when to stop paying ride-thru mortgage?

[screentest]

The real point with "buy and bail" is trying to qualify, after your 2 year post BK wait, for a new mortgage with the current one still unsettled. No way in hell could I qualify for a new mortgage with an existing one pending. I can hardly make the current payment let alone another one. I would never be able to get a new mortgage until I have dealt with the one I have.

Many people are in this situation and could probably rent out their current house etc to try and eat up some of the qualifying DTI. No way I could. Personally I will have to let my current house go and wait out the 3 years and just start over. Back to the rental work for me.

ST

[downsized]

I guess what I'm not understanding is the idea that the first mortgage is unsettled. Unless the mortgage was reaffirmed, the owner has no obligation to continue paying. While the home would have to go through the foreclosure process, it's shouldn't be reported as such on a credit report if it wasn't reaffirmed, so why the additional 3 yr wait?

[debee]

The owner still has an obligation. It's just that bk makes it so there's nothing anyone can do about the owner's failure to live up to it (except take and sell the house).

Foreclosure is a public record and lenders do public records check so even if it doesn't appear on the credit report, they find it via other means.

Also, I think (not sure) they ask outright on the loan application about foreclosure.

[debee]

I'm not so sure it's fraud if the house was IIB? The *buy and bail* stuff I found is all in regards to home owners who have not BK'd the first home. Any reliable sources for this info?

The fraud part comes in when you apply for your new mortgage and they ask you what you're going to do with the house you still own. If you say "I'm planning to walk away" then you will not be committing mortgage fraud. You also won't get a new mortgage.

So what people do (in order to get the new mortgage) is say, "I'll be renting it" and then they walk away. That part is fraud. So to be try and stop the fraud, FHA , Fanniemae, etc made new rules.

[debee]

You are assuming everyone that buys another property is renting out the previous property.

I can't speak for the others on this thread, but I know I wasn't assuming anyone was renting. In fact it's right there in my post where it says, "You have to be able to carry both houses, or ...."

[downsized]

Ok, gotcha. Our timeline is actually 3 yrs post BK so we won't necessarily need to go FHA but the questions still remain on conventional apps, I'm sure. We were planning on securing a loan and letting my brother in law take over this house simply because they can't get a mortgage of their own and our house is bigger than their apartment. Doesn't seem like that will fly with a lender even if it's the truth. :/ Still looking into whether or not quit claiming the deed to me will be of any benefit. So much to consider.

[Sweetpea3829]

If a buyer is determined enough, they can usually find a way to obtain financing.

The buy and bail issue is a sticky one. On the one hand, why SHOULD a bank look at a loan that's been discharged past the requisite 2-3 yrs? The borrower's responsibility to that loan is discharged. Let's be honest here, folks...banks are not allowing "pay and say" out of the kindness of their hearts, they're doing it because usually there's no equity in the property and it's more costly for them to reclaim it. But, when we consider that a bank can technically reclaim the property at any time after the loan has been discharged, even if you're current, to me it seems as though a borrower that has chosen to "pay and stay" should be looked at as a borrower that is renting.

Just as a credit card or a vehicle loan that was discharged isn't counted, why should a mortgage that was discharged be counted?

To me, it seems unfair that, if I paid and stayed for three or more years after the bankruptcy, that I wouldn't be allowed to apply for a new mortgage for a new house simply because the house that was discharged three years ago hasn't foreclosed yet. Personally, I think it should really depend on the discharge date of the bankruptcy, not the foreclosure sale date. You look at some of the posters here and they've been discharged for quite some time and out of the house for some time as well and the bank STILL hasn't officially foreclosed. Why should the bank's delay be held against us?

I know that there was a poster on here that was successful at obtaining FHA financing in a similar situation as this. Their bankruptcy attorney provided documentation and court cases that showed their discharged mortgage shouldn't be counted against them in an application for a home loan. They had a real go of it, but were ultimately successful.

