Mortgage Reaffirmation

[metsno1]

We've recently received our chapter 7 discharge. It was a long process, but well worth the time and effort. We can breath again without difficulty-at least we could until today!

We came across some information today that has upset us, and we're hoping for some advice/reassurance.

During the entire process of filing, we were crystal clear with our attorney about our desire to reaffirm and continue to pay our mortgage. In reviewing all of our documents that we filed with the court/trustee, we indicate our desire to reaffirm.

The bottom line is that now, many months after the fact, in conversation with our mortgage lender, we have found out that our mortgage was not, in fact, reaffirmed. We were stunned.

Called the lawyer today, and spoke to the paralegals who handled most of the paperwork on our case. They said that it was essentially SOP for some mortgage companies to NOT send the reaffirmation documents, and that they (the lawyers office) couldn't make them do so. They said that essentially we have nothing to worry about as long as we continue to make our mortgage payments. We were never informed that any of this had occurred, and were always under the impression that everything had proceeded normally.

Our issue is that now, without a formal reaffirmation, we are essentially at the mercy of Chase to "play nice," and allow us to continue to make the payments without interference. The paralegals at the office wanted to spin it the other way around-that Chase is essentially at our mercy because if we default, they can't come after us for the outstanding balance on the loan.

We think that's ridiculous. At no time during the process was it ever made clear to us that we were doing ANYTHING but reaffirming our mortgage, along with a small second mortgage and a car loan. With this new information, we feel like we now have exposed ourselves to the risk of losing our home if Chase decides they want to come and take it.

What is the real-world risk of that happening if we continue to make all of our scheduled payments (which we will, of course, be doing)?

How aggressive should we be with our lawyer in getting this resolved? What avenues of resolution might be available to us?

Thanks very much for any help/advice/reassurance!

[kiddles]

Real world - Chase doesn't want your house. As long as you pay on time, they'll pretty much ignore you.

BUT - if you are late or miss even one payment - they can foreclose.

[metsno1]

Real world - Chase doesn't want your house. As long as you pay on time, they'll pretty much ignore you.

BUT - if you are late or miss even one payment - they can foreclose.

That's kind of what I thought. And part of the reason that we continually stated that we wanted to reaffirm was to eliminate the need to be "perfect" payers. Don't get me wrong. We invariably pay our mortgage on time, and of course plan to do so moving forward.

But the thought that if something happens that's out of our control (I don't know.....we both get in a car accident, something like that), and we're a few days late on a payment, and then Chase comes in and decides to foreclose-well, that's too much risk for us!! And it's specifically why we went through the process of reaffirmation with our lawyer, who NEVER indicated that anything was wrong or that anything didn't occur.

At this point, I feel deceived by our lawyer, and I'd like some advice on how aggressive to be in trying to get him to remediate and fix the situation.

Thanks!

[JasonK94Z]

There is nothing you or your lawyer can do to make them sign the reaffirmation! They don't have to.
Countrywide (our mortgage lender) doesn't bother with them either. My atytorney informed us that its standard affair for mortgage companies to ignore reaffirmation agreements. So don't worry!
Its to your advantage anyways. You can walk out of your house anytime with no further obligations. Pretty good deal to me since the housing market is going down the crapper, especially if you have a 2nd mortgage and can't sell the house for what you owe, or your upside down in your mortgage due to dropping house values.

PS - On most mortgages, you can be up to 15 days late on your payment with no penalty. Due the 1st, but have till the 15th to pay.

[monkatom]

I hear many people say it's to you're advantage bt what if property prices go sky high in several years and you miss a paymnet and teh lender decides it's good business sense to step in and foreclose a sthey could now make money off selling the house?

As a side question could you a year or two after chp 7 BK refinance a mortgage as long as the rate was good then would that remove the problem of potential foreclosure?
Thanks

[metsno1]

There is nothing you or your lawyer can do to make them sign the reaffirmation! They don't have to.

I get that. And I recognize that we're now "after the fact." What I'm wondering is if, down the road, in the event of a problem-who is responsible for dealing with the resulting mess? It seems to me that our lawyer, who did NOT inform us of any of this during the process, should bear the brunt of responsibility.

Had we known that Chase did not choose to reaffirm the mortgage during the process, we would have asked for a delay in our hearing until we could pursue it further. Since our lawyer NEVER informed us of the fact that we hadn't received all of the necessary documentation, we never had the opportunity to make an informed decision. To us, the potential for foreclosure is such a significantly unsettling threat, we might have reconsidered our decision to file at that time.

Of course, we just found all this out today, so we might be feeling a bit more emotional about it than is really warranted.

