what happens if I did not reaffirm my mortgage after Bankrupcy?

[bnpiferone8]

I am underwater on my mortgage and have been trying to get my lender to eliminate the second and modify the first but have had no success. I have a first that is a 6.9% Interest Only ARM with a $180,000 balance an a second wit same company that has a $18,000 balance. My home appraised at $230,000 2 years ago and now after many improvements appraised at only $175,000.

I have had to file Bankrupcy becuase I went blind and had to exhaust my 401 to keep from being behind on any payments. I took a chapter 7 and thought my mortgage was reaffirmed but now find out it was not.

Can I use it as leverage to get thelender to eliminate the second? I would reaffirm if they ould.

[Maurice Bedard]

Hello,

I wrote an article on this based on my research. I am no lawyer or BK expert, but this should be accurate:

When you do not reaffirm your home loan obligation after bankruptcy, this means that you are not personally liable on the promissory note associated with your mortgage. Your home will remain under the original loan agreement as you resume making payments. The title does not change and you still own the home. You are just not personally liable.


Not reaffirming the mortgage after bankruptcy simply means that you are no longer personally liable for the mortgage. This can be great news for many BK filers who cannot be held personally liable if they were to walk away from their homes because they cannot be sued for any deficiency judgments.


The bad news is that your credit report will note that the mortgage was discharged in bankruptcy and even though you are making payments, your report will not reflect your newly established good payment history. This is because you do not have to make payments and you are not utilizing credit. You might think you are actually rebuilding your credit score back up by paying your mortgage on time and paying period but you may not be gaining anything at all. When it comes to some people, they do not know this and years later when they want to take out a larger loan, they wonder why their credit score is still so low. They may even get denied for the loan because of the low credit score or lack of mortgage history.


However, if you do pay off your mortgage, you will still receive title to the home. Once the home is paid in full, the home is yours. Whether you reaffirm your home loan or not.


After you file bankruptcy, you will have to make a choice to reaffirm your mortgage or not to reaffirm. Some homeowners will elect not to do this because they plan to walk away from their homes and do not want the personal liability hanging over their heads. While others who want to stay in their homes with the benefits of good credit will most likely decide to reaffirm their mortgage.


What Happens If You Do Not Reaffirm Your Mortgage in Bankruptcy? | LoanSafe.org

[bnpiferone8]

Thank you for your reply. I was not given a choice to reaffirm or not. According to my BK Attourney, all banks do not send out lettes offering this. Even though I told my BK attourney that I wanted to keep house and did not want the house discharged. Now that my BK is already dischrged what can I do to have this reaffirmed??

[RyanJP]

How long ago was the discharge? You might be able to petition the court to reexamine the case, and include a reaffirmation, BUT, if they do allow it, the bank still has to agree to it; it's not REQUIRED that they do so.

But, if they allow it, and the bank agrees, then you are just stuck under the old terms of the loan.

Any loan modification you agree to at this point would, in effect, make you responsible for the loan again... to me, this seems like the better course of action. Why risk them denying you a loan mod AND still being personally liable for the old mortgage? Better to wait for them to change the terms.

[troubleinriverside]

Moe is correct, and what you have done is called a "Ride Through". Most mort companies are not requiring a re-affirmation, but some Auto lenders are. You can rebuild your credit by getting a new auto loan as I have, and a starter credit card. in 2 or three years of on time paying, your credit will be rebuilt Bk is no shame. Thomas Jefferson wa BK about 7 times.

[bnpiferone8]

I actually had my second modified after the discharge but not the first. Are you saying that when I got the second modified they should have started then reporting the second to the Bureaus as in good standing?

[RyanJP]

That seems to be the general consensus that I see from lawyers responding to others asking similar questions. Basically, when you signed the modification papers, you signed a contract that said "I agree to pay..." that would likely be successfully used in court to collect money from you in the event you default.

Generally, any debt incurred after your discharge is 100% your responsibility. If they are able to sue you for that money if you don't pay it back, then they have extended you credit, and should be reporting to bureaus accodingly. At least, that's the general opinion I've been seeing.

[bdmont]

Ryan,

I can't seem to find a consensus anywhere on this...you seem to think that you know...but I am really confused. My home was discharged after a bankruptcy last year - I did NOT reaffirm. The banks scrambled to complete a modification shortly after being discharged and I agreed to modify simply because we were already established and it was cheaper than renting.

