Why reaffirming a mortgage is a very, very bad idea.

[sh9730]

Babsy,

THAT topic has a lot less information out there. I think that is because this phenomenom is still pretty new in any real numbers. My GUESS is the answer is yes....and Im hoping that is the case just in case I ever need to do a "cash out" refinance. If I am fortunate enough to never need the cash, then as I said earlier there is NO reason to refinance....why would I put myself back on the hook (liability wise) unless I needed cash for some reason since I have a very good rate now as a result of my modification. I think you said you had a modified loan with a good rate so I wouldnt be able to see any other reason you would want to refinance.

BUT, if for some reason you do, my guess is the criteria will be based upon your credit standing at the time of the request and would follow the same guidelines as those trying to buy a NEW house. However many years after the BK the bank requires etc...the one thing in our favor is we wont have a seperate FORECLOSURE on our report.....

[arthoralbert]

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[keepsmiling]

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[LadyInTheRed]

Can we ditch the spammer, please?

One of my fellow moderators did that this morning. Note the "banned" notation under the user's name.

[avery89]

HELP. Everything I've read on this thread has to do with people having no equity or negative equity in their home, so that makes perfect sense to me not to reafirm. I have considerable equity in my home that I intend to list as exempt. Does that change the circumstances? I have a first mortgage that is/was in the process of modification prior to filing for BK, and a second mortgage for $200,000+ (which they had offered me $30,000 to settle.... if I only had that amount).

If it is still adventageous for me not to reaffirm, how do I proceed. I've already filed the intent to reaffirm. I wait for the bank to send me a reaffirmation agreement, I decline.... then what?? From my understanding, they will still discharge the bk and the loan will be erased. I hadn't paid my mortgage in about a year, do I just start paying my normal monthly payments as if I was on time?

what about my second mortgage? By filing BK, am I forcing myself to pay on a 200k loan, as opposed to the current option of settling for 30k. I'm assuming the settling won't be on the table anymore after the BK, as there won't be any personal obligation. Will their only choice them be to foreclose? Would they possibly agree to reaffirm for a lesser amount.... and why would they do that?

[despritfreya]

I have considerable equity in my home. . . . Does that change the circumstances?

No.

I have a first mortgage that is/was in the process of modification prior to filing for BK,

You can continue to attempt to modify the loan regardless of the bk. Modifying the existing loan does not equate to signing a reaffirmation agreement.

(I have). . . a second mortgage for $200,000 . . . which they had offered me $30,000 to settle....

I do not understand why a lender would offer to settle if, as you say, the home has considerable equity.

I've already filed the intent to reaffirm.

The statement of intentions is basically not relevant. If you are going to reaffirm you have to sign a separate document which then has to be filed with the Court and approved by the Judge.

(If) I wait for the bank to send me a reaffirmation agreement, (and) I decline.... then what??

Nothing. You simply did not reaffirm and so long as you pay, you can stay.

I hadn't paid my mortgage in about a year, do I just start paying my normal monthly payments as if I was on time?

The missing payments must somehow be dealt with, possibly through a successful modification. Ignoring them is not going to make them go away. The missing payments are attached to the lien. While the debt goes away, the lien does not. If you do not voluntarily service the debt (catching up the arrears and making all future payments) the lender can exercise its rights to foreclose the lien.

what about my second mortgage?

Again, while the debt goes away, the lien does not and, if you have sufficient equity in the property the lender may foreclose at some point. As to the settlement, it may or may not be on the table but if you do not have the cash to pay the requested sum it does not matter.

Would they possibly agree to reaffirm for a lesser amount....?

Probably not since there is sufficient equity in the home but you can always ask.

Des.

[avery89]

Thanks so much, Des, for your quick reply. I will definitely follow your advice. To answer your question, the reason I think they offered a settlement is because it does not appear I have any equity in the home because of a very large tax lien that will be signifincatly lowered once I refile my 2006 tax return and correctly claim profits of a home I sold in 2006 (they currently have the total sale of the home as income).

It seems that lien might be working in my best interest, and I might just stall on fixing that error.

[ValleYum]

Edit: Nevermind, blonde moment.

[BarkingCat]

avery89's post about the tax lien made me wonder: Does not reaffirming the mortgage affect a tax lien? If I did not reaffirm my mortgage, which is currently superior to an IRS lien, would the IRS lien maintain its current "position" in the queue," or would it jump ahead of the not-reaffirmed mortgage?

[BarkingCat]

Ah, never mind... answering my own post after more research. All liens pass through chapter 7, not just IRS liens, so not reaffirming should not affect the current "order" of the liens.

avery89's post about the tax lien made me wonder: Does not reaffirming the mortgage affect a tax lien? If I did not reaffirm my mortgage, which is currently superior to an IRS lien, would the IRS lien maintain its current "position" in the queue," or would it jump ahead of the not-reaffirmed mortgage?

[DaisysMom]

I have a very small lien on my home for State Income Tax. My question is if liens get charged interest? Now that I'm discharged and off to my new start, that is one of the first things I am going to "clean up."

DM

[philslyn]

interesting.. i see your point over on this one.. however aren't a debtor is suppose to fill out the reaffirmation agreement for every loan they want to keep while filing bk. so suppose you want to keep your car or a house. isn't a debtor is always ask to fill out the reaffirmation agreement. if its not necessary then should it just be left in blank?
now i got me confuse

[forest007]

Hi,

I have a question. I filed a Chapter 7 on June 28th. The 341 meeting is scheduled for August 24th. I am not reaffirming the loan on my home but plan to stay in it and continue paying.

When I originally took out the loan the bank gave me a reduced interest rate (I think it was reduced by 1%) for setting up the loan on autopay. They did not debit the payment from my account this month (I'm assuming because they were notified of the bankruptcy). Should I send the payment in? I'm afraid of being charged late fees and having other problems.

Thanks

[despritfreya]

They did not debit the payment from my account this month. Should I send the payment in? I'm afraid of being charged late fees and having other problems.

Of course you should make sure the payment is made, especially if you want to keep the property. The lender may go back to the automatic debit once your Discharge is entered. You can call the creditor to find out its policy. It may want something in writing that states you are voluntarily authorizing the debit despite the bk.

Des.

[forest007]

Thanks Des. I didn't know what to do and don't want to make ANY mistakes. I'll be so happy when this is all over.