May I buy a home post chap 7, then walk away from non-reaffirmed mortgage

[tobee43]

when you go to purchase another home as freddy points out it's public records. that's what title companies do, run checks on you and all legal actions etc.

[vlbisme]

I think I finally understand how the non reaffirmed mortgage and HELOC stand after bk. If I am correct, the mortgages that are listed as discharged could be foreclosed upon at any time if the lender wanted to but if you continue to pay and with the bad market they would most likely not. Does that mean if the values increase they can forclose on a current mortgage because your are in default by filing bk even if you never paid late?

[LadyInTheRed]

I think I finally understand how the non reaffirmed mortgage and HELOC stand after bk. If I am correct, the mortgages that are listed as discharged could be foreclosed upon at any time if the lender wanted to but if you continue to pay and with the bad market they would most likely not. Does that mean if the values increase they can forclose on a current mortgage because your are in default by filing bk even if you never paid late?

It depends on what is allowed by state law and whether a discharge of the debt in bankruptcy is an event of default under the loan agreement.

[hopejones]

We moved into our new home 5 months ago using a VA loan. Our CH7 was discharged in March 2009. The banks told us to wait until March 2011 (2 years) to apply for a VA Loan....which we did. One of the conditions of us buying a new home was that we had to rent out the 1st one that was IIB. We found a renter, who signed an official rental agreement & gave us a deposit for rent on our IIB home before our new mortgage on the new house closed in July 2011. You also should have a good reason for moving. We moved into a larger home & told the banks that we were doing so because our family size was increasing. Go to Google & do a search on "Buy & Bail". We essentially did a "buy & bail" but, we rented the house out. We did applications with about 6 different banks...4 turned us down outright....2 were willing to work with us. If you have been keeping your credit blemish free since the BK, I say apply for the mortgage. It is not going to hurt to apply. Just make sure you research all you can & have all your "ducks in a row" 1st.

[tobee43]

We moved into our new home 5 months ago using a VA loan. Our CH7 was discharged in March 2009. The banks told us to wait until March 2011 (2 years) to apply for a VA Loan....which we did. One of the conditions of us buying a new home was that we had to rent out the 1st one that was IIB. We found a renter, who signed an official rental agreement & gave us a deposit for rent on our IIB home before our new mortgage on the new house closed in July 2011. You also should have a good reason for moving. We moved into a larger home & told the banks that we were doing so because our family size was increasing. Go to Google & do a search on "Buy & Bail". We essentially did a "buy & bail" but, we rented the house out.

good for you!!!!!!!!!!!

GREAT information about the buy and bail!!!

[lss177]

Ok, making sure I understand the "rules"...

Live in Georgia, Ch 7 discharged 7/11, did not re-affirm my primary home loan, still living in that home and current on the mortgage.

If I want to "bail" on current house and it forecloses, does the foreclosure appear as a legal "judgment" (on future credit report) since I no longer have the non-re-affirmed mortgage appearing on my current credit report? Then I'd technically have to wait some time period (> two years) to get a conventional mortgage on a different property?

Not sure of the connection between my non-re-affirmed mortgage and the legalities of a foreclosure post-discharge...

[mountanddo]

We moved into our new home 5 months ago using a VA loan. Our CH7 was discharged in March 2009. The banks told us to wait until March 2011 (2 years) to apply for a VA Loan....which we did. One of the conditions of us buying a new home was that we had to rent out the 1st one that was IIB. We found a renter, who signed an official rental agreement & gave us a deposit for rent on our IIB home before our new mortgage on the new house closed in July 2011. You also should have a good reason for moving. We moved into a larger home & told the banks that we were doing so because our family size was increasing. Go to Google & do a search on "Buy & Bail". We essentially did a "buy & bail" but, we rented the house out. We did applications with about 6 different banks...4 turned us down outright....2 were willing to work with us. If you have been keeping your credit blemish free since the BK, I say apply for the mortgage. It is not going to hurt to apply. Just make sure you research all you can & have all your "ducks in a row" 1st.

So now what happens if the renters leave? Are you obligated to keep that house rented? Will they foreclose your current house if say they left and you just did nothing about it? Just curious.

[sadandconfus]

So now what happens if the renters leave? Are you obligated to keep that house rented? Will they foreclose your current house if say they left and you just did nothing about it? Just curious.

I am also curious, I'm in a similiar situation. I'm underwater about $92,000. I received a loan modification after the bK7 and did not reaffirm. Did the rental agreement cover the whole mortgage for your first house?

[JackBondLove]

It seems to me that paying on and living in a non-reaffirmed mortgage basically means the bank is renting the "homeowner" the property as a rent-to-buy situation, with the "homeowner" having the ability to stop the rent payments at any time - as well as the bank evicting the "homeowner", even if the "homeowner" has been making the payments. Obviously since the bank cannot make nearly the cash flow from a property on the market as the original "homeowner" paying the note on an overpriced home (and at higher pre-recession interest rates), banks would love for the "homeowner" to just continue making the payments.

