Reaffermation, with a twist

[tay666]

Ok, I'm not quite to the point where I really have to deal with this, but I like to get ahead on things so I am prepaired. (filed either today or tomorrow, not quite sure yet. 341 not until the end of next month)

I know that usually, it is best to not reaffirm the mortguage, and instead just pay-and-stay. That way, if something happens down the road, you can walk without being on the hook for the balance.

But I am in an odd position.
My house will be paid off in 3 years.
I only owe $11,000.

So, if my bank does offer me a reaffirmation, I am thinking I should jump on it.
This close to the end of house payments, I don't think I want to risk the bank actually forclosing. (I know, not likely at all, but you never know)

Anyone think signing would be a bad idea?
If so, what am I missing in my thought process?

[ja181]

I would wait and see what your attorney thinks. Since you're continuing to pay..they don't really have much of a reason to file for relief of stay to attempt foreclosure.

Also, have you tried a loan modification? You might qualify for some of the recent federal programs...might be able to just eliminate the rest of the mortgage completely...

But might want to wait until after your discharge to try.

[tay666]

Not really worried about them filing for relief of stay.
But who's to say that 2 years from now, when I only owe them $3500 they might decide "Hey, we can make more off this by forclosing and auctioning it, than we will make on the rest of his payments"
From what I understand.
Without a reaffirmation, I actually have no claim to the house after the debt is discharged in BK. Which is why I can walk away from it without any ramifications.
But the flip side is, the bank can actually forclose at any time. They don't actually need any kind of reason. Just most don't as it is easier and more profitable to just keep accepting payments

[ja181]

Good points...

[justbroke]

In almost every State that I know of, a bank can't foreclose upon real property unless you're actually not paying or don't have hazard insurance. (With hazard insurance, they usually force place insurance and escrow the amount into the mortgage payment.)

So, I guess it really doesn't matter whether you reaffirm or not, but they cant foreclose unless you don't pay.

From what I understand... Without a reaffirmation, I actually have no claim to the house after the debt is discharged in BK.

Not true. You are the owner of the home, especially if it's in a State which uses a mortgage and not a deed of trust. The only way for the lender (or lienholder) to gain title, is to foreclose.

Not reaffirming does not destroy or modify your rights as the owner. Not reaffirming only destroys your liability to pay the underlying Promissory Note.

But the flip side is, the bank can actually forclose at any time. They don't actually need any kind of reason. Just most don't as it is easier and more profitable to just keep accepting payments

Not true. The bank/lender must follow the State's underlying non-bankruptcy laws regarding foreclosure. if you read them, you'll see that there must be a default in order for them to foreclose. Bankruptcy is not a constructive default for purposes of foreclosure law, at least as far as I have read. An actual default would be that you failed to make the payments.

The laws are in place so precisely the thing you are afraid of, doesn't happen. That's why I think I'll never buy in a State that uses non-Judicial foreclosures (and Deed of Trusts) again, because it's too easy to foreclose, although a default must have occurred.

[river147]

filing chapter 7 and reaffirm mortgage

So let me get this right, If I file chapter 7 and then Reaffirm my mortgage. I still have ownership to the mortgage right? Can the bank deny my reaffirmation and then decide to forclose? If my loan is brought current before I file chapter 7 and continue making payments, can they still deny my reaffirmation? I'm still confused about this one.

[justbroke]

So let me get this right, If I file chapter 7 and then Reaffirm my mortgage. I still have ownership to the mortgage right? Can the bank deny my reaffirmation and then decide to forclose? If my loan is brought current before I file chapter 7 and continue making payments, can they still deny my reaffirmation? I'm still confused about this one.

Your loan isn't current? If your loan isn't current and you file Chapter 7, they will file for Relief from the Automatic Stay and proceed under your State's non-bankruptcy "foreclosure" laws and rules in order to repossess the home.

You retain ownership of your home regardless of whether you reaffirm or not. Whether they'll proceed with foreclosure in order for them to obtain ownership, or to sell it, is another story.

[StartingOver08]

I did not understand from your first post that you are not current with your mortgage. How far behind are you in the payments? Tay, as JustBroke alludes, make sure you are current before you file Ch 7.

If you file Ch 7 and you are not current, the bank will probably move to lift the stay and foreclose. Most foreclosures move slowly if the house if upside down in value. HOWEVER, where there is equity, the banks move very quickly to foreclose. They can easily eat up the equity in attorney fees and default interest.

[Pandora]

do you not want to stay in the house / state you live in?

