Forbearance, Foreclosure & Chapter 13 - Which way to go?

[dasmom]

House has been in foreclosure for approx 2 years. Have worked with at least 3 HUD-approved agencies and 3 attorneys to try to get a modification. No modification at this time, but have been offered a very affordable 3 month forbearance with no guarantee of being considered or approved for a modification even after making 3 payments as agreed. No idea of what modified payment would be if it was approved after I make the 3 payments. Bank states that the investor has not made a decision about potential modification offer.

Moved out of the house a few months ago because I was planning Chapter 7 and walking away. My other debts are medical bills, back state and federal taxes, as well as student loans. I pass the median income test for Chapter 7.

My rental apartment is not working out because of new health issues I have developed. I can move back into house, make 3 forbearance payments and see if loan is modified. I think the landlord will work with me on letting me out of the lease for the apartment because of my health issues.

I made 3 forbearance payments 2 years ago and bank did not modify loan but filed for foreclosure as soon as I made the 3rd payment. House has been in foreclosure since then. Mortgage amount owed including late fees, finance charges now almost equal court appraisal amount.

I now have legal fees of $10 K (trying to fight foreclosure) in addition to prior debts.

I'm thinking of taking a chance on the bank finally making a decent modification offer and moving back into the house although there is no equity.

Could file Chapter 13 if no modification is offered after 3 month forbearance payments are made, but then would have at least $750 payment under 60 month plan and would have to pay the bankruptcy attorney another $2 K before the Chapter 13 could be filed. Would be a tight budget but doable (monthly payment to trustee and attorney fee).

I am leaning towards moving back into the house.

Feedback or advice on this situation would be helpful.

Thanks!

House has been in foreclosure for approx 2 years. Have worked with at least 3 HUD-approved agencies and 3 attorneys to try to get a modification. No modification at this time, but have been offered a very affordable 3 month forbearance with no guarantee of being considered or approved for a modification even after making 3 payments as agreed. No idea of what modified payment would be if it was approved after I make the 3 payments. Bank states that the investor has not made a decision about potential modification offer.

Moved out of the house a few months ago because I was planning Chapter 7 and walking away. My other debts are medical bills, back state and federal taxes, as well as student loans. I pass the median income test for Chapter 7.

My rental apartment is not working out because of new health issues I have developed. I can move back into house, make 3 forbearance payments and see if loan is modified. I think the landlord will work with me on letting me out of the lease for the apartment because of my health issues.

I made 3 forbearance payments 2 years ago and bank did not modify loan but filed for foreclosure as soon as I made the 3rd payment. House has been in foreclosure since then. Mortgage amount owed including late fees, finance charges now almost equal court appraisal amount.

I now have legal fees of $10 K (trying to fight foreclosure) in addition to prior debts.

I'm thinking of taking a chance on the bank finally making a decent modification offer and moving back into the house although there is no equity.

Could file Chapter 13 if no modification is offered after 3 month forbearance payments are made, but then would have at least $750 payment under 60 month plan and would have to pay the bankruptcy attorney another $2 K before the Chapter 13 could be filed. Would be a tight budget but doable (monthly payment to trustee and attorney fee).

I am leaning towards moving back into the house.

Feedback or advice on this situation would be helpful.

I posted this thread elsewhere, but didn't get any responses. Hope this is the right area.

Thanks!

[newbie2]

I don't know what you owe on the house (especially with 2 years of no payments) and what it is worth, but here is my 2 cents:

You've had 3 attorneys try for modifications on the mortgage and no one has been successful. You racked up legal fees trying this and the only thing that the mortgage company will do now is for three trial payments with no promise of a permanent modification. With the past history of your mortgage lender not being open to a permanent modification despite 3 separate attempts I personally would not take the risk.

If you want out of your apartment because of health issues then perhaps look for another place to live that makes you comfortable.

Good luck to you on whatever you decide to do.

Edit: Just re-read your post and saw that you probably don't have any equity in the house but are not seriously upside down on it.

[Flamingo]

It sounds to me like you are in over your head and beating a dead horse...first, you just moved out of the house a few months ago that you have not made payments on in two years. Have you saved any money during that time by not making mortgage and/or other payments? You only have paid a few months of rent. Why were the modifications not approved/accepted....you have incurred more debt during this time yet want to move back into the house which probably on top of everything else needs some repairs/maintenance...do you have funds in place to cover all that? If you move back in and do the forbearance there still is no guarantee - what are your plans if that doesn't work? Do you have any family that you can move in with during this time until you get this all straightened out or that can help?

I think you want to keep your house and are having a hard time making the decision that you really cannot afford to keep it. Sometimes it is really difficult to just walk away with reality staring one right in the face.

[lorrieduke]

What is the difference between forbearance and forclosure? I'm confused because to me it seems like a forebarance is like a loan modification but yet its called a forebarance. I don't understand.

[Pandora]

if you qualify for Ch. 7 via means test - then why are you allocating any $ for payback, unless your plan is to file Ch. 13 instead to keep the house? If plan is to keep the house and do a 13, then what does $750 payment you're coming up with include...? How far behind are you in payments if you've been in foreclosure for 2 years - it has to be more than 3 months, correct? Does that include all arrears for the mortgage, trustee fee, attorney fee, all other debts, as well as the actual mortgage payment itself? If it doesnt, then you need to redo the numbers to include everything, and then make the determination.

For us, we qualify for Ch. 7 however given we want to keep our home, we opted for Ch. 13 in order to strip our 2nd - no arrears and no other bills except for our property taxes; our 1st mortgage is being paid outside the plan as well.

