cross-collateralization with mortgage and unsecured debt

[miindebt]

I've been trying to look for people who have experienced this, but can't find anything - our lawyer mentioned the other day that we could have a cross-collateralization (sp?) problem with out mortgage. He said that usually in a mortgage there's a clause that says that a default on any debt with the mortgage holder is the same as defaulting on all debts. He thinks that it's possible that when we reconfirm our house (we're slightly underwater, but not much) that the bank may try to tack on the unsecured debt to the mortgage. The mortgage is with a national bank - we owe them about 60k unsecured.

Has anyone had this happen (I've read about the credit unions!) with a bank mortgage? And if so, what happened? This possibility has us a bit worried...

[lrprn]

The only way to know for sure is to unearth your original mortgage contract and provide it to your lawyer to review. Do you still have it (or a copy) where it's easily accessible?

[Ann]

I've been trying to look for people who have experienced this, but can't find anything - our lawyer mentioned the other day that we could have a cross-collateralization (sp?) problem with out mortgage. He said that usually in a mortgage there's a clause that says that a default on any debt with the mortgage holder is the same as defaulting on all debts. He thinks that it's possible that when we reconfirm our house (we're slightly underwater, but not much) that the bank may try to tack on the unsecured debt to the mortgage. The mortgage is with a national bank - we owe them about 60k unsecured.

Has anyone had this happen (I've read about the credit unions!) with a bank mortgage? And if so, what happened? This possibility has us a bit worried...

Okay...NOW I'm worried... I have a first mortgage with CitiMortgage and I am filing chapter 7 in a few days... I have about $16,000 of credit card debt with CitiBank that I'm hoping to have discharged. Is this trouble for me when it comes time to reconfirm my mortgage with them??? BTW... I did not get this mortgage originally with CitiMortgage... They purchased it a few years ago from another mortgage company. Anyone????

[Mensa1]

I've been trying to look for people who have experienced this, but can't find anything - our lawyer mentioned the other day that we could have a cross-collateralization (sp?) problem with out mortgage. He said that usually in a mortgage there's a clause that says that a default on any debt with the mortgage holder is the same as defaulting on all debts. He thinks that it's possible that when we reconfirm our house (we're slightly underwater, but not much) that the bank may try to tack on the unsecured debt to the mortgage. The mortgage is with a national bank - we owe them about 60k unsecured.

Has anyone had this happen (I've read about the credit unions!) with a bank mortgage? And if so, what happened? This possibility has us a bit worried...

Cross collateralization can be a problem...
This is just one reason why you shouldn't re-affirm the mtg on your house. No re-aff, then there are NO add on debts, NO matter what. By not re-aff on the mtg the creditor will charge-off the mtg debt, means you no longer owe it legally. You can simply pay and stay, so you retain homeownership w/o being responsible for paying on the mtg. Obviously if you don't pay, they will foreclose, but if you pay they won't. Simple as that.

Most Attys will suggest that you not re-affirm on mtg debt, so check around and make sure you are getting good advice on the subject before you sign the re-aff, because once you do it is tooooooooooo late to change the outcome.

[newbie2]

Okay...NOW I'm worried... I have a first mortgage with CitiMortgage and I am filing chapter 7 in a few days... I have about $16,000 of credit card debt with CitiBank that I'm hoping to have discharged. Is this trouble for me when it comes time to reconfirm my mortgage with them??? BTW... I did not get this mortgage originally with CitiMortgage... They purchased it a few years ago from another mortgage company. Anyone????

Ann, just because the note was purchased from another lender doesn't negate the original terms. If the original terms didn't have cross collateralization then you don't have to worry in my opinion.

[Ann]

If I'm not legally obligated in paying my mortgage (by not reaffirming) but of I continue to do so because I really want to keep my home then do I legally own it still? I'm so confused now. What it the advantage of reaffirming it???? Sorry, but I honestly thought I had this all figured out. Thanks.

[Mensa1]

If I'm not legally obligated in paying my mortgage (by not reaffirming) but of I continue to do so because I really want to keep my home then do I legally own it still? I'm so confused now. What it the advantage of reaffirming it???? Sorry, but I honestly thought I had this all figured out. Thanks.

Yes, you still own the property. The ony advantage of re-aff the note is that they will still report to the CRA as a valid trade line. Absent that, there are downsides but little other upside. There is much misunderstanding about re-affirming notes and mtgs... even by Bk professionals, so make certain you get a cross section of advice before deciding what to do here.

Much confusion on the petition forms where one elects to Reaffirim, Surrender or Redeem. Well redemption is out of the question in almost every case when talking houses, as redemption is an outright purchase for cash of the item. This may happen with autos or other secured property but not houses. So that leaves Reaffirm or Surrender. Surrender does not mean that you give up the house, it solely means that you aren't reaffirming the responsibility to pay the note. Surrender doesn't mean physically giving up the house, although it could mean that, depending on what the debtor decides to do here. Reaffirmation simply means that you will be legally bound to pay the note and if you don't then the lender may seek damages, depending on your states laws for deficiency, just the same as before you filed ch 7 Bk.

[helpmeout]

What happens when the mortgage is paid off, but not the "unsecured" debt? If there is a cross-collaterization, I would think that the lien wouldn't be released until that was paid off, too. Definitely have your attorney look over the mortgage.