Logically, a mortgagee for another home should consider the old "mortgage" as what it really is - RENT! With that said, mortgagees don't like to lend money to anyone that just stops making payments (or gets a court order - i.e., a BK - to allow him to stop making payments), to say nothing of lenders in general renting to folks just coming out of a BK.

It seems to me that since there is no contract anymore obligating you to pay this "rent", it would not even need to be listed as an expense or a concern to the new lender.

[mountanddo]

It seems to me that since there is no contract anymore obligating you to pay this "rent", it would not even need to be listed as an expense or a concern to the new lender.

That doesn't even make sense to me. Why would you not be obligated to list your "rent" as you call it when you are applying for a home mortgage? Even if you don't re-affirm your mortgage and just stay and pay if you don't "pay" you get foreclosed on and it shows up on your credit, right? I don't know a lot about mortgages in general and even less about them in bankruptcy but I just can't wrap my mind around the lender not caring that you are currently in a house whether it's considered rent or not. They take a look at what you can afford for a mortage and what they are willing to lend you. If you just don't tell them about your rent you would be approved for a lot more mortgage than you can afford. I actually think mortgage lenders approve people for more than they can afford generally anyway but that's a different topic.

My question was that they got a new mortgage because they were able to rent out their first house for an amount that would cover any expenses on that first house. If the renters leave and you just abandon that property can they come back and foreclose on the new house you bought. It seems to me that would be a way to get rid of the first house, get into a second house and live happily ever after. I can't imagine that it works that way and somehow it seems pretty shady.

[pcn]

My question was that they got a new mortgage because they were able to rent out their first house for an amount that would cover any expenses on that first house. If the renters leave and you just abandon that property can they come back and foreclose on the new house you bought. It seems to me that would be a way to get rid of the first house, get into a second house and live happily ever after. I can't imagine that it works that way and somehow it seems pretty shady.

Didn't you just define "Buy and Bail"?

[mountanddo]

Didn't you just define "Buy and Bail"?

I think I did but I thought you were not allowed to do that any more. I guess you have to understand that from someone who hasn't ever been in this situation it just seems too good to be true. Why would you NOT do this? and it seems illegal to me but as I said I'm pretty naive when it comes to stuff like this. Obviously it's a practice that is done often and acceptable.

[pcn]

I know exactly what you mean. Ethics and morals seemingly have no place in the banking or real estate worlds. If I had know then what I know know... Somehow we have to make the shift from absolute ethics to situational ethics, and I HATE the concept of situational ethics. But there are choices that come down to what is best for your family and what is best for those who have no interest in their well being (banks). If I had been out to "optimize" my bk I would have NOT paid off our vehicles, but instead maximized our unsecured credit to pay off student loans and moved assets to more protected places. But like most people, we ended up here with no knowledge of how bk works, only trying to stay afloat.

[LadyInTheRed]

I think I did but I thought you were not allowed to do that any more. I guess you have to understand that from someone who hasn't ever been in this situation it just seems too good to be true. Why would you NOT do this? and it seems illegal to me but as I said I'm pretty naive when it comes to stuff like this. Obviously it's a practice that is done often and acceptable.

What about it seems illegal? You own a home, rent it and tell the bank you rent it. The bank decides that with a tenant you are able to pay both mortgages and gives you the mortgage on the new home. Then your renter leaves making you unable to pay the mortgage on the first home. So, you default and lose the first home. They could only foreclose on the second home if it were collateral for the loan on the first home. What you describe really isn't a "buy and bail" as I understand the term. "Buy and bail" implies you intended to bail at the time you bought. If you know at the time you apply for the mortgage on the second home that the renter plans to leave and you don't disclose that to the mortgage company, you might be committing fraud. But, there is nothing illegal about walking away after the renter leaves because you can no longer afford to pay. You breached the contract and the lender has remedies under the contract and the law.

[mountanddo]

What about it seems illegal? You own a home, rent it and tell the bank you rent it. The bank decides that with a tenant you are able to pay both mortgages and gives you the mortgage on the new home. Then your renter leaves making you unable to pay the mortgage on the first home. So, you default and lose the first home. They could only foreclose on the second home if it were collateral for the loan on the first home. What you describe really isn't a "buy and bail" as I understand the term. "Buy and bail" implies you intended to bail at the time you bought. If you know at the time you apply for the mortgage on the second home that the renter plans to leave and you don't disclose that to the mortgage company, you might be committing fraud. But, there is nothing illegal about walking away after the renter leaves because you can no longer afford to pay. You breached the contract and the lender has remedies under the contract and the law.

well ok, not illegal -bad choice of words but....who wouldn't do this? So you get crappy renters that bail out on you after the first couple of months. You don't lose anything by doing this. You have a nice new house and get to get rid of the old one. Since it was already discharged in your BK there is no financial loss on your end. I'm guessing a foreclosure will still end up on your credit report but you already have a new house what really does that matter.