Advice needed!!! Home Modification and Ch 7 BK

[dianissima]

Ok, we are filing today April 1, Ch 7 no asset case. Keeping our fingers crossed.
Need advice what to do with our mortgage?
Our picture is not pretty(
First 280 K
Second 29 K
Both mortgages via BOA (former Countrywide & Fannie Mae)
Home value 285K per county taxes statement, but the similar home in the neighborhood offered via short sale for 275K and they cannot sell it for 6 months.
We were trying to modify for 3 months, since we both lost main jobs we are not qualify for Mod due to very low income. Our gross income is $3204 now as we only have unemployment benefit and small part time job. Yesterday, after 70 days of calling and e-mailing, begging and escalating it to OOP we received paperwork to fill from BOA, however they lied to us back on January 15, that we are eligible based on our hardship and current income and now they are saying that they need more information. We are sending them everything within 2 days, but it is obvious we cannot be in 31 % for HAMP, due to very low income. Out monthly payment is $2512 and second is $324 and HOA $110 it is almost as our monthly income now...
We just did not pay those bills on March and received extension until the end of the March but we couldn't come up with the money(we were hoping for tax refund, only get $ 76). We were hoping that they will modify and make out monthly payment more affordable. Our loan was 20 Yr conventional ( 16 years left) at 6.3%) so if they will lower the % and extend it to 40 years we can afford payments about $1500 per month. This is about the amount you can rent something similar in our area.
Our attorney told us that they may or may not modify during BK process, he is not an expert for mortgages. Another BOA person told us that they will only modify of we are at least 60 days late, I read Loan safe.org and it is so confusing. .. Many users here advised that we should wait with filing and modify first, but we cannot wait with filing BK anymore, in fact April is the first month when we can file chapter 7 since DH lost his job last Jan and we must find another job and move on. What do you think our options for Modification are? Do we need to stay current during BK? May we qualify for Mod after BK or during BK or we must just let it go?
What would you do? We cannot afford this payment, but we can afford $1400 $1500 per month. This is about how much we will need to rent something similar in our area. We are not attached emotionally to our home but it will be nice to stay here and have an affordable payment until we are back to our feet again and can pay more towards principal. In the other note it is scary to stay with the mortgage which can become more and more underwater... Do you think we should fight for this house or just let it go and rent?
We purchased this home for 400K in 2006 and paid 20 % down back then.
We played by the rules...
Also if we will not be able to modify how long during BK and after BK can we stay here?
Sorry for the long post ..
This forum is a life saver for us. We don't post often but we do read it daily.
Thanks you for you input.

[MarieT]

I think some folks at www.loansafe.org did their BKs first and some after they finished their loan mods. I believe that you have to do one or the other first but maybe it varies by bank. I did my loan mod first and now I am doing BK. I really thought at the time I did my loan mod that once I got my morgage payment lowered that I could catch up but have realized since that BK is inevitable.

Good luck to you!

[akame5150]

From what I understand, while you are in your bk, no bank can modify your loan without approval from the court. This is because of the automatic stay that is put in place when you file.

Therefore you will have to either do the loan mod first or the bk first.

I waited until I discharged my chapter 7 before I filed my loan mod. I was never late on a mortgage payment and had decent income and I was still able to do a favorable loan mod.

Hope this helps.

[pandacb]

if it is a HAMP modification and you have begun trial payments, the rules (https://www.hmpadmin.com//portal/doc...r/hampfaqs.pdf) state that the servicer has to work with the attorney and the court to finalize modification of the loan.

[dianissima]

Thanks for your input

Thanks for all youe reply, folks. I guess we will just wait and see what's going to happen., We did not started the trial payments yet, we are just gping to send all the papers to BOA

[jtindisguise]

From what I understand, while you are in your bk, no bank can modify your loan without approval from the court. This is because of the automatic stay that is put in place when you file.

Therefore you will have to either do the loan mod first or the bk first.

This is true. Right after my chapter 7 closed I was contacted by BofA regarding my application for a loan mod. I was told by the account manager that during an open BK the court must approve any debt modification. Luckily, I was discharged and able to skip this step.

I learned a few things about loan mods. If you are unable to make at least 80% of your existing payment the bank will not help you. This is just what I was told after my approval.

Good luck.

[BananaCabana]

We have not paid our mortgage since May of 2009 and when we went to our third BK consult a couple of months ago we were over $13,000 in arrears. We qualify for a Ch. 7, no asset case but when I told the lawyer that we were in the process of waiting to hear about whether we qualified for the HAMP program in order to try and keep our home she told me to turn it down no matter what it came back as. Her reasoning was that if we accepted the modification and wanted to keep the home we would be automatically shoved into a Ch. 13 because of the arrears amount that we would have to pay back.

