To reaffirm home or Not reaffirm Mortgage

[laurannm]

I don't believe not reaffirming voids the contract. The terms of the loan still exist

[Mi Bankruptcy]

Talking to my attorney he said they don't allow "ride through" anymore. He said at one point it was something they used to recommend. But, they no longer recommend it. He said lenders are getting more aggressive even if you have never been behind. So, he pretty much scared my wife.

Our house payment is low compared to our income. My attorney was quite impressed at how low our house payment was. So, I'll reluctantly reaffirm the loan. My wife would still not be able to rent a home/ apartment for our currently monthly payment if something did happen to me.

[PoorGrammyinBK7]

The key is, you have time. You can reaffirm at any point before discharge.

If it were me, I would wait and see if the lender does anything. If they file a motion in your BK, THEN you can reaffirm. No need for you to make the first move.

If the lender does not file anything in the BK, and you get your discharge, the lender cannot foreclose based solely on the fact that you failed to reaffirm. (just keep making your monthly payments on time and in full).

HHM - you are talking about a home mortgage not being reaffirmed. What about cars? If you have never been late and did not reaffirm?
Are they likely to take them anyway, (with almost no equity in them)?

[HHM]

HHM - you are talking about a home mortgage not being reaffirmed. What about cars? If you have never been late and did not reaffirm?
Are they likely to take them anyway, (with almost no equity in them)?

Same rules apply...a failure to reaffirm is not a default under state law such that the car company can repo simply based on the failure to reaffirm.

[r.m]

If the day after my bankruptcy ends I get in a car accident and die my wife is not stuck with the debt because she has to wait 7 years to file again.

If this is your main concern, that if you die or are disabled, your wife would be stuck with the debt, then get some life and disability insurance.

If I'm getting this right, you're current.

While the "lenders don't want your home" line is untrue (the truth is they don't care one way or another), it's highly unlikely Wells is going to be instructed to begin foreclosure because you didn't re-affirm... in MICHIGAN!

Now, should you subsequently default, then it could get a little tricky trying to do anything but a full re-instatement, but that depends on a whole host of other factors.


You're acting like a "maximizer" when you should be a "satisficer."

Google those terms if you'd like further explanation.

Bottom line, you're torturing yourself with "what if's."

Stop it!

There is no "perfect."

Make your best decision with the info you have, and get on with the business of getting back on your feet and moving forward.

Best of luck.

[gymbo]

Here is my concern.
Right now, clearly, no bank wants to own more empty homes.
But what happens in 5-10 years? Let's say the market rebounds, and your home that was barely worth what you owed, or worth less, now has plenty of equity?
Then, can the banks go through their files of people who filed BK and did not reaffirm and start cherry picking which properties they want back??? Even if you have always been current? It seems grossly unfair but also seems entirely possible.
Just a thought.

[lillaimof2kids]

Here is my concern.
Right now, clearly, no bank wants to own more empty homes.
But what happens in 5-10 years? Let's say the market rebounds, and your home that was barely worth what you owed, or worth less, now has plenty of equity?
Then, can the banks go through their files of people who filed BK and did not reaffirm and start cherry picking which properties they want back??? Even if you have always been current? It seems grossly unfair but also seems entirely possible.
Just a thought.

I do have the same concerns as you! Here's my thinking...
If my state, Ohio, had a law saying we HAD to sign a reaffirmation (which there is none) to keep a piece of property that would be a completely different story. My 1st mortgage does not do reaffirmations, my 2nd mortgage submitted a reaffirmation I refused to sign. The 2nd mortgage bank would have to have grounds to foreclose on me. There's nothing the says I HAVE to sign a reaffirmation. I'm honoring our original terms and conditions. My 2nd mtg. bank is reporting my payments to the credit bureau with a balance reported. I'd say they've accepted my ride through since they report "paying as agreed" on my credit report.

[laurannm]

From a practical sense, why would a lender want your home if say 5-10 years from the now the market has rebounded? If you have been making your payments on time, chances are they will make alot more money continuing to accept your payments (and all of the interest) then they will foreclosing your house. Plus as HHM as said, they cannot foreclose strictly because you didn't sign a reaffirm. You would have to default on the loan (i.e. late payments) in order for them to foreclose.

One other option would be to refinance when/if the market rebounds and you have equity in your house (assuming you have been dilligent about rebuilding your credit when the time comes).

Another thing I also remember reading about is that the BK code only mentions personal property when it comes to reaffirming, and not real property.