[yoyoma51]

My wife and I may be in a similar situation. We filed on Ch. 7 on 11/27, wishing to reaffirm our 1st & 2nd mortgage with GMAC. We currently owe about what it is worth, but can't see continuing to pay on the loan of they won't reaffirm. We have had the mortgage for only a couple of years and have never been late.

If they don't reaffirm, my understanding is that:

1. It doesn't show up as "positive" payment history on your credit report as the debt has been discharged.

2. If you want to sell your home a few years down the road, you're not entitled to the equity you've appreciated as the mortgage was discharged, ending your obligation to pay (but you continued to anyway).

If that is the case, we think we'll wait until spring (when the weather is nicer) and then walk away from the house & mortgage. We can't see continuing to pay the mortgage, property taxes and upkeep/repairs and then having nothing to show for it. We can have a nice rental condo or home for way less than what our house costs us.

Any opinions? Are we misunderstanding what will happen?

Please provide your thoughts!

[lrprn]

Reaffirmation provides no protection from foreclosure due to missed payments. Even if Chase did reaffirm your mortgage, they could still foreclose if you missed just one payment. Frankly reaffirmation protects CHASE, not you.

Your lawyer may have just given you the best Christmas gift you will ever receive.

[metsno1]

Thanks...

Thanks for all the response. We're feeling a lot better about the whole situation.

One more question.....What happens if, down the road a bit, we decide to sell the house, and we do so at a profit of say $60-$70K? Will we be at risk of losing that equity?

[JasonK94Z]

Thanks for all the response. We're feeling a lot better about the whole situation.

One more question.....What happens if, down the road a bit, we decide to sell the house, and we do so at a profit of say $60-$70K? Will we be at risk of losing that equity?

No, you won't lose that equity.

[RickInMich]

My wife and I may be in a similar situation. We filed on Ch. 7 on 11/27, wishing to reaffirm our 1st & 2nd mortgage with GMAC. We currently owe about what it is worth, but can't see continuing to pay on the loan of they won't reaffirm. We have had the mortgage for only a couple of years and have never been late.

If they don't reaffirm, my understanding is that:

1. It doesn't show up as "positive" payment history on your credit report as the debt has been discharged.

2. If you want to sell your home a few years down the road, you're not entitled to the equity you've appreciated as the mortgage was discharged, ending your obligation to pay (but you continued to anyway).

If that is the case, we think we'll wait until spring (when the weather is nicer) and then walk away from the house & mortgage. We can't see continuing to pay the mortgage, property taxes and upkeep/repairs and then having nothing to show for it. We can have a nice rental condo or home for way less than what our house costs us.

Any opinions? Are we misunderstanding what will happen?

Please provide your thoughts!

As the above poster said, you definitely are entitled to your equity if/when you sell it down the road.

Also, lrprn is right. Reaffirmation protects the mortgage company. But I do have a question since everyone seems to say the could foreclose if you're late on one payment. Wouldn't they still have to go through a typical foreclosure process? In other words, you'd still be entitled to your state's protection under the foreclosure law. I assume you'd still be able to stop foreclosure by making your payment and paying any fees. Lrprn, is that right?

[newimges]

Reaffirmation protects the mortgage company. But I do have a question since everyone seems to say the could foreclose if you're late on one payment. Wouldn't they still have to go through a typical foreclosure process? In other words, you'd still be entitled to your state's protection under the foreclosure law. I assume you'd still be able to stop foreclosure by making your payment and paying any fees. Lrprn, is that right?

With or without a reaffirmation agreement - the mortgage company HAS to go through the typical foreclosure process.

[inhocknow]

If after your bankruptcy is discharged and closed, you can wait some time and then refinance your mortgage and eliminate the fear of your mortgage company foreclosing on you for "no" reason ?

[halloweendmb1]

yes you can depending upon what your credit score is and if no lates on your mtg in the past year. You don't neceassrily need to wait 12 months after the BK. I am a mortgage originator and have helped people 2 months afterwards get 30 year fixed rates and no subprime I only am able to do FHA VA and Fannie Mae Conforming,

So yes it is very possible but you will need to prove income and keep your bk papers for review

[lrprn]

Everyone seems to say they could foreclose if you're late on one payment. Wouldn't they still have to go through a typical foreclosure process? Lrprn, is that right?

If you are still in bankruptcy and your case hasn't closed, then yes, the lender still has to go through the courts to lift the stay and start the foreclosure or repossession process.

However, after your bankruptcy is closed, if you miss payments the lender just has to follow the foreclosure or repossession laws in your state (some allow non-judicial foreclosure) and whatever foreclosure clauses there are in your signed contract.

There's tremendous variability between the state foreclosure laws - http://www.foreclosures.com/www/page...StatePref=true

Same goes for each state's repossession laws - http://www.quickrepo.com/repo-company-tools/laws.htm