Reaffirmed and Regretting It?

[michael1970]

Hi. I recently received my Chapter 7 discharge earlier this year for a great deal of debt I took on after a divorce several years ago. I was struggling to keep my head above water for years, constantly borrowing to just get by. My girlfriend convinced me to file since she had done it successfully a few years back before meeting her. My discharged debt was unsecured in the amount of approx $55,000. My lawyer was great, but I did not really get any feedback on reaffirming my 1st and 2nd mortgage. I wanted to stay in the house to preserve the home I had built for my two sons, and renting was not an option in my small town. So, I reaffirmed both mortgages along with an auto loan.

Well, because I was caught in a world wind process, I really did not think over the idea that I was already upside down in my house. I just did not want to deal with a foreclosure in a small town where everybody knows who you are. I can make the the mortgage payments, but they are high for this type of house. When I say upside down, I mean that I owe $115,000 on my interest only first mortgage (US Bank) and $42,500 on my 25yr fixed second (Ditech/GMAC), totaling $157,500. Four years ago, Ditech was approving just about everyone for there flagship 125% mortgages. I qualified and jumped at the opportunity to consolidate more of my past debt into a single payment. Their "creative" appraisal came in at approx $125,000 four years ago, but based on comparable sales in my area, I would put that value now at $100,000 to $110,000 (not as much as my 1st mortgage) or possibly less as no houses are selling. So, I am upside down $47,000 to $57,000, with no real hope to ever recover that amount any time soon.

My questions:

1) Since I reaffirmed the mortgages, am I on the hook for all of this debt should I consider walking and forclosure? It's my understanding that if I did not reaffirm and eventually walked, they could not come after me.

2) Is there any way of negotiating with Ditech/GMAC to reduce the 2nd considerably, thus giving me hope of equity in the future? What if I continue paying my 1st but not my second? Any chance Ditech forecloses because I reaffirmed?

3) If I consider walking and enduring a foreclosure, should I do it sooner than later, since my credit is already wacked from the bankruptcy? Suprisingly, my credit score is 650 despite the BK, probably because it was excellent before BK and I am current on all payments since.

4) I have researched Obama's programs quite a bit. I think I fall through the cracks with no "hope" of benefiting from those programs.


I really have no personal ties to this home other than it is the only home my sons have known. I am quickly realizing that I am renting now because I will not realize any equity in this home. The only difference is I cannot leave because I cannot sell and satisfy the mortgages. Foreclosure is really the only way to get out from under this. My gut tells me I really could care less if I ever own a home again. Despite the fact that I am an adult and my decisions have put me in this position, I feel that big banks did not do me any favors by underwriting a 125% loan on the cusp of a housing correction. Because of this, I really have no moral obligation to stay in the home just to continue paying the banks.

Sorry if this is rambling. I appreciate any feedback or recommendations.
Thanks.

[AngelinaCatHub]

Hi. I recently received my Chapter 7 discharge earlier this year for a great deal of debt I took on after a divorce several years ago. I was struggling to keep my head above water for years, constantly borrowing to just get by. My girlfriend convinced me to file since she had done it successfully a few years back before meeting her. My discharged debt was unsecured in the amount of approx $55,000. My lawyer was great, but I did not really get any feedback on reaffirming my 1st and 2nd mortgage. I wanted to stay in the house to preserve the home I had built for my two sons, and renting was not an option in my small town. So, I reaffirmed both mortgages along with an auto loan.

Well, because I was caught in a world wind process, I really did not think over the idea that I was already upside down in my house. I just did not want to deal with a foreclosure in a small town where everybody knows who you are. I can make the the mortgage payments, but they are high for this type of house. When I say upside down, I mean that I owe $115,000 on my interest only first mortgage (US Bank) and $42,500 on my 25yr fixed second (Ditech/GMAC), totaling $157,500. Four years ago, Ditech was approving just about everyone for there flagship 125% mortgages. I qualified and jumped at the opportunity to consolidate more of my past debt into a single payment. Their "creative" appraisal came in at approx $125,000 four years ago, but based on comparable sales in my area, I would put that value now at $100,000 to $110,000 (not as much as my 1st mortgage) or possibly less as no houses are selling. So, I am upside down $47,000 to $57,000, with no real hope to ever recover that amount any time soon.

My questions:

1) Since I reaffirmed the mortgages, am I on the hook for all of this debt should I consider walking and forclosure? It's my understanding that if I did not reaffirm and eventually walked, they could not come after me. Yes you are.

2) Is there any way of negotiating with Ditech/GMAC to reduce the 2nd considerably, thus giving me hope of equity in the future? What if I continue paying my 1st but not my second? Any chance Ditech forecloses because I reaffirmed? If you do not try, both of us would never know. As to the second mortgage, they can forclose, they have to buy out the first mortgage to do this though, but then they could just sue you.

3) If I consider walking and enduring a foreclosure, should I do it sooner than later, since my credit is already wacked from the bankruptcy? Suprisingly, my credit score is 650 despite the BK, probably because it was excellent before BK and I am current on all payments since. Well not only will they forclose, but you will now be held for the difference in the sale (yeah sure) and the loan.

4) I have researched Obama's programs quite a bit. I think I fall through the cracks with no "hope" of benefiting from those programs. Keep trying. Things could change. They will get worse. Suggestion, file for a Chapter 13. After a 7 this is allowed. You will have to pay, but will probably be much less. It is loosley called chapter 20, as it is a 7 and 13. This could be your out.