Now, I have two loans - one (formerly) with BOA and a second with US Bank. My question is - do I own the loans or rather am I liable after modifications without reaffirming? Bank of America just SOLD my loan to Seterus and said that I owned the loan. But US Bank said very frankly that the loan was discharged and that is that. And my attorney said that a modification is in essence a "reaffirmation".
WHO IS RIGHT?

If I own the loans, I would like to have it reported with the credit bureaus - but if not - I am confused how BOA could sell my loan to another company without it being fraudulent...

Thanks for your help.

[Jeffrey L. Shurtliff]

From what I have read here is you did not reaffirm, but got a modification after bankruptcy. You have a second and if that second has been claimed on the bankruptcy it is gone. However that second has a lien on the property. You still own the loan, but it is non recourse. The servicer can sell the loan to anyone it wants and it is not fraudulent. Serterus is a loan modification servicer and it is normal for your loan to be under them.
The second and it being eliminated by your reaffirming is a question and is up to the lender. However; realize that may just not happen and that contacting the second holder and negotiating a settlement would be the answer here. Remind them that the loan is non recourse and you can walk at any time and settling would be in their best interest.

[interesting...]

Seterus is a servicer for Fannie Mae. They service all types of loans, not just modded ones.

[bdmont]

thanks for your reply Jeffery.

What you are saying is that I should attempt to go above and beyond the mod on the second and negotiate more out of them? If so, what path has the least resistance?

Re: Seterus, if my first is a non-recourse loan even after the mod - do they know that - seems like a bad investment to buy a loan that is backed by a value less than the loan amount and with an occupant that you can't sue...

Also what about the credit bureaus? If BOA said I owned it and my lawyer said I own it - than it seems as though it should be reported...correct?

Last question: just for clarification - if I walk away (not that I am going to) after both were mod'd but both were discharged prior to the mod, are they both non-recourse? And if it goes up in value, can I sell the property? And if not - if I have repairs can I charge it to the bank? The last is only somewhat in jest, but has a sliver of reality to it...

It seems there is still a bit of grey in all of this...

Thanks again.

[interesting...]

thanks for your reply Jeffery.

Re: Seterus, if my first is a non-recourse loan even after the mod - do they know that - seems like a bad investment to buy a loan that is backed by a value less than the loan amount and with an occupant that you can't sue...

Seterus did not buy the loan. Fannie Mae owns the loan, and they're using Seterus as a servicer. (I'm not even sure that Seterus owns any servicing rights...)

[Jeffrey L. Shurtliff]

I may have missed that the second was modified. If the second is modified you may still be able to negotiate, although I have never heard of this. You do own the loans though no matter who services them. You also have the right to ask questions about the second with the holder of the note and negotiate some kind of a settlement. Some will not talk to you about it though.
Yes they are both non recourse. Also ,I did not get the state you are in.
You can sell the property if it goes up in value but you will have to pay the entire balance owed. I am guessing you have a final balloon payment on this property? And LOL, no you cannot charge the bank for repairs. LOL
Also I believe you still have some grey area here as the second has been modified and all you can do is try to negotiate. If they do or if they don't this will dispel this unknown.

[angel]

Hello

Question: Did I accidently reaffirm my mortgage (discharged under a chapter 7 bankruptcy) once I signed a modification several months later?...I hope not. I recently ran into trouble again with the loan. BOA is trying to foreclose. I have discovered that the modification addendum states that it is a "Chapter 13" verses the chapter 7 which is documented in court. Did BOA purposely make that error?

Additionally, The orginal mortgage was with countrywide ( a no documentation loan). It was signed by MERS and transfered with the chain of title being broken, as well as forged notary (my signature) and noted robo signatures present. The sale date is coming up soon. What can I do????

[RyanJP]

thanks for your reply Jeffery.

What you are saying is that I should attempt to go above and beyond the mod on the second and negotiate more out of them? If so, what path has the least resistance?

Re: Seterus, if my first is a non-recourse loan even after the mod - do they know that - seems like a bad investment to buy a loan that is backed by a value less than the loan amount and with an occupant that you can't sue...

Also what about the credit bureaus? If BOA said I owned it and my lawyer said I own it - than it seems as though it should be reported...correct?

Last question: just for clarification - if I walk away (not that I am going to) after both were mod'd but both were discharged prior to the mod, are they both non-recourse? And if it goes up in value, can I sell the property? And if not - if I have repairs can I charge it to the bank? The last is only somewhat in jest, but has a sliver of reality to it...

