Divorce and foreclosure: what happens when they intersect?

Divorce and Foreclosures: When the Two intersect then what?
The rate of foreclosures in the New York (and the rest of the country) area is increasing. So is the rate of divorce filings. What happens when a couple files for divorce and they are in foreclosure?
By the time couple receives notice of foreclosure, they are already about 3 months behind in their mortgage payments. If an action for divorce is filed before the property goes into foreclosure, but no judgment has yet been rendered, then the property is likely to be owned by both spouses as tenants by the entirety or joint tenants. Even if title is in one person’s name only, if the property was purchased during the marriage, it is marital property. So if the property goes into foreclosure while the divorce is pending, the lenders can usually go after both spouses and both spouses are on the hook for either curing the arrears, or losing title to the property through a judgment of foreclosure.
If a judgment of divorce has already been rendered, then the lender would only be able to go after who ever has title to the property. Usually after a divorce there will be some sort of deed/title transfer of the property. So that if one spouse received the property as part of a property settlement in a divorce, and that spouse is the only spouse with title, more than likely the lenders can only go after the property owner – that spouse with title to the property. But this is true only if there has been a refinance, and one spouse has legally been removed from the note and deed to the property.
If there has not been a refinance, and title to the property has not yet vested to one spouse then both spouses would be on the hook.
What can spouses do to cure the foreclosure and prevent it from ruining their credit? There are a number of things:
1) Seek a modification of the outstanding loan and note. Try to get the lender to either reduce the interest rate, or the principal amount that is due on the loan.
2) Try to do a short sale to raise funds to pay the lender
3) Try to negotiate a deed transfer in lieu of foreclosure either with the lender or another third party
4) Work out a plan where reduced payments can be stretched over a longer period of time
5) See whether there are any defenses to the original mortgage such as failure of the lender to provide a truth and lending statement, irregularities with finance charges under-reporting, fraud, anti-discrimination law violations, civil conspiracy, unfair and deceptive acts and practices.
6) File bankruptcy (this gives you an automatic stay on the foreclosure and buys time to come up with money to cure arrears if that is feasible for the homeowner)
7) Rescind the mortgage (this is a limited remedy with a 3 year statute of limitations and is available only where it can be demonstrated that a Truth in Lending Act (“TILA”) and RESPA (Real Estate Settlement Procedures Act) disclosures were not made as required. These disclosures include terms of loan, finance charges, loan duration, interest rates, fees, insurance and escrow payments.)
[GSMITHBOOK]