But my own experience with it (FHA) was that the moment a lender learned of our discharged, but not yet foreclosed property, they wanted to know what our intentions with it were. And letting it go didn't fly well with them. Even if we WERE current with the mortgage, the lender didn't much care. Actually, interestingly, most of the lenders that I spoke with last fall weren't quite sure WHAT to say to us and exactly how to handle our situation (particularly because our property is a rental property). It was only after we started speaking directly with a loan officer, explained everything in full and he took it to FHA that we got some solid answers. And unfortunately, they were all "no."

Our USDA direct loan is *somewhat* unique in that our discharged property is a multifamily, we were relocating, and our bankruptcy was really not a result of our own financial mismanagement. And we can document that pretty clearly. It helped that our credit scores were sufficiently high enough to put us in the category of applicants that qualify for automatic underwriting in regards to credit worthiness.

debee is right though...we *don't* technically have our loan just yet. But...assuming our property in RI does not foreclose before the closing for the property we are purchasing here in NY, we should be good to go. Oh, and assuming USDA doesn't run out of money again. Which they may very well do.

[Sweetpea3829]

Quit-claiming the deed only worked for us because my husband couldn't apply for a USDA loan with his name on the title for another property. We used the quit-claim to free him from the discharged property. The caveat is that, if there is still a foreclosure, it still goes on his public record because his name is still on the loan.

We still did disclose to USDA the existence of the property even though my husband's name was not on the title. Figured it was the best route considering they'd see it on the RMCR (albeit IIB) anyways.

[debee]

Ok, gotcha. Our timeline is actually 3 yrs post BK so we won't necessarily need to go FHA but the questions still remain on conventional apps, I'm sure. We were planning on securing a loan and letting my brother in law take over this house simply because they can't get a mortgage of their own and our house is bigger than their apartment. Doesn't seem like that will fly with a lender even if it's the truth. :/ Still looking into whether or not quit claiming the deed to me will be of any benefit. So much to consider.

Fannie Mae changed their underwriting even before FHA did so they have rules in place to deter Buy & Bail too. If I were you, I would probably start calling some mortgage brokers and running hypotheticals. Don't give them your SSN yet. Just tell them your credit score, 3 years out of bk, down payment, your equity position, that you want to rent to your brother-in-law, etc and see what your options are.

[screentest]

If a buyer is determined enough, they can usually find a way to obtain financing.

The buy and bail issue is a sticky one. On the one hand, why SHOULD a bank look at a loan that's been discharged past the requisite 2-3 yrs? The borrower's responsibility to that loan is discharged. Let's be honest here, folks...banks are not allowing "pay and say" out of the kindness of their hearts, they're doing it because usually there's no equity in the property and it's more costly for them to reclaim it. But, when we consider that a bank can technically reclaim the property at any time after the loan has been discharged, even if you're current, to me it seems as though a borrower that has chosen to "pay and stay" should be looked at as a borrower that is renting.

Just as a credit card or a vehicle loan that was discharged isn't counted, why should a mortgage that was discharged be counted?

To me, it seems unfair that, if I paid and stayed for three or more years after the bankruptcy, that I wouldn't be allowed to apply for a new mortgage for a new house simply because the house that was discharged three years ago hasn't foreclosed yet. Personally, I think it should really depend on the discharge date of the bankruptcy, not the foreclosure sale date. You look at some of the posters here and they've been discharged for quite some time and out of the house for some time as well and the bank STILL hasn't officially foreclosed. Why should the bank's delay be held against us?

I know that there was a poster on here that was successful at obtaining FHA financing in a similar situation as this. Their bankruptcy attorney provided documentation and court cases that showed their discharged mortgage shouldn't be counted against them in an application for a home loan. They had a real go of it, but were ultimately successful.

