Chase 1st Ride Through, + a 2nd Mortgage...

[MC9199]

I have been reading some of the posts on ride-throughs and mortgages with Chase, and while I'm still a little confused I think I'll eventually get it.

I filed Ch. 7 three days ago. I have a 1st mortgage with Chase Home Finance, plus a second mortgage through a servicer (PHH). The 1st + 2nd mortgage debt puts me about 10-15% upside down on the house. I am filing with about $46 K in unsecured debt.

My atty said we will not reaffirm the mortgages due to the lack of equity...figuring recent home sale prices and selling costs, the trustee won't sell.

I am not behind on any mortgage payments and intend to keep paying, though I will try to negotiate modifications (mortgage payments are currently 35% of net income).

Is there any reason to reaffirm instead, to help my chances of getting a loan modification?

Do I need to get behind in order to get a loan modification?

Can Chase or the 2nd mortgagor do anything to force a foreclosure?

[daytona]

What is value of home, value of 1st motgage and value of 2nd mortgage?

[MC9199]

The value according to zillow is $216,000. This is probably high, and we are working on getting more realistic values from other sources.

The 1st mortgage (Chase) is $95,000; 2nd is $115,000.

The 2nd is higher due to a refinance of an HELC where I unwisely rolled into it a lot of other mostly unsecured debt.

[daytona]

Your attorney is giving you good advise on not to reaffirm. If you don't reaffirm then they can not sue you for deficiency if you have to give your home up down the road..IE, if you let it go into foreclosure. If your payments are only ~35% of net income then your chances for a modification are not good as the HAMP program states they have to be over 38% of gross income to qualify and that is only for 1st mortgages.

The 2nd will only foreclose if you quit paying them and they will likely foreclose in your scenario because you have a lot of equity. You can't strip the 2nd in a CH13 beacuse there will be equity left over if your home is worth more than 95k. The only option in a CH7 with a 2nd is to not reaffirm and offer a settlement for so many cents on the dollar...but in your case it does not appear likely the 2nd would settle for less than say 50-60% of the mortgage.

If you keep paying the 1st and 2nd they will have no reason to foreclose...ie, a ride through.

[MC9199]

Thanks for the info - Not sure I understand this part though...

The 2nd will only foreclose if you quit paying them and they will likely foreclose in your scenario because you have a lot of equity.

I really don't see that I have any equity, based on the numbers I've given.

I take it the best approach is not to reaffirm either mortgage? I understand they can foreclose if I don't keep payments up.

Thanks again for your response.

[daytona]

Sorry I should have said "value" instead of equity.

Here is how the 2nd will look at it:

Pick a value for your home at todays prices.
Say 175,000.

Deduct your 1st motgage as they are priority. 95k

This leaves 80k in "value".

You have a 115k balance on 2nd, secured by 80k in "value" in this example. (175k - 95k = 80k)

If the 2nd were to foreclose they would have to pay off the 1st mortgage (95k) and whatever is left over after expenses they keep. So say it cost them 40k to foreclose and sell the house..they would still have 40k left in "value" to apply against the 115k mortgage. They would be "cutting thier losses" so to speak. If you re-affirm then the 2nd would come after you for the 75k deficiency in this scenario. If you don't re-affirm then the 2nd could not come after you for the difference.

Now here is a scenario where it would make no sense for the 2nd to foreclose if you quit paying them. (you can use any amounts, just an example)
Use 175k in value, secured by say a 155k first mortgage with 50k 2nd. If you quit paying the 2nd they would have no incentive to foreclose because it would still cost them say 40k to foreclose and they would have to pay off the first mortgage (155k) to now own the home. So they would spend 40k and still have the 50k 2nd mortgage. After they paid off the 1st (155k) and sold the home for 175k, they would still be out 70k...which is more than the 50k mortgage they have because of their expenses.

Here is a more extreme example...say 175k value, 200k 1st mortgage, with a 50k 2nd. A 175k sale would not even cover the 1st mortgage so the 2nd would get zero and certainly would not foreclose. In this example one might be able to do a CH7, not reaffirm and settle the second for say 10% or 5k to make the 2nd lien go away.

Remember, it is going to cost "whomever "a lot of money to foreclose in missed mortgage payments, legal expenses, taxes, insurance, and real estate fees to re-sell the home and is why banks would prefer not to foreclose....especially if you are still paying them. Even in your scenario, neither bank will foreclose if you are paying them...they have no reason to and legally can't...your are satisfing your "contract" with each of them by paying.