Post discharge home loan questions

[dgkp]

Our chapter 7 BK was discharged in May 2009. Our attorney advised us not to reaffirm our home loan...we were upside down by about $60K on the first and included a 2nd, approx $50K in the bankruptcy. We stopped paying on the 2nd but have never missed a payment on the 1st. Home values continue to fall in our area, and we're now about $100K upside down on the first. We'd like to try to get the principal reduced and our loan modified. We've tried contacting our mortgage company, but they won't talk to us. They send us 'receipts' for our payments monthly rather than regular mortgage statements. Before we paid and retained our BK attorney, she told us that she could have the 2nd mortgage lien lifted. Just before the discharge, she told us that the lien couldn't be lifted since we had filed Chapter 7. Now we can't refinance, because then the 2nd lienholder would move into first lienholder position, or so we've been told.
We feel like we're throwing our money away every month, and don't know if there's any hope at this point to keep our home, or if we should just walk away from it?
I would appreciate it soooo much if anyone has any info that might us help figure out what to do!
Thanks

[dgkp]

Post discharge home loan questions

Our chapter 7 BK was discharged in May 2009. Our attorney advised us not to reaffirm our home loan...we were upside down by about $60K on the first and included a 2nd, approx $50K in the bankruptcy. We stopped paying on the 2nd but have never missed a payment on the 1st. Home values continue to fall in our area, and we're now about $100K upside down on the first. We'd like to try to get the principal reduced and our loan modified. We've tried contacting our mortgage company, but they won't talk to us. They send us 'receipts' for our payments monthly rather than regular mortgage statements. Before we paid and retained our BK attorney, she told us that she could have the 2nd mortgage lien lifted. Just before the discharge, she told us that the lien couldn't be lifted since we had filed Chapter 7. Now we can't refinance, because then the 2nd lienholder would move into first lienholder position, or so we've been told.
We feel like we're throwing our money away every month, and don't know if there's any hope at this point to keep our home, or if we should just walk away from it?
I would appreciate it soooo much if anyone has any info that might us help figure out what to do!
Thanks

[mike258]

If you stop paying the second mortgage, they are within their rights to foreclose, however, they will need to pay off the 1st mortgage before they can collect anything. It's highly unlikely they will foreclose and they will probably send you some sort of settlement offer. They'll want to get that loan off their books as quickly as possible.

GMAC sent me a settlement offer when I was 6 months behind on my second mortgage. If I sent them $6,000 they would consider my $80,000 2nd mortgage paid in full...and would release the lien (I was upside down $125k). It did me no good because I already decided to surrender my home in bk (where were they 6 months before that????)


So it really depends if you want to stay where you are. You will either have to pay rent or pay your 1st mortgage (and all the taxes, insurance, etc.). Keep in mind, that if you do walk away, you will not be able to get an FHA backed mortgage for 3 years, because you will have a foreclosure on your records.

Oh, and yes, if you refinance the 1st and not the 2nd mortgage, the 2nd mortgage will move into the 1st lienholder position. They need to sign a document (I forget what it's called) to move them back into 2nd. They wont do that if you are behind...

[BBW]

Mods can be a nightmare, your probably can't refi until it has been 12-24months anyway. If you are upside what is the harm of walking away and letting them foreclose? Your credit is already ruined. I wonder if they can get a judgement on the difference between what they get at auction and what you owe... That would be the only reason not to walk away if that is the case.

[lrprn]

You could refinance both your first and second mortgages, but both would have to agree to refinance to help you out of the deep hole you now find yourselves in. Chances of being able to get both lenders to agree to refinance are very small - you can't even get mortgage #1 to agree to it

Depending on how much you are making every month, if you have sufficient disposable income to be able to file Ch 13, a bk lawyer can then legally strip the second mortgage so you would owe nothing on it. You would still owe the first mortgage, however.

Given that you are now $100K underwater on the first mortgage as well, that's a lot of money to make up just to keep the house. You won't be able to pay off the first mortgage even after stripping the second if you are able to sell the house - not good. You were very smart to not reaffirm.