The modification did come back approved but they had only lowered the monthly payment by about $200/month which was still unaffordable for us. They also would not tell us anything about the mod such as interest rate, principle amount, etc.

Earlier this year we also went through a mod process with the bank that was the bank's program. They brought the payment down by $500 which was more affordable than the HAMP one was. BUT the first 10 years of payments were to be to interest only. No principle paydown at all in those 10 years unless I made extra payments. If we are paying only interest for 10 years we would be better off renting!

So far, the modifications have seemed to be nothing but a joke and the banks are still coming out the winner in most of these situations. They drag the payments out over longer periods of time earning the interest on that extended time and make more money than they were going to originally on the loan. There may be some decents mods out there but I have not been privy to them yet.

[momofthree]

I learned a few things about loan mods. If you are unable to make at least 80% of your existing payment the bank will not help you. This is just what I was told after my approval.

This may be what your particular lender requires, but it is not standard, and it is NOT part of the HAMP guidelines. We have a permanent HAMP mod and our payment is less than 80% of our original payment.

Her reasoning was that if we accepted the modification and wanted to keep the home we would be automatically shoved into a Ch. 13 because of the arrears amount that we would have to pay back.

That would be true IF you had to repay the arrears immediately. However, the arrears are added onto the loan balance and your account is brought current once again when the mod is finalized. You're only forced into a 13 in this kind of scenario when your account is considered delinquent, which it is not after the mod is completed. I don't think bk attorneys are necessarily up to speed on how these mods work....

The modification did come back approved but they had only lowered the monthly payment by about $200/month which was still unaffordable for us. They also would not tell us anything about the mod such as interest rate, principle amount, etc.

I agree that it's ridiculous that they don't disclose the rate, terms, etc upon entering the trial period--that was my experience as well. They do disclose them all on the permanent mod docs that you have to sign and notarize to finalize the mod. Also, HAMP is supposed to lower the payment to 31% of your gross income. Was that still too high for you? If so, then it's likely not your house payment that's the problem, it's your other expenses. If they didn't lower your payment to 31%, then it wasn't HAMP.

There may be some decents mods out there but I have not been privy to them yet.

I agree, some of the mods I've read about on loansafe.org are horrendous! However, there are some good ones...mine being one of them. I'll share with you and then you'll be privy to at least 1 decent mod success story, lol.

We owed $220k (1st mortgage only) on a house worth about $190k. Payment of $2425 PITI on a 15-year loan with 11 years left. Economy hit, husband had pay cut by 15%, son was diagnosed with autism but our state (CA) is in such a poor state that he doesn't qualify for any aid and insurance doesn't cover his medical expenses, so we had a true hardship. Our mod decreased our payment to $1850/mo ($575 savings) and only increased our term by 2 years, so we now have 13 years left on our mortgage. Even with the extended term, the bank will still make less money on our loan than if they had kept the original terms because the rate was cut so much.

So, yes, while mods don't work for everyone, it certainly worked out well for us, and honestly our 15-year mortgage SAVED us because it meant that we had paid down a large chunk ($60k) in the previous 4 years than if we had been in a 30-year (only would have paid down about $17k over 4 years), so the mod wouldn't have helped us much in that scenario and we probably would have been stuck in one of these crazy 40-year loans...

[BananaCabana]

Also, HAMP is supposed to lower the payment to 31% of your gross income. Was that still too high for you? If so, then it's likely not your house payment that's the problem, it's your other expenses. If they didn't lower your payment to 31%, then it wasn't HAMP.

Yes, the I believe HAMP brought it very close to 31% which is unaffordable at this time due to other obligations that we are trying to get rid of. But at 31% the mortgage is still way too high when you consider the "experts" on debt to income ratios say a mortgage payment including escrow, etc should not exceed 29% of gross income. And before we lost our jobs and had to find new ones our mortgage fell quite nicely into that niche. Now it does not. Once we eliminate the monthly payments from the property we are in the process of selling we could probably swing it if we had to. BUT, with rent between $400-$800/month cheaper for the same property and with how much the house is underwater (SW FL area) it just doesn't make any financial sense to try and keep it. So yes at 31% it could very well be a problem whether other expenses play into it or not. Still, you are right. When I am buying groceries for a seven member family and another modification is only buying groceries for a family of three my mortgage mod is not going to work as well as it will for the family of three. My expenses are going to be much higher than theirs no matter how you look at it. 31% is too high to pay for housing unless it is the only choice out there. For some, it very well may be.

Thanks for sharing your story! I am glad it worked out for you! Especially since it is one of the good ones.