Help! Mortgage is going up and I don't know what to do..

[STEPH1079]

My husband and I have been in a Ch.13 for 10 months. We have an ARM on our house, and our payments will be going up starting in September. They will adjust every six months. Right now our interest rate is 8.75%. I was looking over our paperwork and it said for the first change, it will not be over 11.75% but not under 8.75%. It also said that our interest rate would never be below 8.75% or above 14.75%. I guess that is what they call a cap.
I don't know what to do. Our mortgage payment is high enough as it is, there is no way we can manage it going up even higher.
Our Ch.13 is for 3 years. Do we tough it out and wait until our BK is over, and then re-finance? I was told that even when we are discharged from the Ch.13, we will probably have to wait another 12-24 months before refinancing. Is this true?
Any advice is appreciated. Thanks!

[13inOR]

I would advise applying through your attorney for a modified plan asap. That is preferable to not being able to make your payments and have the plan dismissed, or to lose your home.

[Minnymouth]

Is your mortgage payment part of your Chapter 13 payment plan or paid separately outside the plan?

If it is part of your payment plant you can request the Trustee make an adustment in your Chapter 13 payment plan to accommodate the increase in the mortgage payments. Also they can extend your plan a year or two.

Contact you attorney that handles your plan and see what can be worked out and approved by the Trustee.

Keep us posted.

[STEPH1079]

Our mortgage is paid outside of the plan. Does that mean we won't be able to ammened our plan?

[Ch13experts]

There is hope...

Steph1079,
You can still modify your plan by having your attorney explain to the trustee what is going on with your mortgage. I wouldn't stop there however. I'd call my lender and ask them to do a note modification.
A note modification is where they change the terms of your loan for some period of time. For instance they can extend your fixed interest payment for 3 more years to bridge the time you are in BK. That's a suggestion.
I would contact a mortgage broker and see if they can be of help. You may be able to buy out your bankruptcy with a new loan. Also, call the trustee and ask the escrow department what their philosophy is on buyouts before the 3rd year. Ask if you must pay 100% of your plan or if you can pay your pot plan. Once you have this information, you can make a decision that will be in your best interest.
Loans exist out there to help people in your situation; the key is finding someone who will not take advantage of your desperation. Check out www.NARLO.com for a loan officer in your area who might be more responsible than just someone out of the newspaper.

Good luck,

[SinkingFast]

Sounds like you've gotten some good advice toward finding a solution to the problem.

Hope everything works out for you. Remember, your attny can ammend your payment plan to adjust for the increas in mortgage costs. But sounds like you may have other options available as well.

Keep us posted.

[13inOR]

Yes,like was mentioned before, the fact that our mortgage is paid outside the plan doesn't affect your ability to modify.

Also, as a side note that might help you down the road, it wont take you 12-24 months to refi after you are done, you can do it immediately and the banks look at your payments to your trustee as part of your credit history and if those are all made on time, that goes a long way towards getting you approved!
I thought it was great that they took that into consideration, even though it doesnt show on your credit report.
good luck!

[STEPH1079]

Thanks for all of the great advice. I will definitely talk to my attorney. I am also going to see if they can do a note modification. I didn't even know that existed. Wow!
I am also glad to see that we will be able to re-finance right after we are discharged. From what I have read it looked like they want people to wait another 1-2 years. Ouch!!
Thanks again everyone, I will keep you posted.

[STEPH1079]

One other question. Do I need to talk to my attorney to get approval before asking my lender to do a note modification?

[STEPH1079]

Here's the latest:

I just talked to my attorney and he said that we should try to "tough it out."
We would be hard pressed to find a lender that will refinance us, since we will just be a year into the BK in May/June. We bought our house in 2004 and honestly I doubt we have enough equity to pay off the plan, if we did find someone to refinance us. Not only that, but the rate would still be high as well.
I am going to try to see if we can get our mortgage loan modified. If we can keep the interest rate we have now, for another 2 and half years, that would be great. By then we will be discharged from the 13 and can refinance without having to pay it back, and hopefully with a better interest rate.