But my own experience with it (FHA) was that the moment a lender learned of our discharged, but not yet foreclosed property, they wanted to know what our intentions with it were. And letting it go didn't fly well with them. Even if we WERE current with the mortgage, the lender didn't much care. Actually, interestingly, most of the lenders that I spoke with last fall weren't quite sure WHAT to say to us and exactly how to handle our situation (particularly because our property is a rental property). It was only after we started speaking directly with a loan officer, explained everything in full and he took it to FHA that we got some solid answers. And unfortunately, they were all "no."

Our USDA direct loan is *somewhat* unique in that our discharged property is a multifamily, we were relocating, and our bankruptcy was really not a result of our own financial mismanagement. And we can document that pretty clearly. It helped that our credit scores were sufficiently high enough to put us in the category of applicants that qualify for automatic underwriting in regards to credit worthiness.

debee is right though...we *don't* technically have our loan just yet. But...assuming our property in RI does not foreclose before the closing for the property we are purchasing here in NY, we should be good to go. Oh, and assuming USDA doesn't run out of money again. Which they may very well do.

Couldn't agree with you more on this as this is exactly howIi feel about the situation but our good old friends on Wall Street don't care what makes sense. Its what makes money and that is there only focus.

I am not in an big hurry to repurchase a home anyway as I have no desire to become a slave to a banker again and wear the ball and chain of debt.

Just looking someday down the road....way down the road.

ST

[BK2PD]

Wrong again, Mortgage fraud is when you inflate your income by including your previous home as a rental. There is no such thing about mortgage fraud if you decide to walk away after you told the loan officer you will have it rented. Check your facts first before you start spouting off.

[GettingGoing]

Wrong again, Mortgage fraud is when you inflate your income by including your previous home as a rental. There is no such thing about mortgage fraud if you decide to walk away after you told the loan officer you will have it rented. Check your facts first before you start spouting off.

I don't think anyone here wants to debate the whole mortgage fraud issue. The majority of the people here check these threads on a daily basis just waiting for someone to post that they were successfully able to purchase a new home without having to wait for their bk'ed mortgage and foreclosure to season. My wife and I are coming up on 2 years post bk7 and have been renting an excellent house in an excellent school system for our children that we would like to purchase. The owners tried to see the house but were unable to sell it so they decided to rent it out. Our problem is that Wells Fargo has just decided to finally foreclose on our FHA bk7 home so we are just starting our waiting period even though we both have 700+ ficos, perfect post discharge payment history and excellent job history. The banks don't care that we have worked hard to fix our financial issues or that our bk7 was caused by circumstances beyond our control.

/rant

[CCsAreEvil]

Our problem is that Wells Fargo has just decided to finally foreclose on our FHA bk7 home so we are just starting our waiting period even though we both have 700+ ficos, perfect post discharge payment history and excellent job history.

Hmm.. so, the question (again) is whether the foreclosure is going to show up on your credit report even though the mortgage loan has been discharged in BK. I'm pretty sure even up to today, I haven't read any concrete information that this does or does not happen. And if so, doesn't this make your credit take another big "hit" and requiring more rebuilding over another 3 years? Or, maybe I'm missing something.

[mijd]

Hmm.. so, the question (again) is whether the foreclosure is going to show up on your credit report even though the mortgage loan has been discharged in BK. I'm pretty sure even up to today, I haven't read any concrete information that this does or does not happen. And if so, doesn't this make your credit take another big "hit" and requiring more rebuilding over another 3 years? Or, maybe I'm missing something.

IMO, I believe a foreclosure should not show on your CR if the house is a stay and pay as it would show the mortgage "discharged in bankruptcy". However, if the mortage was reaffirmed it seems the CR would take the hit. Then again I'm not an expert or a lawyer.

[OutofTime]

I'm in the process of prequalifying for a new home while still in my pay and stay. With my wife now working plus a 750+ credit I hope we can get approved. I will also walk away since this house is worth less than owed and was not reaffirmed. I'll update my situation as it changes. Anyone here have luck, its been a yr since op on this subject?