Credit Counseling Requirement Question

[litehouse01]

Has anyone had to attend credit counseling as a condition of getting their permenate mod because of your back end dti being over 55%? If so what time frame or criteria did the bank require? And if you completed credit counseling how long did it take afterwards to get your perm mod? Did it create more issues for you or was the bank willing to work with you?

[BobandArlyn]

Hey Litehouse,

Just did a google search and found this e-zine article about HUD Approved Credit Counseling for Making Home Affordable Plan...most of the info you want is about 3/4 of the article down.

The HUD Credit-Counseling Requirement of the "Making Home Affordable" Plan

Arlyn

[BobandArlyn]

PS....

Think this may open up a new place for scammers because I'm not sure it is free, but I think it may be and it should be. Sounds like just a couple meetings.

We had to pay $35 to go to a Chapter 13 credit counseling and you must check to be sure they are HUD approved credit counselors before entering into counseling. This took 30 minutes over the phone though.

THE MORAL: CHECK THAT THEY ARE HUD-APPROVED. I WOULD IMAGINE HUD will have a website for that.

U.S. Department of Housing and Urban Development (HUD)

[litehouse01]

Thanks Bob abd Arlyn your are a tremendous help...did you do the chapter 13 credit counseling over the phone prior to even applying for your trial mod? And did you have to submit paperwork to chase concerning it? If you don't mind I'' tell you what concerns me about our situation....when I ran the back end test with our original mortgage payments(1st & 2nd) it really throws the money wrench in as they are way too high for our income we have now that why we need the perm mod the debt associated with the back end dti consists of about 357. per month and another loan of 207.26 per month..we unfortunatly had a few charges offs on our credit report that shouldn't be added in as there is no payment associated with them as we had to let them go we couldn't afford to pay them.there is no payment listed on our credit report for them only states charged off. But what can credit counseling do for original mortgage payments that are too high now vs our current income? thats the biggest drag on the back end dti and I don't want to be turned down because of it.. I don't know what to do at this point..We are getting ready to make our 4th trial payment. Any thoughts are greatly appreciated...I feel like I keep getting knocked down always another obstacle.I guess my backup plan at this point f chase denies us is bankruptcy to try and save our house. I don't want to loose my house.

[BobandArlyn]

Lighthouse,

Thanks for the nice compliment Lighthouse.

We had to do the over-the phone counseling as a pre-requisite for filing the Chapter 13. It really just VERIFIED what we already knew. That we were going to have to file bankruptcy. They don't recommend, but give you options. We filed it in January, prior to applying officially with WAMU/Chase for the modification. (Originally started in November 2008 with the scam company that took $950--our stupidity!--filing on the California home modification fraud site....gonna get that back...that's next!).

Anyway, our Chapter 13 is part of our hardship letter right up front. While remodeling our home, we got caught into credit card debt by about $45k and didn't read our bills and payments doubled, interest quadrupled...yada yada..... couldn't keep up--again our bad. So, sought help through bankruptcy.

We are attempting to modify BEFORE our ARM adjusts in two more years. I'm retiring in December to keep my health and it means we definitely would not be able to make our new payment even with the bills gone!! So started this process early.

Honestly, I think the debt counseling is a requirement to GETTING the modification so that after the modification even with the dti over 55%, you won't go down the same path. I don't think it is meant as to get you denied. As a matter of fact, just took a minute and found this statement on a credit counseling website regarding mortgage modification credit counseling: "For those homeowners who owe more than fifty five percent of their monthly income to debtors for all of their combined debts, the mortgage holder must agree to participate in credit counseling in order to form better habits and money management skills."

What is so wrong with having to file bankruptcy....? Credit sucks already now..... Bankruptcy is the new divorce.... won't be considered an issue in the future...unless you do it 3-4-5 times...!

[litehouse01]

I have no problem with filing for bankruptcy..at all and I appreciate your sharing your circumstances you are very kind to do so...you made me feel better actually....I guess the best thing to do is for me to wait and see what Chase wants us to do as far as the counseling. Because as I stated we are at the 4th trial payment and it would be too late to include it now...so I guess i will wait and have them tell me that want us to get counciling.......Whats your opinion on charge offs if you don't mind my asking...since there is no actual payment listed because we aren't paying any that shouldn't be counted in bank end debt should it? Thanks again Arlyn you are very kind and helpful...

