Improper Loan Modification

[qwerty64]

This is bizarre. We filed joint Chapter 7 in January 2008. We discharged in April 2008. We did NOT reaffirm on the mortgages (1st and 2nd). As the BK was nearing discharge we filed for divorce and advised the attorneys to surrender the house in the BK.

BK discharged and I moved out. My ex decided to exploit the situation to live rent free until the bank kicked her out. The lender went insolvent during the 2008 mortgage meltdown and did not foreclose. Nearly 2 years later another bank acquired the former assets of the insolvent bank and they started mailing my ex foreclosure notices.

So my ex lived rent free for 2 years. When the new bank came after her she worked out a loan modification (they tacked all the past due payments onto the new mortgage balance) even though the house was supposed to be surrendered according to both BK documents and the divorce decree.

So here I am, 4 years removed from my discharge, and having rebuilt my credit to a reasonable level. I recently went out to try to buy a home again. My loan application was denied because my old home neither foreclosed nor reaffirmed.

My question: Was it improper for a bank to write a loan mod without my signature on a note that had previously been a joint obligation?

I did sign a quitclaim during the divorce proceeding (under advice for my attorney) thinking that this would help remove me from the old loan if my ex kept the place.

At no point have I ever signed any document to reaffirm or to modify the old mortgage. I'm no lawyer but I would guess my ex technically "reaffirmed" by signing documents for a loan mod.

I feel screwed. My ex got to keep a house that was supposed to be surrendered in BK. The lender should have foreclosed but instead they wrote a loan mod. If that's not bad enough, they did it all without my signature yet they admit they reviewed a copy of the divorce decree while underwriting the loan mod.

I can't buy a home now. Is it me or was this loan mod improper? How can a bank modify a joint note by getting signatures from only one party? And if I signed my life away by granting a quitclaim what about the 2nd mortgage holder from 2008? Shouldn't they have to consent to the loan mod as it also affected their subordinated debt?

[LadyInTheRed]

It is not possible to reaffirm a loan after it is discharged in bankruptcy. So, you have no personal liability for the loan, even after modification. Either does your ex. The modification is really just an agreement by the bank to not foreclose if your ex makes the modified payments as agreed.

As far as getting a new mortgage, you should work with the underwriting department of a prospective lender to see if things can be sorted out. If you recorded a quitclaim deed, I think that should help. An experienced mortgage broker may be able to help.

[justbroke]

There is definitely no reaffirmation here, just as LadyInTheRed points out. No debt can be reaffirmed after entry of the discharge (period). A modification is not new debt, so this isn't a new loan. Perhaps you can, as Lady suggests, work with underwriting and you may be able to get a letter from the old bank showing that you never modified the mortgage, that it was QC'd to the ex-spouse, and that you had no connection with the property in over 2 years.

That may or may not work. I am really interested to see how this works out. You really only recourse is to go to the family court for a violation of the decree, but that doesn't solve your immediate problem.

[tobee43]

maybe i missed something here, but if the original mortgage was listed on the bk, wasn't the amount of the mortgage then listed as IIB after your discharge? i know we surrendered as well, we still have not had the property foreclosed on, and it is listed as IIB on our credit reports.

so, if you get divorced and your wife does something and signs a modification AFTER you are no longer married, i cannot see how you can be held responsible for anything to do with the old home. in as much as the quit claim deed, i'm not certain that would really hold up, as many people feel they are a quick relief to a situation of property transfer when in many cases they are not.

lady and jb give excellent advise about working with a broker that can help you, however, the first thing i would address is the credit reporting agencies that are handing out this information. i know it may be some work on your part, but maybe you can get this all cleared up.

best of luck!

[LadyInTheRed]

in as much as the quit claim deed, i'm not certain that would really hold up, as many people feel they are a quick relief to a situation of property transfer when in many cases they are not.

Usually when it's discussed here, people want to quitclaim to the bank so they can get their name off title. The quitclaim is only valid if it is accepted by the party to whom the property is quitclaimed. In the OP's case, if he quitclaimed his interest in the property to his ex and his ex "accepted" the property, it's a valid transfer of whatever interest he had in the property. What constitutes acceptance will depend on state law. But, if the house was part of the marital settlement agreement or judgment, I'd be petty confident that the settlement agreement/judgment is evidence of acceptance.

[tobee43]

Usually when it's discussed here, people want to quitclaim to the bank so they can get their name off title. The quitclaim is only valid if it is accepted by the party to whom the property is quitclaimed. In the OP's case, if he quitclaimed his interest in the property to his ex and his ex "accepted" the property, it's a valid transfer of whatever interest he had in the property. What constitutes acceptance will depend on state law. But, if the house was part of the marital settlement agreement or judgment, I'd be petty confident that the settlement agreement/judgment is evidence of acceptance.

ha! just always the devils advocate here. i hear you on this one, and most likely i agree it may be fine. but in most cases it depends on the date of the actual filing of that deed with respect to any time restrictions or obligations set forth in the court ordered action, as you point out, this may vary from state to state. family law is not me

with respect to quitclaim during or just prior to a bk within a two year period prior to the actual filing, we know we must list that transaction on the petition and it does and will send up red flags. even if it's for the sole purpose to get one's name off the title, which usually is the only point to draw up such an instrument in the first place.

the problem being sometimes it does not delineate whom is the actual and true responsible party or owner, many times that ends up in court where the validity is then put before a justice and a determination is then made.

[LadyInTheRed]

with respect to quitclaim during or just prior to a bk within a two year period prior to the actual filing, we know we must list that transaction on the petition and it does and will send up red flags. even if it's for the sole purpose to get one's name off the title, which usually is the only point to draw up such an instrument in the first place.

It's good to point that out. I get the impression that the OP signed the quitclaim a while ago, but it isn't really clear when.

[tobee43]

It's good to point that out. I get the impression that the OP signed the quitclaim a while ago, but it isn't really clear when.

right, OP does not state when exactly that quit claim deed was executed, filed/recorded etc. i would go back to the atty who had the quit claim deed drawn up and have them explain it's significance?