Clarifying Homestead Law

House Bill 648, now pending before the state legislature, is an attempt to resolve some of the ambiguities that exist in homestead law. The unanswerable question asked most often is “do you have to record a new homestead after you refinance?” The problem is that since a mortgage is technically a deed and a deed dissolves an existing homestead, a new mortgage should dissolve a homestead as well. Many take the opposite view, saying that a mortgage is just a security instrument that does not automatically wipe out an existing homestead. This proposed legislation would end this debate by specifically exempting mortgages from the protection of the homestead. Consequently, lenders would no longer require borrowers to release or subordinate homesteads to new loans. Another area of ambiguity involves property held in trust. This law specifically allows a homestead to be recorded on property owned by a trust where the trustee resides in the property. Now before anyone emails saying “you mean the beneficiary, not the trustee,” the intent of this part of the legislation is to afford the homestead’s protection to those people who, for whatever reason, place their personal residence into a trust but continue living there as if it remains the family home. The final area the new legislation addresses is the rights of spouses and other family members to file a homestead. It says that a homestead filed by one family member also protects the interest of a co-owning family member who also resides in the property. It also allows the combining or stacking of multiple homesteads. In a related matter, we’ve added a new section to www.lowelldeeds.com. It’s called Homestead Forum and we’d like to use it as a place to share thoughts, ideas and interpretations on homestead law and practice. The way the forum works right now, you just send us an email with your thoughts and we cut and paste your thoughts (but not your name) into the forum to create a running dialogue. Please check it out.