Help on What to do, Complicated Situation - Loan Modification Forum

LesleyTN1020 · 09-20-2009, 06:54 PM

Hi, I wonder if anyone can offer some advice in this horrible mess, we don't know where to turn at this point. It's a long story but I will try to keep it brief. We are in Tennessee.

In 2005, my husband (we were not together back then) filed for chapter 7 following a divorce. The bankruptcy was discharged in June 2005. He did not intend to include his house in the BK. He signed a reaffirmation agreement and continued to make payments on time on the loan. Subsequently we met and married and I moved into the house. In 2006, we decided to think about moving. We applied for a mortgage and were told after our credit was run that the existing loan was discharged in bankruptcy and never reaffirmed. We contacted the mortgage lender as we assumed it was being reported incorrectly by the mortgage lender to the credit reporting agencies as we had a copy of the reaffirmation agreement he signed back in 05. They told us it was not reaffirmed and then went ahead and hired a lawyer to review the file and write to us showing proof that our attorney sent the reaffirmation to their attorney to be filed 2 days after the chapter 7 was discharged. They charged $2000 to his mortgage account for "legal fees". So, we established it was not reaffirmed.

In 2007, I was diagnosed with multiple sclerosis and discovered I was pregnant around the same time. My health took a downturn and after our daughter was born we were left without my income so we took a 2nd mortgage out with HFC for $10K with a balloon payment in 10 years. They valued the house at 95K, it was not really worth that but at the time we had no other options.

After I got better and went back to work my husband was laid off from his job of 10 yrs. We fell 4 payments behind on the mortgage. It is an FHA loan and they contacted us re loss mitigation. They suggested a partial claim and we had to make 3 on time payments in order to be eligible. We paid on time and continued to make payments on the 2nd loan also. We didn't hear from the 1st lender and months went by with us just paying the monthly payment but still 4 payments behind.

This week they have contacted us and said we must sign the partial claim document by Friday or they will start foreclosure proceedings. They also want the $2K in legal fees by Friday for the dispute in 06, or they will start foreclosure proceedings. I asked them about a short sale and they said yes, we could do that and list the house, and have 90 days to get an offer. The house however is now worth $75K at best, and there is a total of $83K on 1st mtg and $10K on 2nd. There are extensive repairs needing done to the home. Since the 2nd would get nothing, I doubt they would agree to a short sale? It's with the horrible HFC. Right now, that loan is current and on a temporary interest rate reduction.

The first lender said if we walk away and they foreclose, we are liable for the 2K in "legal fees" and the late fees on the mortgage.

What a mess. I guess our questions are this:

1. I have heard there is bankruptcy code that states a lender cannot report a foreclosure months or years after the loan was discharged. I assume this would apply to a short sale too? If so, we are thinking a public record would show the foreclosure and still ding his gradually rebuilt credit but a short sale possibly not if it is not a public record?

2. Can a lender legally add/charge fees to a loan already discharged in bankruptcy? They have indicated they will try and sue my husband for any shortfall in a foreclosure because he said he intended to reaffirm even though he never did.

3. If it forecloses what is the process with the 2nd mortgage when there is nothing left to pay them? Do you think there is any possibility of HFC agreeing to a settlement or conversion to an unsecured loan?

We really don't know where to turn, and only have a few days to decide what to do. We are not heartbroken about losing the house but renting is an OK option for the short term but may be a problem with awful credit if a foreclosure happens. But it would seem crazy to sign on the dotted line to do the partial claim because then we are bound by a third lien on a property not worth close to what the outstanding loans would be.

Any advice? Thanks so much for taking the time to read this.

09-20-2009, 06:54 PM	#1 (permalink)
LesleyTN1020 Junior Member Join Date: Sep 2009 Posts: 1 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Help on What to do, Complicated Situation Hi, I wonder if anyone can offer some advice in this horrible mess, we don't know where to turn at this point. It's a long story but I will try to keep it brief. We are in Tennessee. In 2005, my husband (we were not together back then) filed for chapter 7 following a divorce. The bankruptcy was discharged in June 2005. He did not intend to include his house in the BK. He signed a reaffirmation agreement and continued to make payments on time on the loan. Subsequently we met and married and I moved into the house. In 2006, we decided to think about moving. We applied for a mortgage and were told after our credit was run that the existing loan was discharged in bankruptcy and never reaffirmed. We contacted the mortgage lender as we assumed it was being reported incorrectly by the mortgage lender to the credit reporting agencies as we had a copy of the reaffirmation agreement he signed back in 05. They told us it was not reaffirmed and then went ahead and hired a lawyer to review the file and write to us showing proof that our attorney sent the reaffirmation to their attorney to be filed 2 days after the chapter 7 was discharged. They charged $2000 to his mortgage account for "legal fees". So, we established it was not reaffirmed. In 2007, I was diagnosed with multiple sclerosis and discovered I was pregnant around the same time. My health took a downturn and after our daughter was born we were left without my income so we took a 2nd mortgage out with HFC for $10K with a balloon payment in 10 years. They valued the house at 95K, it was not really worth that but at the time we had no other options. After I got better and went back to work my husband was laid off from his job of 10 yrs. We fell 4 payments behind on the mortgage. It is an FHA loan and they contacted us re loss mitigation. They suggested a partial claim and we had to make 3 on time payments in order to be eligible. We paid on time and continued to make payments on the 2nd loan also. We didn't hear from the 1st lender and months went by with us just paying the monthly payment but still 4 payments behind. This week they have contacted us and said we must sign the partial claim document by Friday or they will start foreclosure proceedings. They also want the $2K in legal fees by Friday for the dispute in 06, or they will start foreclosure proceedings. I asked them about a short sale and they said yes, we could do that and list the house, and have 90 days to get an offer. The house however is now worth $75K at best, and there is a total of $83K on 1st mtg and $10K on 2nd. There are extensive repairs needing done to the home. Since the 2nd would get nothing, I doubt they would agree to a short sale? It's with the horrible HFC. Right now, that loan is current and on a temporary interest rate reduction. The first lender said if we walk away and they foreclose, we are liable for the 2K in "legal fees" and the late fees on the mortgage. What a mess. I guess our questions are this: 1. I have heard there is bankruptcy code that states a lender cannot report a foreclosure months or years after the loan was discharged. I assume this would apply to a short sale too? If so, we are thinking a public record would show the foreclosure and still ding his gradually rebuilt credit but a short sale possibly not if it is not a public record? 2. Can a lender legally add/charge fees to a loan already discharged in bankruptcy? They have indicated they will try and sue my husband for any shortfall in a foreclosure because he said he intended to reaffirm even though he never did. 3. If it forecloses what is the process with the 2nd mortgage when there is nothing left to pay them? Do you think there is any possibility of HFC agreeing to a settlement or conversion to an unsecured loan? We really don't know where to turn, and only have a few days to decide what to do. We are not heartbroken about losing the house but renting is an OK option for the short term but may be a problem with awful credit if a foreclosure happens. But it would seem crazy to sign on the dotted line to do the partial claim because then we are bound by a third lien on a property not worth close to what the outstanding loans would be. Any advice? Thanks so much for taking the time to read this.

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