If you can't file Ch 13, then if the house just gets to be too much to handle, you can consider stopping payments on both mortgages and letting foreclosure happen. If you decide to go that direction, do not leave your house right away. Many folks have made no house payments and stll been able to stay in the house for months without paying anything on the first or second mortgages. This allows you to save up a tidy nest egg and at your leisure find a good rental.

You are in a very tough position right now, and I'm so sorry you are struggling . Please keep posting and let us know what you decide to do, ok?

[lrprn]

dgkp, I merged your two duplicate threads you posted in different forum areas into this one. It's against our forum rules to post the same questions in two different places. Over time, we've discovered that you'll get better and more answers this way. Thanks!

[Chowder]

Our chapter 7 BK was discharged in May 2009. Our attorney advised us not to reaffirm our home loan...we were upside down by about $60K on the first and included a 2nd, approx $50K in the bankruptcy. We stopped paying on the 2nd but have never missed a payment on the 1st. Home values continue to fall in our area, and we're now about $100K upside down on the first. We'd like to try to get the principal reduced and our loan modified. We've tried contacting our mortgage company, but they won't talk to us. They send us 'receipts' for our payments monthly rather than regular mortgage statements. Before we paid and retained our BK attorney, she told us that she could have the 2nd mortgage lien lifted. Just before the discharge, she told us that the lien couldn't be lifted since we had filed Chapter 7. Now we can't refinance, because then the 2nd lienholder would move into first lienholder position, or so we've been told.
We feel like we're throwing our money away every month, and don't know if there's any hope at this point to keep our home, or if we should just walk away from it?
I would appreciate it soooo much if anyone has any info that might us help figure out what to do!
Thanks

It's just amazing these lenders are so thick. Even with news about just how hard foreclosures are going to bite them.

Like lrprn points out, you can go the "chapter 20" route. 7 first, then a 13. In a 13 that second can be stripped.

[dgkp]

Thanks everyone, and one more question...

Thanks very much to everyone who replied to my message!
I'm getting conflicting reports about what happens if we do decide to walk away from our house. Both the first and second mortgages were discharged in the Chapter 7. If we walk away and just let the bank have the house now, would it hurt our credit even more? I have no idea how the whole foreclosure thing would work since both loans have been discharged. Our attorney told us back in May that since the loans were discharged, we had no legal obligation to pay either and could walk away from the house at any time without penalty.

[mike258]

Thanks very much to everyone who replied to my message!
I'm getting conflicting reports about what happens if we do decide to walk away from our house. Both the first and second mortgages were discharged in the Chapter 7. If we walk away and just let the bank have the house now, would it hurt our credit even more? I have no idea how the whole foreclosure thing would work since both loans have been discharged. Our attorney told us back in May that since the loans were discharged, we had no legal obligation to pay either and could walk away from the house at any time without penalty.

Your attorney is correct, however the bank still has to go through a foreclosure process to get the property back into their name. The foreclosure will not show up on your credit reports and will not damage your credit any further, however, it will show up in your county land records and it will show up when someone does a title search.

[dgkp]

Thanks Mike

Thanks so much for the information...I truly appreciate it!

[AfterBKinMI]

post discharge-Reaffirmed 2nd mortgage, not 1st

Our Ch. 7 bankruptcy was discharged in Feb 2008. At the time of filing, we thought we wanted to save our house. Bad decision encouraged by bad legal advice. We hold a 1st mortgage with a bank and also an HELOC with a credit union. We reaffirmed the HELOC because the CU said they would take our car as well. We intended on reaffirming the 1st mortgage too, but am now gald we didn't. We are over $60K underwater in this house ($30K on 2nd and at least $30K on the 1st. ). We have found mold in the basement, as well as other costly repairs that are coming up. We can no longer afford to make payments, keep up with repairs(especially basement), and put into a house that valued so far under what we owe. I am wondering what would happen since we reaffirmed the HELOC if we walked away and found a new place or if my parents bought a house and allowes us to rent from them?