[litehouse01]

If they do deny us plan B would be to hire an attorney and persue Bankruptcy to keep the house and apply again for modification but I hope it doesn't come to that I hope they will just send us to credit counciling and after completion do the perm mod (wishful thinking)

[BobandArlyn]

You make me pleased. You are welcome. Our life is an open book now. We just don't care. We had always paid our bills on time, never late, paid early, paid more, but, missed reading one statement lowering our credit limit and we overcharged on that card started the landslide to follow.

Charge-offs are just that I would think. The creditors no longer have them on their books to collect. Doesn't do well on the credit score tho. I do not think that charge-offs will be included in your ACTIVE debts at all. It's like Chapter 13, those that do not file a claim to receive distribution of our payments to the Trustee, will charge them off. They aren't included in the bankruptcy and we no longer owe them.

However, who knows how Chase or other institutions will think, but I think you will be OK. Please keep us posted.

[BobandArlyn]

Originally Posted by litehouse01

If they do deny us plan B would be to hire an attorney and persue Bankruptcy to keep the house and apply again for modification but I hope it doesn't come to that I hope they will just send us to credit counciling and after completion do the perm mod (wishful thinking)

You have always got to keep the wishful thinking and hope. Remember what is truly important, YOUR FAITH, FAMILY AND FRIENDS. My husband and I have a tent, a dog, 3 cats and a paid off car. We'll roam if have to but we will be together.....the ride with the animals could get HAIRY though!

Arlyn

[litehouse01]

You are so funny Arlyn you lift my spirits.....As far as Chase or any of the other banks I don't think they could hold debt against us thats charged off..that debt just makes the rounds in the secondary market with collection agencies..they buy it for pennies on the dollar. And we are not actively paying it haven't for a long time it was just to much to handle and there is no payment per month amount associated with it. My husband worked for 34 yrs with US Airways and his company had been thru 2 bankrupties thur both pay and benefits were lost. Then his company was sold to America West Airlines in order to save what was left the new owners began downsizing the company and the station where my husband spent his career of over 34 yrs was a shadow of its former self. They cut flights and employees and hours...He was not cut thru all of that because of his seniority but his hours were cut along with the paycuts we could not survive..Those left that we eligible to retire did so because the monthly retirement was more than the US Airways base salary ended up being thru all the paycuts.It was our only chance to survive. Sad part in those 2 bankrupties that US Airways did they dumped the pension plans on the PBGC so the pension is about one third of what it wold have been...go fgure we reaches a crossroads he had to retire and find another full time job to offset the pensions if we had any chance to survive. I coolect a small pension from my former employer Northwest Airlines they closed their reservation center here in Baltimore and moved it out west. I hope Chase doesn't come back and say but you could have stayed at US AIrways and not retired because that was not the case if we wanted to survivie we are a victim of downsizing we had no control; over that....thanks for letting me ramble on..

[BobandArlyn]

Thank you for sharing Lighthouse. I'm sorry to hear about your difficulties. You guys will make it through. Who would have thought that we would having to be fighting this fight at this time of our lives. The stories that are on this website from ALL the generations going through this is heartwrenching.

Moe has started such a wonderful community here. Most everyone here are non-judgmental, everyone is helpful and caring. It would be interesting to have some type of activity down the road...meet mid-country somewhere and meet the people that helped us in some small or large way through this forum. I know that is lofty, but it is my wishful thinking that our homes are saved and we can all get to that point. My wishful thinking.

[litehouse01]

I totally agree...this forum has been a god send because without I don't know what I would have done...not only as a place to vent and share our stories and ideas but as a place of hope that all is not lost. and people advise other avenues to take when denials comes....my hope is and this may be wishful thinking on my part but that soon approvals out weigh the denials.....I wonder what month Chase is currently working on..when I got the modification at risk packet last week they sent me 4 more coupons..I was told via phone at the end of our 3 months we were extended until Jan 1 2010...I am 56(soon to be 57) and my husband 58 I never thought we would be going thru this but with people like you and this forum we are clearly not alone...It would be nice to meet the people we have gone thru this with....this forum has become like family and when all is said and done we should all stay in touch.......our email for you is litehouse01@msn.com we would love to stay in touch.

[davephx]

On charge offs - they don't only go to collection companies some companies keep them and you still get collection calls. Worse it seems many credit card companies including Chase are immediatly filing lawsuits for the balances after chargeoff. You have less options and can wind up with garnished bank accounts and liens on home, which can screw up modification.

I have one suit filed which I need to file an answer to and it looks like 3 more pending. All filed immediately after the 180 day charge off period plus 30 days fair credit act notification if collection agency which I reply to trying to delay. But doesn't seem to help much.