It seems there is still a bit of grey in all of this...

Thanks again.

The reason it isn't reported on it is because you don't "owe" any money. You are basically paying rent. Your name is on the title as the owner, but you have no obligation to pay the bank anything to live there. On the other hand, the bank has no obligation to allow you to continue living in the house, either. But, if you continue to pay, they have no reason to foreclose in order to take back the title.

[meadows]

I just learned that my mortgage was not reaffirmed, after filing Ch. 7 BK in late 2009. I have been "renting" my property since. (This came about because B of A, who was reporting my payments to the credit bureaus as a courtesy, sold my loan.) The new provider will not report the same as my loan was not reaffirmed.

At the time of my BK, my home was upside down by a few thousand and I had hoped to modify. After going to heck and back with B of A, providing docs over and over, they finally denied me.

Although I have not been late on a payment in the 15 years that I have owned the home, I am now $80K underwater, still unemployed, tired and walking away. (I will need to move out of state to work, as my profession is not hiring in this market, or have significantly lowered the salary.)

Since my home was already "discharged" in the BK, and showing so on my credit reports, and I am now renting, is the normal foreclosure process the same? (About 90 days after a missed payment.) Or, is the process more of a "Three day notice to quit" type?

I will not be making my February 2012 payment. (I am out of money, but packed and ready to move.) What can I expect from the provider? Thanks.

[Jeffrey L. Shurtliff]

I just learned that my mortgage was not reaffirmed, after filing Ch. 7 BK in late 2009. I have been "renting" my property since. (This came about because B of A, who was reporting my payments to the credit bureaus as a courtesy, sold my loan.) The new provider will not report the same as my loan was not reaffirmed.

At the time of my BK, my home was upside down by a few thousand and I had hoped to modify. After going to heck and back with B of A, providing docs over and over, they finally denied me.

Although I have not been late on a payment in the 15 years that I have owned the home, I am now $80K underwater, still unemployed, tired and walking away. (I will need to move out of state to work, as my profession is not hiring in this market, or have significantly lowered the salary.)

Since my home was already "discharged" in the BK, and showing so on my credit reports, and I am now renting, is the normal foreclosure process the same? (About 90 days after a missed payment.) Or, is the process more of a "Three day notice to quit" type?

I will not be making my February 2012 payment. (I am out of money, but packed and ready to move.) What can I expect from the provider? Thanks.

The foreclosure process will be pursuant to your state law.

[Baybblooz]

Meadows....I have a similar story. I filed BK end of 2009 and was discharged in 3/2010. I did not reaffirm the 1st or 2nd mortgages on my house in AZ and I'm upside down, can't collect enough rent to cover the costs, etc. I am wondering what to do....which is best after a chapter 7 BK? Kick tenants out and walk away? Try to do a loan mod on a 2nd home? Short sale? If I stop making payments is the foreclosure process the same as others or is it sped up since i filed BK and they weren't reaffirmed?

[angieb]

I just learned that my mortgage was not reaffirmed, after filing Ch. 7 BK in late 2009. I have been "renting" my property since. (This came about because B of A, who was reporting my payments to the credit bureaus as a courtesy, sold my loan.) The new provider will not report the same as my loan was not reaffirmed.

At the time of my BK, my home was upside down by a few thousand and I had hoped to modify. After going to heck and back with B of A, providing docs over and over, they finally denied me.

Although I have not been late on a payment in the 15 years that I have owned the home, I am now $80K underwater, still unemployed, tired and walking away. (I will need to move out of state to work, as my profession is not hiring in this market, or have significantly lowered the salary.)

Since my home was already "discharged" in the BK, and showing so on my credit reports, and I am now renting, is the normal foreclosure process the same? (About 90 days after a missed payment.) Or, is the process more of a "Three day notice to quit" type?

I will not be making my February 2012 payment. (I am out of money, but packed and ready to move.) What can I expect from the provider? Thanks.

