July 1, 2015
The United States Supreme Court’s decision on June 26, 2015 in Obergefell vs. Hodges will have an immediate impact on Texas residential lenders. This Law Letter discusses some of the results of the Supreme Court’s ruling that same-sex couples have the “fundamental right to marry” and that States may not prohibit same-sex marriages or create barriers to same-sex marriages.
The Court held that “same-sex couples may exercise the fundamental right to marry…The Constitution…does not permit the State to bar same-sex couples from marriage on the same terms as accorded to couples of the opposite-sex…same-sex couples may exercise the fundamental right to marry in all States…”
Impact of the Obergefell decision on Conveyances and Liens on the Texas Homestead
Under the Texas Family Code, a “spouse” cannot convey their Homestead or put a lien on their Homestead without the consent of the other spouse.
Texas Family Code Sec. 5.001. SALE, CONVEYANCE, OR ENCUMBRANCE OF HOMESTEAD. Whether the homestead is the separate property of either spouse or community property, neither spouse may sell, convey, or encumber the homestead without the joinder of the other spouse except as provided in this chapter or by other rules of law
Texas lenders will need to know the marital status of their borrowers and may choose to obtain a “Marital Status Affidavit” for all home loan closings.
Impact on Texas Common Law Marriages
Common Law Marriages (also called “Informal Marriages”) are recognized in Texas and require only that the two adults (who are not already married to other persons) agree that they are married, live together as spouses and hold themselves out to the public as a married couple. (Texas Property Code Sec. 2.401)
Under Texas Property Code Sec. 2.402, a couple may file a “Declaration of Informal Marriage” with the County Clerk where the couple resides, which is further proof of the couple’s marriage. This Declaration is not required to create a Common Law marriage but it does make the existence of such a marriage easier to verify and is a public confirmation of the marriage. The Property Code contains guidelines for preparing the “Declaration of Informal Marriage”.
After the Obergefell decision, a same sex adult couple who agree to be married, live together as a married couple and who present themselves to the world as a married couple likely have a Common Law marriage. Consequently, any property they purchase during their marriage is presumably Community Property and is owned equally by both persons. Property they acquired before marriage (or acquired during marriage by gift or through an estate) would likely be Separate Property.
Same sex individuals who lived together as a married couple before the Obergefell decision and who continue to do so after the decision and present themselves to the public as a married couple may be married under Texas’ Common Law marriage standards. For loan applications, the information regarding marital status will pertain equally to opposite-sex and same-sex couples.
Although the Obergefell decision did not directly address Common Law/Informal marriages, the decision makes clear that same-sex couples will have the same rights as an opposite-sex couples to be married, including the right to marry under Texas Common Law.
Impact on Divorces
After Obergefell, same-sex married couples who seek to terminate their marriage will be subject to divorce proceedings just as opposite-sex couples are subject to divorce proceedings and division of property and assumption of debts should be resolved in the Divorce Decree.
Impact on Other Aspects of Homestead Law, Federal Disclosures and Proper Description of Same-sex Married Couple in Loan Documents
After Obergefell, a same-sex married couple (just as a opposite-sex married couple) may only claim one homestead. A same-sex married couple who own two homes may only claim one as their homestead.
If a same-sex couple applies for a home loan (either Purchase, Refinance, Home Equity or Home Improvement), the lender will need to determine whether they are married, just as they now do with opposite-sex couples. If they are married, then both will need to at least sign the Deed of Trust and Right of Rescission (for Refinances, Home Equity loans and Home Improvement loans.) Federal law requires that each person who is entitled to rescind a transaction be provided with the Final Truth-in-Lending Disclosure (and after Oct. 3rd, the “Closing Disclosure”). Currently for Home Equity loans, we also recommend that both spouses sign the “Acknowledgement of Fair Market Value”.
In signing a Warranty Deed or loan documents, a same-sex married couple may be referred to as “ (name of person) and spouse, (name of other person)” or “______________ and ______________, a married couple”.
If you have any further questions or if you would like us to present a seminar on this subject for your staff, please give me, Karen Miller or Michael Baird a call and we’ll be glad to set it up.