2nd mtg with CU, says won't accept pymt unless reaffirm

[tampagirl23]

I have filed for Chapter 7. I have a first mortgage with Chase for 87K and a second with my local credit union for 63K. With the way the market is in my neighborhood, I couldn't sell my townhome for 80K, let alone 150K. Both my first and second are interest-only loans. I got the paperwork yesterday from my CU wanting me to reaffirm the second mortgage. They are saying I must reaffirm, pay-off the loan, or surrender. The letter also states "The CU doesn't accept voluntary repayments without a reaffirmation agreement." Well I would be an idiot to sign a reaffirmation on my second mortgage being as flipped as I am. My question is are they really going to refuse my monthly payment? I had planned on just continuing to make my payments so the loans wouldn't go into foreclosure. But is the CU really dumb enough to refuse my $250 a month and force my house into foreclosure and then they get NOTHING being the 2nd lien holder? I'm not sure if this is just a threat on their part or what, I have a checking and savings there, but the accounts are empty (I moved banks knowing the cross-collaterlized) so they can close those for all I care. I just don't want to have to move right now if I don't have to.

Has anyone heard of a CU refusing payment if you don't reaffirm? Can they do this?

[chad9162]

I think you'll be find especially after one missed payment. I think its just a scare tactic to reaffirm. Right now they know that if the house forecloses they'd get nothing. In some states that 2nd would become unsecured debt and they could sued you for it if you reaffirm. Since you BK'd on it they know they can't get anything from you unless you REAFFIRM.

I wouldn't worry about them foreclosing. They'd have to pay the 1st off and foreclosure cost and in the end still get nothing. Who'd pay $90K+ to just to lose $63K? Really they're just full of sh*t. Its probably a "standard" letter that goes out to everyone.

There was another thread where Chase told the OP he had to pay via Western Union since he did not reaffirmed. He didn't reaffirm but ironically they still let him mail the payments in.

[ShouldWeFile]

You should communicate to the CU that, based on current market conditions, the home will sell for an amount less than the first mortgage amount, let alone the second that the CU holds. They may or may not be aware of the market value and first mortgage balance. They only analyze these things if they are genuinely considering proceeding with a foreclosure.

IMHO, you have all the negotiating strength at this point, and that will immediately disappear once you sign a reaffirmation agreement. If phone calls get you nowhere, then write them and see how that goes - CC the CU president, and/or other officers...

[StartingOver08]

Do not reaffirm the 2nd. They use these strong arm tactics because this is their last chance to keep you tied to the loan.

As Chad said earlier, why would the CU spend an extra $90k to protect their $63k? Extremely unlikely to happen in this market.

[tampagirl23]

The CU took the payment I made a couple days ago so I'm not sure when they plan on stopping accepting payment. I am not reaffirming that loan, it is an interest only HELOC that adjusts each year to prime minus one. I think those are decent terms until either the market gets better or I walk.

As for the first mortgage with Chase, it is also an interest only that is currently fixed at 6.25% but set to adjust at the end of next year and then will adjust every 6 mos. I was thinking about trying to get better terms with that mortgage and then reaffirm that, given current conditions am I better off not reaffirming that as well? Chase accepted my last payment via check they told me they will not display any info on the web, allow online payment, or send statements until I reaffirm. But as long as I make full payments I can continue to stay there.

I'm not sure if once my BK is discharged if I am best letting this go into foreclosure and living free for 6-9 mos until sale and then rent somewhere for a while, or try to reaffirm the first with better terms and hopefully be able to sell it in a few years or at least rent it out.

Thoughts?

[spidge]

Do you have a hardship of any kind? Under employed(no more overtime), drop of income, medical issues, etc. Hold your house payments aside for a few months instead of paying them, but out of sight. Sounds scary but almost no mortgage companies are modifying when the borrower is current. Send the 1st a hardship letter stating your hardship and include everything including the fear of the future rate change. Keep it to no more than a page and three or four paragraphs. During this period you will hold the payments keeping the total amount ready. While you are in a modification they will not apply them anyway, but will hold.
When the first modifies the the loan they will add your missed payments into the modification and you will start your new payment the next or following month. While this is happening the 2nd is squirming and sending you threatening letters but not actually filing anything against you. Eventually you will need to make them an offer to settle explaining they will not get anything otherwise. Start by offering 5% but they will likely start at 60%. Most lenders seem to have a minimum of 30%, but that is still case by case.
But wait where do you get the 5-30% to settle? Well if you were holding your payments aside every month you will be close to having 7% of your 2nd in cash to settle. Figure 4 months of non payment on both loans and 4 more on the 2nd.
This is what I would do if I were to do it again, but I was able to get the 1st to modify and I was not ready to file BK. I will have to deal with the 2nd after filing but with current 1st.
If not sure of this ask around to get confirmation. I am still nervous of the entire process, BK, modification, it all centers around the lenders motivation.

[TEW]

I have filed for Chapter 7. I have a first mortgage with Chase for 87K and a second with my local credit union for 63K. With the way the market is in my neighborhood, I couldn't sell my townhome for 80K, let alone 150K. Both my first and second are interest-only loans. I got the paperwork yesterday from my CU wanting me to reaffirm the second mortgage. They are saying I must reaffirm, pay-off the loan, or surrender. The letter also states "The CU doesn't accept voluntary repayments without a reaffirmation agreement." Well I would be an idiot to sign a reaffirmation on my second mortgage being as flipped as I am. My question is are they really going to refuse my monthly payment? I had planned on just continuing to make my payments so the loans wouldn't go into foreclosure. But is the CU really dumb enough to refuse my $250 a month and force my house into foreclosure and then they get NOTHING being the 2nd lien holder? I'm not sure if this is just a threat on their part or what, I have a checking and savings there, but the accounts are empty (I moved banks knowing the cross-collaterlized) so they can close those for all I care. I just don't want to have to move right now if I don't have to.

Has anyone heard of a CU refusing payment if you don't reaffirm? Can they do this?

See how they like not getting paid at all. there is a slim to none chance they will foreclosure. You can play hard ball back.