And lastly, I remember reading something about a "doctrine of laches", which I think is a legal term that says that a plaintiff (i.e. the lender) cannot sit on their rights for a long period of time and then try to exercise those rights at the 11th hour.

[Mi Bankruptcy]

If this is your main concern, that if you die or are disabled, your wife would be stuck with the debt, then get some life and disability insurance.

If I'm getting this right, you're current.

While the "lenders don't want your home" line is untrue (the truth is they don't care one way or another), it's highly unlikely Wells is going to be instructed to begin foreclosure because you didn't re-affirm... in MICHIGAN!

Now, should you subsequently default, then it could get a little tricky trying to do anything but a full re-instatement, but that depends on a whole host of other factors.


You're acting like a "maximizer" when you should be a "satisficer."

Google those terms if you'd like further explanation.

Bottom line, you're torturing yourself with "what if's."

Stop it!

There is no "perfect."

Make your best decision with the info you have, and get on with the business of getting back on your feet and moving forward.

Best of luck.

R.M... Although I appreciate you input I respectfully disagree with your conclusion. I am a balanced combination of both. In terms of the welfare of my family I am a "maximizer". However, I am generally a "satisficer"

My final decision is based on this. Reaffirm because my wife has not been in the workforce for 7 years and has no hardskills to immediately fall back on IF something did happen to me.She a resourceful women and could make things work in the end.

My home is still worth more than I purchased it for. Additionally, because I was a "maximizer" when buying my home this help me from falling into the trap of Adj rate mortgages and taking the higher fixed rate.

R.M. By all means Bankruptcy & Bankruptcy planning is not the place to be a "satificer".

[happy_ira]

The key is, you have time. You can reaffirm at any point before discharge.

If it were me, I would wait and see if the lender does anything. If they file a motion in your BK, THEN you can reaffirm. No need for you to make the first move. If the lender does not file anything in the BK, and you get your discharge, the lender cannot foreclose based solely on the fact that you failed to reaffirm. (just keep making your monthly payments on time and in full).

I am in complete agreement with HHM based on firsthand experience as a Ch 7 filer and received the same precise advice from a very experienced attorney.

[happy_ira]

If the lender does not file anything in the BK, and you get your discharge, the lender cannot foreclose based solely on the fact that you failed to reaffirm. (just keep making your monthly payments on time and in full).

Wait a second... question: What about so-called adhesion clauses that are present in *most* home mortgages? You know, the ones that state something like "Hey, you are considered to be in Default if you file a bankruptcy (and 13 other reasons usually listed like not making payments, etc.).."

Any thoughts? I am in a similar position as Mi and others (and my mortgage also happens to be with Wells Fargo). My attorney highly recommended NOT signing the reaffirmation (unless they come knocking furiously before the discharge or file a motion prior to discharge). That said, can they or can they not wake up in 5-10 years and say "Hey, this house is ours based on the loophole that you have a discharged bankruptcy... blah blah blah."

??

[Mi Bankruptcy]

I know..It can drive you nuts...Everything(inside) tells me to not reaffirm. However, do I really want to roll the dice and make my situation worse. There is absolutely no way I can find a home or apt for what I pay for my mortgage. It is escrowed for insurance and taxes too.

[happy_ira]

Mi - in addition to the posting here which I would liek to get input on my latest comment from HHM and others abotu the "adhesion clause"), I sent you a private message: http://www.bkforum.com/private.php

[happy_ira]

Wait a second... question: What about so-called adhesion clauses that are present in *most* home mortgages? You know, the ones that state something like "Hey, you are considered to be in Default if you file a bankruptcy (and 13 other reasons usually listed like not making payments, etc.).."

Any thoughts? I am in a similar position as Mi and others (and my mortgage also happens to be with Wells Fargo). My attorney highly recommended NOT signing the reaffirmation (unless they come knocking furiously before the discharge or file a motion prior to discharge). That said, can they or can they not wake up in 5-10 years and say "Hey, this house is ours based on the loophole that you have a discharged bankruptcy... blah blah blah."

??

Anyone?

[HHM]

Here is my take

1. Courts have almost universally affirmed that "default on BK" clauses are unenforceable.
2. Keep in mind, if you do not reaffirm a mortgage, your personal obligation on the debt is discharged; thus, only the lien survives. As a result, under state law, the only remedy foreclose a lien is non-payment. All other clauses of the mortgage contract are essentially discharged. At that point, only non-payment can trigger a foreclosure.