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

Discussion in 'Credit Repair' started by bnpiferone8, Jan 11, 2011.

  1. bnpiferone8

    bnpiferone8 LoanSafe Member

    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.
  2. Moe

    Moe Call 1-800-779-4547 Staff Member Loan Safe Mortgage


    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
  3. bnpiferone8

    bnpiferone8 LoanSafe Member


    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??
  4. RyanJP

    RyanJP LoanSafe Member

    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.
  5. troubleinriverside

    troubleinriverside LoanSafe Member

    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.
  6. bnpiferone8

    bnpiferone8 LoanSafe Member

    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?
  7. RyanJP

    RyanJP LoanSafe Member

    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.
  8. bdmont

    bdmont LoanSafe Member


    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".

    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.
  9. Jeffrey L. Shurtliff

    Jeffrey L. Shurtliff LoanSafe Member

    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.
  10. interesting...

    interesting... LoanSafe Member

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

    bdmont LoanSafe Member


    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.
  12. interesting...

    interesting... LoanSafe Member

    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...)
  13. Jeffrey L. Shurtliff

    Jeffrey L. Shurtliff LoanSafe Member

    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.
  14. angel

    angel LoanSafe Member


    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????
  15. RyanJP

    RyanJP LoanSafe Member

    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.
  16. meadows

    meadows LoanSafe Member

    What next? Foreclosure process (walking away after "renting" for two years -did not reaffirm mortgage))

    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.
  17. Jeffrey L. Shurtliff

    Jeffrey L. Shurtliff LoanSafe Member

    The foreclosure process will be pursuant to your state law.
  18. Baybblooz

    Baybblooz LoanSafe Member

    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?
  19. angieb

    angieb LoanSafe Member


    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.
  20. Jeffrey L. Shurtliff

    Jeffrey L. Shurtliff LoanSafe Member

    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.

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