divorce-settlement agreement, so your ex-wife didn't have the right to demand a copy of your credit report, and the bureau could be financially liable for giving it to her.

Now, here's the bad news: Filing a lawsuit against the bureau likely would be a waste of time because its lawyers are a lot more highly paid than you can afford to fight. And though your ex-wife broke the law by requesting your personal report too, it probably doesn't make sense to sue her, either: The federal FCRA limits claimants like you to a maximum of $1,000 in awards, unless the person who ordered the report takes out more credit in your name and then fails to pay it back.

Though going to court wouldn't make much sense, you could consider filing an "identity-theft" report with your local law-enforcement agency about your ex-spouse's actions. The complaint might not go anywhere, but would put her on notice that you won't tolerate this sort of behavior in the future.

Also contact the credit bureau that furnished your ex-wife with the report for additional advice. It might suggest that you put a "credit freeze" on your account to prevent unauthorized people from trying to obtain loans or other types of credit in your name, or assign you a personal identification number that you must furnish before an individual or potential creditor can access your report.

Both such options have their advantages and drawbacks, which the bureau's customer-service representative can explain.

Q. Are payments for a homeowners' hazard-insurance policy tax-deductible?

A. No, not if the house is your personal residence. But all or most of the cost usually can be written off on your upcoming tax return as an "operating expense" if you rent the insured property to others.

For details, get a free copy of Internal Revenue Service Publication 527, Residential Rental Property, by calling the agency at (800) 829-3676 or by downloading it from

Q. I am really, really mad at my real estate agent. I had her present a full-price offer on a house a few days ago, and the seller signed it immediately. Figuring that the seller is clearly desperate, I told my agent to submit a new offer for $5,000 less the next day. She won't do it, so now it looks like I'm going to get stuck paying $5,000 more than the seller would have accepted! Can I sue the agent for negligence? What other options do I have?

A. It sounds as if you are having a serious bout of "buyer's remorse," a common ailment among first-time purchasers. Symptoms include an overwhelming fear that the agreed-upon price was too high, plus the sometimes paralyzing terror that comes with thinking of accepting the 15- or 30-year commitment that a typical mortgage involves.

You have to get over it, for both emotional and legal reasons. You'll feel better if, like most homebuyers, you can pat yourself on the back because you researched local home prices to determine the property's true market value and hired the best real estate agent to represent you.

On the legal side, you have little grounds to sue the agent for negligence or to demand that the sale be canceled. Your agent did her job by finding a house that you agreed to purchase, and the seller signed the first contract that the agent offered on your behalf. The agent is now owed a commission regardless of whether you complete the sale, while the seller likely would be able to either keep your "good faith" deposit or sue you if you were to breach the contract.

Though filing a lawsuit isn't a promising option, you may have a way to wriggle out of the deal with little or no cost. Assuming your first offer contained the handful of contingencies that I always recommend, you may be able to cancel the sale without penalty if you can't obtain a suitable loan to finance the transaction or if the seller failed to disclose defects in the home that a professional inspector uncovers and the seller refuses to correct.

The bottom line, though, is that you signed a written contract with the seller to purchase the house. You have both the legal and moral obligation to fulfill it if the seller also makes a good-faith effort to complete his part of the bargain.

Real estate trivia: About 7.5 million homeowners and renters bought a new TV for their living room to watch last weekend's Super Bowl, the Retail and Advertising Marketing Association says, up from 5 million last year.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.

2012, Cowles Syndicate Inc.

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