I was contacted yesterday afternoon to do a Signing for the Wife, Borrower and her husband, Co-Borrower this evening at 6 p.m. When I received the documents this morning, I noticed that Husband’s name (signature line) was on some, but not all of the documents. I called the Signing company for clarity. They contacted the Lender. According to them, husband was not the Co-Borrower and, therefore, did not NEED to sign, but could sign if he chose to do so.
Immediately upon my arrival to their home, I’m handed a fully-executed Free Trader Agreement by the Wife. Long story short, they were separated from each other on yesterday! Their Attorney not only drafted this document, but contacted the Lender as well. According to them, their Attorney communicated (their marital status) to the Lender in sufficient time for them to have modified the documents. Her intention was to have the Free Trader Agreement in the hands of the Lender prior to the creation of the Closing Documents. (Also, the Attorney will be preparing a Separation Agreement as well.)
At approximately 10 a.m. this morning, I received notice via SnapDocs that the documents were ready for me to print. I arrived at my appointment this evening and that’s when I learned about the Free Trader Agreement. Neither of the documents had been modified and calls to the Lender went unanswered.
I have never heard of a Free Trader Agreement. However, you did not mention the state this occurred in and laws can differ between states that are community property states and those that are not. In community property states, either party can encumber real property without including the other spouse, but there are still some documents that the non-borrowing spouse must sign. Since I only do business in a community property state (California), my expertise is in that area. However, I have done loans (as a loan processor/underwriter) in Colorado which is not a community property state and the borrowing spouse is the only one required to sign the documents unless the non-borrowing spouse is to be taking title. In either case, I would say that the documents in your situation are wrong and I would not have continued with the signing until the documents were corrected according to the attorney’s instructions.
I had a telephone conversation with a Paralegal in a law firm in Charlotte. According to her, a Free Trader Agreement is unique to North Carolina.
Free Trader Agreements allow a husband or wife to purchase property after the date of separation but before an absolute divorce without the necessity of having the other spouse being placed on the deed. The most common scenario—husband and wife separate. One spouse stays in the former marital home. The other spouse moves out and intends on buying a new place. However, the paperwork gets caught up because the spouses refuse to both sign and be on a deed for new property together. Obviously, the parties do not want this. What to do? This is the basic premise behind a Free Trader Agreement.
With a Free Trader Agreement, the spouses can freely purchase real property without placing the other spouse on the deed. This, by no means, will allow one spouse to sell the former marital home without the consent of the other—that is not what this is for. Instead, this allows the “purchasing” spouse to keep that real property as a separate asset and a separate obligation (ie—the mortgage). This can have huge value for both parties.
This document can also address the obligation that each party has to the other to refrain from attempting to get credit in the others’ name, as well as to promptly pay all debts and financial obligations incurred from the date of separation on.
Free Trader Agreements should be drafted in accordance with N.C.G.S. 52-10 and 39-13.4, they must be signed by both parties and notarized, and are filed with the Register of Deeds.
