In the case Karnitz v. Wells Fargo Bank, N.A., homeowners Joel and Tanya Karnitz built a home with a construction bridge loan in the names of both husband and wife, then refinanced into a permanent home loan with lender Wells Fargo. At close of the refinance mortgage transaction, the lender’s documents requested only that Joel Karnitz sign to obtain the loan and mortgage, despite the fact that both Joel and Tanya were on the title and the construction bridge loan for the home.

As a result, Tanya never signed — and was never asked by Wells Fargo to sign — the loan or mortgage documents.

After a few years, the Karnitzes filed for bankruptcy and eventually defaulted on their mortgage with Wells Fargo, which instituted foreclosure proceedings on their home. The Karnitzes sued, claiming that Wells Fargo’s mortgage was invalid under Section 507.02 of the Minnesota Statutes, which requires both spouses to sign a "conveyance" of a married couple’s homestead, including a mortgage, for the conveyance to be valid.

At the district court level, the court granted summary judgment in favor of the Karnitzes, invoking Section 507.02.

The court of appeals, however, overturned the trial court’s ruling. After acknowledging that the express language of Section 507.02 would invalidate Wells Fargo’s mortgage for not having been signed by Tanya Karnitz, the court went on to cite case law authorities detailing criteria under which the Karnitzes were estopped from claiming that the mortgage was invalid.

The undisputed facts of the Karnitzes’ situation, the court opined, fulfilled these criteria: Tanya had prior knowledge of and consented to the mortgage; Tanya retained the benefits of the transaction (by using the new mortgage to pay off the construction loan); and Wells Fargo extended more than $130,000 in exchange for the mortgage lien on the property. Additionally, the Karnitzes made payments on the loan for years, and asserted the mortgage’s invalidity only when the home was in foreclosure.

Accordingly, the court concluded, the Karnitzes should be barred from claiming that the mortgage was invalid.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site,


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