I wouldnt give up the ghost - to let the bank have the house when there is only 11K owed on it...nope. Obviously there is equity if you owe that little, so what is the value of the house currently?

I'd file a Ch. 13 to keep the house and bring the payments current under the plan, but then again... you didnt mention you were behind in your mortgage, so like the others asked, how far behind are you? You also need to account for the equity in your house in either Chapter you file as exemptions come into play.

[lmaosm]

Not really worried about them filing for relief of stay.
But who's to say that 2 years from now, when I only owe them $3500 they might decide "Hey, we can make more off this by forclosing and auctioning it, than we will make on the rest of his payments"
From what I understand.
Without a reaffirmation, I actually have no claim to the house after the debt is discharged in BK. Which is why I can walk away from it without any ramifications.
But the flip side is, the bank can actually forclose at any time. They don't actually need any kind of reason. Just most don't as it is easier and more profitable to just keep accepting payments

They can't do that! Listen closely to your attorney and follow their directions.

[Mi Bankruptcy]

It would be more concerned about the trustee wanting to sell my house to get the equity in the house. How much equity do you have in it? You said you only have 11 more years until it is paid off??

[tay666]

It would be more concerned about the trustee wanting to sell my house to get the equity in the house. How much equity do you have in it? You said you only have 11 more years until it is paid off??

I only have 3 years left to pay on it.
About $11,000 left on the mortguage.

Equity - according to the tax valuation, about $35,000.
In real life, given the current condition due to no funds for mantanence the last 3 years, and the current housing market in the area, maybe $10,000 - $15,000.

I am not behind. river147 is the one that menitoned their loan is behind.

And yes we want to keep the house. We are looking forward to not having a house payment in the near future.

The paralegal said the attorney will go over this stuff with us sometime around our 341. I was just wanting to get my head wrapped around all the possibilities ahead of time.
Glad to hear the my train of thought was way off the tracks.
After readind some of the responses, I did some more research online, and discovered that in Ohio, they cannot just decide to take the house.
If found this (or very similar quotes) on several different pages relating to CH7 in Ohio.
"So long as you continue to make your mortgage payments on time, your mortgage company cannot sell your home by filing suit to foreclose on the mortgage. "

[keptdigging]

Not really worried about them filing for relief of stay.
But who's to say that 2 years from now, when I only owe them $3500 they might decide "Hey, we can make more off this by forclosing and auctioning it, than we will make on the rest of his payments"
From what I understand.
Without a reaffirmation, I actually have no claim to the house after the debt is discharged in BK. Which is why I can walk away from it without any ramifications.
But the flip side is, the bank can actually forclose at any time. They don't actually need any kind of reason. Just most don't as it is easier and more profitable to just keep accepting payments

You're not thinking this through at all. Even if the bank COULD foreclose on you in 2 years with $3500 owed... they would get $3500 (plus their reasonable costs) and YOU would get the rest. The bank is only entitled to what they're owed. They DON'T OWN the house. It is not rent-to-iown!

That said, I don't think they can foreclose at all if you're current.

And, obviously, even if they could, there's no incentive for them to do so if you're current.

[river147]

current on mortgage but filing chapter 7

My mortgage loan will be brought current once my modification is finalized.
I plan on filing chapter 7 and include the house, but will reaffirm the mortgage.
My concern is, can the bank deny by reaffimation? Reaffirming means I am re-agreeing to continue to make payments on the mortgage right? But do I still retain ownership of my home? Once I reaffirm and if I fall behind on payments later(this is after my bk is discharge), can the bank still have the legal right to forclose or can I just walk away from the mortgage without any ramifications since I included this house in chapter 7 ? Sorry, I'm still confused about this and still need clarification.

[newbie2]

My mortgage loan will be brought current once my modification is finalized.
I plan on filing chapter 7 and include the house, but will reaffirm the mortgage.
My concern is, can the bank deny by reaffimation? Reaffirming means I am re-agreeing to continue to make payments on the mortgage right? But do I still retain ownership of my home? Once I reaffirm and if I fall behind on payments later(this is after my bk is discharge), can the bank still have the legal right to forclose or can I just walk away from the mortgage without any ramifications since I included this house in chapter 7 ? Sorry, I'm still confused about this and still need clarification.

Don't reaffirm. Just pay and stay. If you reaffirm then stop paying you will be liable for the note again.

The mortgage always stays in place (the banks right to foreclose if you don't pay). What you don't want to happen is that they can come back on you after your bankruptcy is discharged.