[justbroke]

What is the difference between forbearance and forclosure? I'm confused because to me it seems like a forebarance is like a loan modification but yet its called a forebarance. I don't understand.

A forbearance is where the lender will temporarily forget that you are past due and continue to take your current payments. With almost all installment loans, once you become past due, the only way you could make a payment is to pay the past due amount(s) plus the current amount. otherwise they won't accept what they consider a "partial" payment. A forbearance removes that restriction and allows you to "skip" the missed payments and begin payment the full "current" payment amount.

Unfortunately, a forbearance isn't permanent, and eventually they will want the past due amounts! This is why it's important to get a "modification" when the forbearance is complete. The "modification" is what will modify your loan to actually be current. The "modification" can change the terms and duration of the loan, which can include principal reduction (unlikely), APR decrease (possible), and adding the arrears (missed payments) to the loan (likely).

Please know that when the add the arrears to the loan, they usually re-amortize the loan as well, so your payment usually goes up, unless you're getting an APR adjustment as well. Some say that they "put the late payments at the end of the loan", but this usually isn't true. They actually add the late payments to the principal balance and re-amortize!

I think all this forbearance and "trial" modification junk is just a way for the bank (or servicer) to earn more money while the foreclosure is inevitable! Some do the "trial" modifications, collect months of additional principal and later deny the modification -- knowing from the start that they would deny it anyhow.

I would never spend more than the costs of one or two months of mortgage payments to fight foreclosure... as a delay tactic. Now, in your particular case, 2 years of free rent is worth $10K in most situations (especially mine since I pay about that $10K in two months). Always make sure your strategy is financial viable.

I am leaning towards moving back into the house.

I did this during my Chapter 13 myself.

Feedback or advice on this situation would be helpful.

The Chapter 13 route could be a good option if the home is not underwater, or you can strip an "unsecured" 2nd mortgage, and it is financially worth it to stay in the home.

[SMinGA]

Maybe in some situations, but not all.

I am on the tail end of an 'in house' modification with Bank of America. Here is my 'deal':

1. It brings my loan current: adds the interest that I should have paid over 6 missed payments to my principal

2. It reduces my rate, was @ 6.95%. Now will have 3.875% for 2 years, then 4.375% for 2 years, and as of July 1st 2014 it will become 4.75% and stay there. Original loan term was 30 years, that remains the same.

They only amortized the missed interest. The missed principal, well that part is already on the principal balance outstanding. Instead of adding to my principal to make up my missed escrow payments, they've increased my escrow payment slightly going forward. They tend to audit that account & payment amount once a year anyhow.

For my situation, I had to show Bank of America that I could manage my mortgage payment. At one point there were going to deny me for expenses exceeding income - but they were miscalculating the tip income on my 2nd job. (They were looking at the net check, and while my tips show in the check detail they are not in the net paycheck since I've already received them...)

I think all this forbearance and "trial" modification junk is just a way for the bank (or servicer) to earn more money while the foreclosure is inevitable! Some do the "trial" modifications, collect months of additional principal and later deny the modification -- knowing from the start that they would deny it anyhow.

Ps... No 'trial payments' or 'months of modification'. I think that red tape is mostly with the federal mods. My beginning to end was about 6 weeks. Though waiting on FedEx to deliver my signed docs back to BofA. Was send Wed. 'overnight' but it seems that doesn't mean what I expected it to.

[Pandora]

SMinGA

Bank of America is notorious for revoking their in-house modifications, even months later, so be very careful. Not very many have gotten the returned signed permanent modification documents back from the bank either, and even those that do, have found that they've been revoked months down the line.

I just read where you are planning to file 13 later this year; make sure you have that signed notarized document back from the bank before you proceed with your 13. We had to wait for ours in order to make the new terms stick for our 13.

Good luck to you. What is loan safe?

[dasmom]

SMinGA

I just read where you are planning to file 13 later this year; make sure you have that signed notarized document back from the bank before you proceed with your 13. We had to wait for ours in order to make the new terms stick for our 13.

Does that mean that if I file the Chapter 13 during the forbearance period, the forbearance amount remains the current monthly payment during the 60 months in addition to the monthly payment made to the trustee?

Example:

Forbearance payment is 1000
Trustee payment is 800

Will I pay 1800 for the life of the Chapter 13?

Thanks.

[Pandora]

Does that mean that if I file the Chapter 13 during the forbearance period, the forbearance amount remains the current monthly payment during the 60 months in addition to the monthly payment made to the trustee?

Example:

Forbearance payment is 1000
Trustee payment is 800

Will I pay 1800 for the life of the Chapter 13?

Thanks.

No - forbearance is temporary as you've already noted (only 3 months) - it will revert back to your old payment once the forbearance is up, with whatever terms you had previously.

Question is and remains to be answered - why are you trying to hold onto the house when its been in foreclosure for 2 years? How far underwater are you? If you havent made a payment in 2 years, except for these 3 months of forebearance - then your arrears must be astronomical. Are you certain you could even afford to repay all of your secured/unsecured in a Ch. 13?

[dasmom]

@Pandora,

Thanks for responding. My house is not underwater at this time. Yes, I can afford the Chapter 13 payment as explained to me by my attorney. I am earning significantly more money now than when the house went into foreclosure.

Around the time of the move to the apartment my child experienced a very traumatic event that led to the death and serious injury of several of my child's classmates. The accident and being in the apartment has resulted in my child becoming clinically depressed. Going back to the old neighborhood with childhood friends would be a positive change for my child.

Moving to another apartment will increase expenses to approximately the same as staying in the house and going through Chapter 13.

I think having things be as normal as possible for my child will help with recovering from the trauma.

Thanks,

dasmom