I really have no personal ties to this home other than it is the only home my sons have known. I am quickly realizing that I am renting now because I will not realize any equity in this home. The only difference is I cannot leave because I cannot sell and satisfy the mortgages. Foreclosure is really the only way to get out from under this. My gut tells me I really could care less if I ever own a home again. Despite the fact that I am an adult and my decisions have put me in this position, I feel that big banks did not do me any favors by underwriting a 125% loan on the cusp of a housing correction. Because of this, I really have no moral obligation to stay in the home just to continue paying the banks. This may or may not be so about the morality of all of this, but you do have a legal responsibility now.

Sorry if this is rambling. I appreciate any feedback or recommendations.
Thanks. Not a problem on rambling. It is my posting style.

I wish you good fortune. This is why most here suggest just keep paying if you wish to keep a car or house. They don't want the item, they want the money. If you rode through you could walk away. Heck with what the town thinks about your bk or personal problems. Half of them are in your same boat and likely the other half will be. 'Hub

[LSUTiger32]

My questions:

1) Since I reaffirmed the mortgages, am I on the hook for all of this debt should I consider walking and forclosure? It's my understanding that if I did not reaffirm and eventually walked, they could not come after me.

I am just trying to help you here but I am curious why it matters what the home is worth and what you owe? Can you afford the payment. Maybe you should not re-affirmed it but you have and if you can afford the payments there is no way I would walk away from it. The value will rebound some when this economy comes out of its funk. You even said your credit score has rebounded to 650 so why would you really destroy everything with a foreclosure just because you are upside down?

[mynextlife]

You have to pay to live somewhere, if you can afford the payments why disrupt your kids home life? If you can just ride it out. Look on the bright side, you are not as upside down as ALOT of folks. The market will recover but it will take time.

[kw1025]

like cat said, you are on the hook for reaffirmed assets. however, most banks are not going after deficiency amounts, since chances are you do not have the money to pay back. they can 1099 you for deficiency amount, but you will not be liable if you were insolvent at the time

[whipster1]

Depends on your state whether the loans are recourse or non-recourse. If they are non-recourse you are not liable for any deficiency. Ask your lawyer.

[lrprn]

1) Since I reaffirmed the mortgages, am I on the hook for all of this debt should I consider walking and forclosure? It's my understanding that if I did not reaffirm and eventually walked, they could not come after me.

The key here is did the reaffirmation documents with both your mortgage lenders and your signature get filed with the court? If they did *NOT*, then you don't owe the balance if you surrender the house.

However, if the signed reaffirmation documents did get filed with the court, then I'm sorry to say that yes, you are stuck with the balance on the loans if you surrender the house now.

2) Is there any way of negotiating with Ditech/GMAC to reduce the 2nd considerably, thus giving me hope of equity in the future? What if I continue paying my 1st but not my second? Any chance Ditech forecloses because I reaffirmed?

Anything is possible. You won't know until you try. But don't hold your breath.

3) If I consider walking and enduring a foreclosure, should I do it sooner than later, since my credit is already wacked from the bankruptcy? Suprisingly, my credit score is 650 despite the BK, probably because it was excellent before BK and I am current on all payments since.

If you truly do need to walk away, please buy a half hour time with your former bankruptcy lawyer. Go over what your viable options might be.

4) I have researched Obama's programs quite a bit. I think I fall through the cracks with no "hope" of benefiting from those programs.

Unfortunately that's the case for many If you've researched a great deal already, chances are you've already visited http://makinghomeaffordable.gov/, correct? How did you do on the online test there?

Your first step is to find out if your mortgage lenders filed the signed reaffirmation agreements or not. Everything hinges on that.

[OhioFiler]

Well, because I was caught in a whirlwind process, I really did not think over the idea that I was already upside down in my house. I just did not want to deal with a foreclosure in a small town where everybody knows who you are. I can make the the mortgage payments, but they are high for this type of house. When I say upside down, I mean that I owe $115,000 on my interest only first mortgage (US Bank) and $42,500 on my 25yr fixed second (Ditech/GMAC), totaling $157,500... I would put that value now at $100,000 to $110,000 (not as much as my 1st mortgage) or possibly less as no houses are selling. So, I am upside down $47,000 to $57,000, with no real hope to ever recover that amount any time soon. Thanks.

This paragraph should be quoted in a sticky. Too many people make this mistake with their houses and come to regret it.

It is critical that every filer look at their assets and debts from a smart financial perspective and not from emotional inklings. I would rather suffer the humiliation(perceived though most likely not the case) of the whole community knowing I was bankrupt and losing my house than be saddled with a debt I shouldn't have but am stuck with for at least 8 years.

[michael1970]

Your first step is to find out if your mortgage lenders filed the signed reaffirmation agreements or not. Everything hinges on that.

Can anyone tell me how I find this out?

Thanks.

[lrprn]

Can anyone tell me how I find this out?

Three ways to find this out:

1. Contact your lawyer who represented you in the 7 and ask him/her to check for you to see if any reaffirmation documents were filed with the court.

2. If you have a PACER account, check the historical documents section on your case to see if any reaffirmation agreements are filed there by your lenders.

3. Contact your local bankruptcy court and nicely ask the bk court clerk if he/she would check your case to see if reaffirmation agreements were filed before your case was discharged and closed.

Hope the answer ends up being no reaffirmation agreements were filed. Good luck!