Reaffirm to Refinance for HARP

[Sweetjuly]

Hi all! I have been in this battle for HARP with Wells Fargo. Applied, qualified and denied when it went to underwriting for the reason that "we did not reaffirm" our home in the bankruptcy 7 2 1/2 years ago. Loan officer says, all we had to do was to reaffirm and we would be approved. Problem is, we can not re-open our bankruptcy case just to reaffirm the mortgage. It's just not gonna happen per lawyer! So I went to another lender thinking it may just be a Wells requirement, and I am running into the same thing, and the loan officer says since it is not being reported in our credit report the underwriting system does not pull over any mortgage that they are going to refinance even though everything else looked good. It's a catch 22 for us!! We are willing to reaffirm, but we just simply cant per bankruptcy law since the debt has been discharged. Stuck, stuck, stuck we are

[Evan Bedard]

Hi Evan and thanks for replying! We are both struggling to make payments and would like to take advantage of the lower interest rate to accomplish a lower monthly payment. We do not qualify for HAMP since we dont meet the 31% DTI requirement. I thought by refinancing the loan, we are essentialy making ourselves liable for the loan again and that by creating a new loan with the refiance, tha bankruptcy discharge on the older loan would no longer protect us. The loan is technically still under our names as well as the deed, the fact that it is not showing on our credit appears that we dont have a mortgage since it was discharge.

Oh ok, I was gonna mention applying for a loan modification since a refinance is not possible, but you obviously have done your research and are well aware of the programs.. However, it would not hurt to apply for a traditional in-house modification because there is no 31% requirement..

Here is some information we have wrote about not reaffirming your mortgage after BK..

"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."

[blueskywcc]

Oh ok, I was gonna mention applying for a loan modification since a refinance is not possible, but you obviously have done your research and are well aware of the programs.. However, it would not hurt to apply for a traditional in-house modification because there is no 31% requirement..

Here is some information we have wrote about not reaffirming your mortgage after BK..

"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."

Evan, I thought.... if you reaffirm a mortgage loan after a bankruptcy, it means you are personally liable and you agree to the current mortgage terms.... meaning.... you can't refinance or modify under any program. Or, is my understanding wrong?

I currently have a mortgage loan that I didn't reaffirm when I filed a bankruptcy about 3 years ago. I want to do either apply for HAMP or HARP. If I understand replies correctly, should I reaffirm first and then apply for HAMP or HARP? Does HARP2 have minimum credit score requirement?

Thanks in advance.

[Evan Bedard]

Evan, I thought.... if you reaffirm a mortgage loan after a bankruptcy, it means you are personally liable and you agree to the current mortgage terms.... meaning.... you can't refinance or modify under any program. Or, is my understanding wrong?

No if you reaffirm the mortgage that will not prevent you from changing the terms of the loan through a loan modification or a refinance.

I currently have a mortgage loan that I didn't reaffirm when I filed a bankruptcy about 3 years ago. I want to do either apply for HAMP or HARP. If I understand replies correctly, should I reaffirm first and then apply for HAMP or HARP? Does HARP2 have minimum credit score requirement?

Are you sure your mortgage was not already discharged through the BK since you filed 3 years ago and never reaffirmed?

[blueskywcc]

No if you reaffirm the mortgage that will not prevent you from changing the terms of the loan through a loan modification or a refinance.



Are you sure your mortgage was not already discharged through the BK since you filed 3 years ago and never reaffirmed?

Evan, thank you for your prompt reply.

I did not reaffirm 1st mortgage and HELOC when I filed the BK. But, I kept making payments to both loans to keep the house. My current credit report states that the 1st mortgage was included in the BK but, not HELOC loan. All my payments to 1st mortgage after the BK are not reported in the credit report. But, all payments to HELOC are reported.

Basically, my current interest rate is 6.5 with 20 years remaining. I want to refi so that I can reduce the interest rate. My current Equifax credit score is 680. If my current bank asks me to reaffirm before refi, should I reaffirm?

Thanks

[Evan Bedard]

Basically, my current interest rate is 6.5 with 20 years remaining. I want to refi so that I can reduce the interest rate. My current Equifax credit score is 680. If my current bank asks me to reaffirm before refi, should I reaffirm?

If your credit report states that the loan was included in the BK and it is showing a $0 balance it sounds like the loan has been discharged. Once the mortgage is discharged I do not believe you can go back and have the mortgage reaffirmed..

[RunningDear]

blueskywcc,
I filed chapter 07 which was discharged in Jan 2010.
The loan was not reaffirmed yet I was still able to get a HAMP through GMAC.
The key is that even though it has been modified you do not lose your standing, The lender does not gain any rights to collect the debt

[Evan Bedard]

Thanks for sharing runningdear, that is very true that you can still achieve a loan modification on a mortgage that has been discharged and never reaffirmed after BK.

[blueskywcc]

blueskywcc,
I filed chapter 07 which was discharged in Jan 2010.
The loan was not reaffirmed yet I was still able to get a HAMP through GMAC.
The key is that even though it has been modified you do not lose your standing, The lender does not gain any rights to collect the debt

RunningDear, wow! that's great new! Was GMAC the same lender? Do you have to stick with the same lender if applying HAMP? What about HARP? How many months did your HAMP process take? My current lender is Nationstar Mortgage. Any advice?

[RunningDear]

blueskywcc
GMAC was the primary Citi was the second.
There is a list of HAMP Participants at Home Affordable Refinance Lenders - Freddie Mac.
It looks like Nationstar is listed...
If your second is underwater you may want to stop paying on it until you get the first modified.
Good luck to you

[Eltoro]

Thanks for sharing runningdear, that is very true that you can still achieve a loan modification on a mortgage that has been discharged and never reaffirmed after BK.

Hello, I am applying for loan modification and just in case if I got the loan-mod and except the mod with out knowing the future out come. My question is that the mortgage is included in BK and is not reaffirm. By excepted the loan modification after BK discharged. Which mean the BK protection from IRS and lender is voided. In the future if I walk away from the new loan. Can lender and IRS will go after me?
Thank you so much.

[Cat Damiano]

Hi Eltoro,


If your loan is included in a bk 7 and NOT Reaffirmed, then a modification would not change that, what could is if you were able to refinance the loan which would create an entirely new loan and the loan that was included in the bk would be no more.