1st mortgage and property taxes after discharge

[Doghouse]

After chpt 7 discharge, when you keep paying on a 1st mortgage and not pay the 2nd on a house that was not re-affirmed, as some people are doing, who is responsible for paying the property taxes? Is it still you and not the lender until the lender forecloses and sells? Same question on HOA?

Also when you surrender your house in bk, are you able to do the above scenario of pay 1st and not 2nd (negative equity situation, of course)? At least until the lender decide to foreclose, if at all? I'm thinking above scenario really applies to people whose intent was to keep the house but not re-affirm as opposed to those that explicitly surrenders.

[StartingOver08]

If you are going to keep the house you pay the taxes and insurance as well as the first. The second has been discharged, the issue becomes will the second release their lien with a lump sum payment of some percentage of the balance?

If you are surrendering then why would you pay the first or the property taxes? You are giving the house back, you just have possession until the foreclosure is finalized.

[Vanda]

if you are not surrendering the house but don't have the money right away to pay the taxes and insurance, will they push you into a 13?

[Doghouse]

Okay, so it's only the folks that intended to keep the house but not sign a re-affirm that opt to continue paying the 1st and not the 2nd.

Now with regards to the homeowners association fees, my attorney says the amount owed as of bk filing will be discharged but I will now have to keep paying the HOA fees until house is foreclosed and sold as long as I remain in the house. Or maybe pay after discharge till house is sold. Will clarify with her but .... huh? Is this the case with anyone else on a surrendered house here in Calif? Do I need to keep paying the HOA?

[StartingOver08]

Okay, so it's only the folks that intended to keep the house but not sign a re-affirm that opt to continue paying the 1st and not the 2nd.

Now with regards to the homeowners association fees, my attorney says the amount owed as of bk filing will be discharged but I will now have to keep paying the HOA fees until house is foreclosed and sold as long as I remain in the house. Or maybe pay after discharge till house is sold. Will clarify with her but .... huh? Is this the case with anyone else on a surrendered house here in Calif? Do I need to keep paying the HOA?

Yes, you have it right about a pay thru on the 1st and stop paying on the jr liens.

As to the HOA, yes you have to pay the non-discharged HOA fees until the house foreclosure is completed. You can check you state statutes to see the remedy for unpaid HOA fees.

Here in Fl the HOA can lien the property, which is what they do normally and the bank has to pay the delinquent fees to deliver clear title to the next buyer. However, the banks are actively pushing a bill thru now (in Fl) to limit their expenses and allow the associations to go after the 'previous owner' (that's us) if the deliquent amounts are over X months.

California may already have something like that in place - check your statues.

[Vanda]

I did not realize that you could get your 2nd mortgage discharged in a Chapter 7, I thought a Chap. 13 was the only way. Good to know!

[StartingOver08]

I did not realize that you could get your 2nd mortgage discharged in a Chapter 7, I thought a Chap. 13 was the only way. Good to know!

Vanda, the personal liability for the 2nd mortgage is discharged in the Ch 7 if the loan is not reaffirmed. However, the lien remains on the property.

In order to get the lien removed you strip it in a Ch 13.

Now because of the condition of the economy, the 2nd mtg's holders that have been discharged in a Ch 7 MAY BE willing to work with debtors to remove the lien for X dollars. This is something that various people on the board are trying to work through now. The debtors have nothing to lose as the debt is already discharged in a Ch 7.

[Vanda]

2nd mortgage lien

Vanda, the personal liability for the 2nd mortgage is discharged in the Ch 7 if the loan is not reaffirmed. However, the lien remains on the property.

In order to get the lien removed you strip it in a Ch 13.

Now because of the condition of the economy, the 2nd mtg's holders that have been discharged in a Ch 7 MAY BE willing to work with debtors to remove the lien for X dollars. This is something that various people on the board are trying to work through now. The debtors have nothing to lose as the debt is already discharged in a Ch 7.

StartingOver, so the lien is there but you would only pay it if/when you sold the house in some future when prices go back up (like when I retire maybe)? What are the other ramifications of having this lien on the house?

[StartingOver08]

Well, the lien is there and it continues to accrue interest in accordance with the note. If your house value increases over the long term - when you begin to get into a real equity situation, then the lender can foreclose against the property only (and not go after you for a deficiecy). There would have to be a substantial increase in equity for the lender to do this though. So there is some amount of risk here. The risk is low in a negative equity market like today.

That is why you might want to negotiate the lien removal right away while we are in this negative equity market. You don't know if the market will take 5 yrs to turn around or 10 yrs etc.

[Vanda]

Negotiating lien removal

Well, the lien is there and it continues to accrue interest in accordance with the note.

So, I would wait to see if I will receive a Chapter 7 discharge, then negotiate with them? When I talked to them right away they asked me, how much can you afford to pay back per month? I didn't know it worked like this, thanks for the explanation.

[Vanda]

taxes/insurance

So I must ask this question again, if I get current on my first mortgage, which I will do, but can't get current on taxes and insurance right away, is that a likely reason for them to push me into a Chapter 13? As you can see I am trying to avoid a Chapter 13.

[StartingOver08]

Vanda - if you pay the 2nd on a monthly basis you are defeating the purpose of getting rid of the lien. Look at the posts by Relief and some of the others - they are negotiating a one time payoff of X% (like 10% of the note) for a release of lien. Relief and the others are currently working on this - its not completed yet. The amount of the percentage is negotiable of course, but monthly payments puts you back in square one - right?

As to taxes and insurance - before you do this, can you afford the house? If the taxes and insurance are making the house payment not affordable, then just surrender it in the BK and live out the remainder of the foreclosure period saving your funds.

If you don't pay taxes and insurance the first mtg will pay the taxes and add to your balance. They will then force place insurance on the property that is about 300% higher than the normal insurance - so work your budget first before you pay any arreage.