To reaffirm home or Not reaffirm Mortgage

[Keebler]

I honestly would not be worried about not reaffirming. Again, your "mortgage" or lien still exists, regardless if you affirm or not. If you decided to sell or refinance, you should not have any problems.

The only potential issue is the fact that the lender will not report your payments to the credit bureaus. So when it comes time to refinance or sell (if you ever decide to), you may have to request payment history from your current lender in order to show that you have been making on-time payments.

I understand the logic that the mortgage still exists and so the agreement is still in place. However, take a look at the next situation and tell me how to look at it.

I have a broken Suburban that I halfway expect the Credit Union that's 1,000+ miles away to abandon. I indicated that I wanted to reaffirm it but they only offered to reaffirm it plus a credit card and an overdraft line of credit. I now have no interest in reaffirming it. The contract requires me to keep it insured and failing to do so will cause the credit union to obtain single-interest insurance at my expense.

If I choose to drop the insurance, can't the credit union obtain insurance for me and charge me? After I'm discharged, the charge will fall outside of the bankruptcy and thus be enforcable? As long as they fail to reposses the truck, I'm worried I may be stuck with some of the obligations in the contract. I stopped paying months ago but it is still licensed and insured.

Thye attorney tells me "I'm the attorney, don't worry about it" and it doesn't make me feel any more assured.

[laurannm]

I'm thinking no, they cannot come after you for the insurance. Typical part of the note states that if you do not keep the property properly insured, then you are at default, in which case they will reposess.

When you say you stopped paying, do you mean you are now intending to surrender the vehicle?

[jgordo52]

The only potential issue is the fact that the lender will not report your payments to the credit bureaus. So when it comes time to refinance or sell (if you ever decide to), you may have to request payment history from your current lender in order to show that you have been making on-time payments.

Other than calling the lender and requesting after not re-affirming to report your payments and payment history to the CRA's, what is your options to get it reported? I mean can the lender pick and choose what to put in there. Say you paid on time for 6 months and the 30 days late, can they only put the 30 day late and not the previous months?

THanks,

Jeff

[treadingwater]

Reading with great interest...

We have a very unique situation. We have a 1st and 2nd on our home with BB&T, but it's a construction to perm loan that has never been modified as the construction (remodeling) is still very incomplete. Had our 341 on Nov. 3rd, Trustee abandoned interest. Hired a separate atty. to negotiate a new mortgage and now, 45 days into the process, BBT wants a reaffirmation to even begin negotiating. My instincts is NO way. We have somewhat of an upper hand in that the house is not worth anywhere near the mortgage and is still very much a construction/remodeling mess. The atty. says, file the reaffirmation and then if you don't get the terms you want, rescind it -- she says the law gives you 60 days to rescind a reaffirmation. I feel if we sign the reaff. we give up any bargaining power. any thoughts...

[hamletsdead]

Why reaffirm?

In California, you have no personal liability for purchase money mortgages -- that is, the loan you got when you bought your house. The bank can only come after you for a deficiency judgment on refinance money, or HELOCs, or 2nd mortgages all taken out after the initial purchase of the real property. When you get your discharge in Chapter 7, you wipe out all personal liability for any deficiency judgment, which simply puts you in the same situation as everybody who bought a house in California and simply didn't refinance. The contract is still good, still binding, EXCEPT for the part where you personally guarantee the loan in the event of a default. After discharge, the only security the bank has is the property, and they are legally bound to abide by the terms of the loan agreement as long as payments are made. They can't foreclose, unless you stop paying.

The lame thing is when they stop reporting your payments to the CRAs. Logically there is no reason for this because post-discharge you are in the exact same position as someone who just bought a house. Purchase money loan = no personal liability. So it should show up on your credit report.

[skweakalee]

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).

What type of motion would they file?

How would this affect the reaffirmation situation (described below)?

As I understand this whole reaffirmation situation:
The court requires a statement of intention. One could intend to reaffirm. If the reaffirmation terms are "great" and you really want to keep the house, go ahead and reaffirm. If the terms don't improve, then don't reaffirm. Check state law & note terms to see if bankruptcy constitutes a default - if it doesn't, stay and pay on time and you get to keep the house. If bankruptcy does constitute a default, you can still stay and pay, but you are gambling with the lender's desire to foreclose. Should the lender choose not to foreclose relatively soon, you have a case in equity (laches) against foreclosure.

[tcreegan]

Hi skweakalee,

Don't take it personally if none of the previous posters answer, the thread was a year ago..probably all moved on by now...

Tom in Colo

...oh, almost forgot, it would be a motion to approve the reaffirmation. Your scenario is essentially correct.