[litehouse01]

before I would let them get me in court to garnish or judgements or liens i will do bankruptrcy go right to an attorney at start the process and get rid of it once and for all....its holding them at bay the preverbel wolf at the door..........thats why I wish they would get this mod business over with.

[davephx]

The problem is Bk will delay the modification - have to get Court approval.

Chap 7 gets rid of credit cards but if income is over the average you have to do a very complex means test to qualify. And it has no benefit for the mortgage.

Chap 13 rolls up the back payments into the plan. But if the 2nd is underwater it is treated as unsecured and along with credit cards puts me over the limit on unsecured.

One I think 7 ,can cram down the 2nd mortgage.

My problem is the means test and hoping to wait for final mod but if it takes another 3 months ....

[litehouse01]

I don't know what the income requirements are for bk but we are under 50k per year actually it will be about 44k this year maybe..but like you said it takes time thur bk but would rather do it than loose the house especially if we get denied..we have no other choice at that point..but to file bk and have to reapply I guess....but I am going to remain positive at this point until they tell me otherwise...just mailed backed the modification at risk packet.....also faxed the same last so they will get it twice.........what month do you think they are working on? Since they are so far behind

[davephx]

Every lender is different looks like Citi is about 6 trial payments it seems. But that also may be because Fannie is 3 months behind but no one knows for sure.

The Chap 7 income test is different for every state. It is about 42K in AZ, 50K as I recall in CA.

[BobandArlyn]

Thanks Davephx, I forgot about BK Court approval.

The means test for us was about $150 over and we had to file Chapter 13. However, when I retired, we make it and can convert to a Chapter 7.

Arlyn

[litehouse01]

Bob and Arlyn..do you think it would be wise to contact one of the HUD approved counslers in my area now (we are at our 4th trila payment) or wait to hear from chase..I don't want to mess anything up. I talked with my husband this morning and asked should we seek a bankruptcy attorney now and he said he thought to wait to hear from chase he said the bk attorney would probably say lets see what chase says when they do our file to know how to proceed..I feel like I am between a rock and a hard place not knowing what to do..

[BobandArlyn]

Originally Posted by litehouse01

Bob and Arlyn..do you think it would be wise to contact one of the HUD approved counslers in my area now (we are at our 4th trila payment) or wait to hear from chase..I don't want to mess anything up. I talked with my husband this morning and asked should we seek a bankruptcy attorney now and he said he thought to wait to hear from chase he said the bk attorney would probably say lets see what chase says when they do our file to know how to proceed..I feel like I am between a rock and a hard place not knowing what to do..

I would not do anything unless Chase requests it! "Don't try to fix it if it ain't broke" theory.....

[litehouse01]

Thanks thats what I am going to do wait and see what chase says and then act quickly from there.......my husband agrees and feels a lawyer would say the same he would need to know what chase says to better direct us in what to do from there........Thanks Arlyn for good advice

[Hopefull2009]

Litehouse - I'm sort of in a similar situation. My back end DTI is over 55%. The HAMP guidelines require you to certify/agree in writing that you will obtain credit counseling. They are supposed to send a letter/notice for you to sign that you agree to get the counseling when your modification is about to become permanet. My understanding is you don't have to complete the counseling requirement prior to modification, but you have to sign the agreement. The counseling is free to you.

[litehouse01]

I just hope they stick to the guidelines and offer it instead of a straight denial........I guess we will have to wait and see what happens...

[MyHAMP]

Originally Posted by davephx

Chap 13 rolls up the back payments into the plan. But if the 2nd is underwater it is treated as unsecured and along with credit cards puts me over the limit on unsecured.

As far as I know, it doesn't. The limit of debts (secured/unsecured) is determined at the time you are filing for CH13. At that time, the second is a secured debt. After it is converted by the judge, it doesn't cause an issue any more. I had the same concern so I contacted a "guru" on a BK-forum and he confirmed that:

"The section of the Bankruptcy code which controls this is 11 USC 109(e). Section 109(e) establishes the debt limits based on whether they are secured or unsecured debts. However, any of those debts must be non-contingent, liquidated and undisputed.
In a Chapter 13 lien stripping situation, the unsecured portion of the mortgage/lien to be striped is contingent! It's contingent because it is considered a contested matter and must be adjudicated by the Court."

Additional source, post #2:

Married, over debt limit, but separate debt - Bankruptcy Forum

Hope that helps anyone..

[davephx]

MyHAMP - Good info and source.

New Means Test median income figures effective November 1st but can't seem to find them other than in Oregon where the median declined as is probably the case all over. This makes it even header to pass the Chap 7 income test without having to go thru the means test.