Why did you continue making the payments after discharge? Here is my situation. I filed back in 09 recieved discharge in 09 walked away. It has been 3 years and the bank still has not foreclosed and they have been paying the property taxes to boot! I just learned that I still own the home and contacted them requesting them to foreclose. They said they won't seek to foreclose because my husband is active duty military and this is their new policy after being sued for wrongful foreclosures. I told them my husband will be active duty for another 5 years so they told me then we will not forelcose for 6 years then.. one year after he leaves the service? I'm SHOCKED! So here is my question can I rent out the home legally? and what about homeowners insurance? I cancelled that 3 years ago.. and now nobody will cover me because the home has been vacant for so long and it hasn't been insured for so long. I don't know what to do.

[Jeffrey L. Shurtliff]

Why did you continue making the payments after discharge? Here is my situation. I filed back in 09 recieved discharge in 09 walked away. It has been 3 years and the bank still has not foreclosed and they have been paying the property taxes to boot! I just learned that I still own the home and contacted them requesting them to foreclose. They said they won't seek to foreclose because my husband is active duty military and this is their new policy after being sued for wrongful foreclosures. I told them my husband will be active duty for another 5 years so they told me then we will not forelcose for 6 years then.. one year after he leaves the service? I'm SHOCKED! So here is my question can I rent out the home legally? and what about homeowners insurance? I cancelled that 3 years ago.. and now nobody will cover me because the home has been vacant for so long and it hasn't been insured for so long. I don't know what to do.

I would rent it out. Also as you have not made a payment in three years you are technically in adverse possession. Not knowing your state; some state provide statutes that you have color of title in less than two years.

[interesting...]

what's amazing about this is that there's a federal law that protects servicemen, yet I've heard of the banks foreclosing on them anyway... you cannot sue or take any action against active servicemen. It was instated during WWII I believe...

See this link: Soldiers' and Sailors' Civil Relief Act Provides Umbrella of Protection

[angieb]

yes SCRA! I am the odd man out.. most don't want foreclosure to happen and or be kicked out. I filed and was discharged. 3 years later.. I'm ready to buy again with good credti and find out I still own. No I won't take a hit on credit down the road whenever they decided to foreclose but, it will hurt me in buying a home if I wanted to.. (seriously don't think I will ever purchase again) I just spoke to them and they told me that I can not move back in to the house or rent it because they have put locks on it and I'm no longer allowed in there! SAYS WHO??? By LAW you can NOT KEEP ME OUT OF A HOME THAT HAS MY NAME ON THE DEED AND NOT YOURS! FORECLOSE or I'm moving in and renting out! NOW they say well what if we CAN WORK out a foreclosure would you be willing~~~ PISSES ME OFF because that is what I've been trying to get them to do for months now and they said NO WAY! I told them I won't and can't short sale because I have a heloc! Banks created this housing market crisis not me. Bought the home for 179 now only worth 90! GEESH~

[RyanJP]

Why did you continue making the payments after discharge? Here is my situation. I filed back in 09 recieved discharge in 09 walked away.

Sometimes the mortgage payment is less, or not significantly more, than comparable rent would be. Why go through the hassle of moving to keep paying the same amount?

[butterflies]

I'm in a similar situation. My bankruptcy was discharged almost 3yrs ago, and I thought I had reaffirmed on my first & 2nd mortgages as well as my van. Things were fine until I lost $600 mo in child support. I went to my lender for help, and after months of going back & forth, I found out that they had no record of my reaffirmation for my first mortgage, so they couldn't & wouldn't do anything to help me. They suggested I talk to my attorney about reopening my case to file it, so they could help me, but my attorney said that the court wouldn't reopen my case and I would be out money since I would have to pay him to even try. I do have a reaffirmation for my 2nd mortgage & I have been paying both since my bankruptcy. So.. I have been sqeeking by, but with 2 kids, it's not working anymore. So can anyone tell me what would happen if I stopped paying the full mortgage payment amount due on my first mortgage? My payment is $725 mo - so what if I paid half of that? Can they really kick me out of my house if I'm not legally obligated to pay the debt, yet I still am paying something?? If so, how long would I have? I am still paying the 2nd mortgage and have no problem paying that one since I reaffirmed. I live in Michigan, so I don't know if that matters. I would appreciate any advice on this that I can get! Thanks

[majorse7en]

My husband and I had our Chapter 7 bankruptcy discharged in October 2011. Our home was included although we had done a loan modification with Seterus in 2010. We had no idea our home was in the bankruptcy as we intended to keep it. My question is this: Can we qualify for another loan modification if our mortgage isn't reaffirmed? If we miss some payments will a Chapter 13 bankruptcy protect us from foreclosure?
Help!