Question to those who did NOT reaffirm mortgage but intend to keep their house

[blueeyz]

I met with the paralegal in my attorney's office last week and she advised that I do not reaffirm my mortgage and just make my payments. OK, well that sounds fine and dandy, pay the mortgage and if you decide to walk away, you are not held responsible. Sweet deal right? OK, I get it BUT the positive payments are not reported on your credit. That bothers me because I intend to stay in my current home for many years and some day plan to sell and buy a bigger home as this is my first home.

What happens when I try to get financing on a new house years down the line and my credit shows that I included my house in my BK and I have nothing to show for all my current payments? I think that looks irresponsible. I would not think that would be beneficial in getting a good mortgage loan. Opinions on this?

[bk2009]

What if you lose your job in a year and get behind in your mortgage payments? What if you are severely disabled and unable to work? You can't file BK for a long time again, so you could be responsible for the difference when the mortgage company forecloses AND you would still have the ding of a foreclosure.

When you go to buy again, you'll probably have gotten some other credit by then, to show good payments. Also, whoever you are applying with for a mortgage will know that you weren't foreclosed upon because there will be no foreclosure on your CR. And they'll probably ask "so, hey, whatcha going to do about this other house? Sell it?".

[blueeyz]

I completely understand the pros of not reaffirming. The only credit I plan to have is my car loan because I want NOTHING to do with credit cards ever again. I do not want to have trouble buying another house some day because I have no positive mortgage credit to assist me in that regard.

[bk2009]

Well, I would think a car loan would show positive payments. Let's face it, you didn't have a positive mortgage line before you purchased your first house either, so it's not like that's a necessary step. They're going to look at whether you pay bills on time (your car payment) and your debt to income ratio (which should be fantastic with no other CCs to worry about).

[Peeps]

I'm with you... wondering the same thing. I'm not entirely positive, but I think it's just a sale deficit that people can walk away from (the house ends up selling for less than whats owed) and I think some states have slightly different rules on it. In my case, I have some equity in the house and I plan to keep up with all the payments even through a possible BK. I figure if I ever get into trouble I can just sell the place myself, take whatever profit might be there, and pay off the loan to the mortgage company. Like you, I eventually plan to sell it somewhere down the line and will also need a good payment history to help get lower rates on a new home loan.

I would guess that one could still show proof that payments were made on time to the first mortgage company when applying for a new loan. Even if there's no supporting info on a credit report, there's still a paper trail of proof. With so many BKs nationwide, I have to believe mortgage companies have seen this before.

If you're planning to work with an attorney, he/she could probably fill in the gaps. There are some law firms that seem to have specializations in both BKs and home loan negotiation/modification. They probably have all sorts of good info. I have a feeling I'll be looking in that direction, myself.

[blueeyz]

True, when I bought my house I did not have any previous mortgage payments. Debt ratio is huge and my credit score will be high so it probably will not be an issue. I just do not like making my payments on time with nothing to show for it.

I will have previous credit reports to show that all my mortgage payments were made on time except one 30 day late for the first 2.5 years of the loan before it was included in the BK. I just worry that the rug could potentially be pulled out from under me because I will no longer have legal responsibility to my mortgage.

[Egr61]

I'm also not reaffirming my mortgage, and I intend to keep my house. I read somewhere that you could post the mortgage payments to your credit report yourself, even if the lender did not. Is that true?

[help1234]

Just to give you a little perspective on why NOT to reaffirm. When we were getting paperwork together in March, 2010 we had market analysis from 2 different agents. At that time we had almost $90,000 equity (we were able to exempt it). The lender wanted us to sign an agreement, but our attorney advised against it especially since the market is so unstable right now and my DH is retired/disabled. We are now 3 months post discharge and just for laughs and giggles I had another analysis last week... We now have only $30,000 equity. In about 10 months we have lost $60,000!!! At this rate we will be underwater before the middle of next year. Yes, we plan on staying here, but what happens if this continues and DH's health gets worse and we have to leave? I can sleep very well at night knowing we made the right choice and can just walk away if needed.

[tcreegan]

Hi blueyz,

the positive payments are not reported on your credit. ....they can be, send a written request to your lender. The credit line can be notated 'paid as agreed'

you could post the mortgage payments to your credit report yourself, even if the lender did not. Is that true? ...hmmm, never tried that but I don't think it will fly, people would be putting all kinds of positve stuff on their reports.

I think it's just a sale deficit that people can walk away from ...you can walk away from the entire mortgage note, deficiency and all

Thinking ahead to a future home loan, pull the big three credit reports a few months after discharge and clean them up. Leave positive entries alone, get negative ones labeled as 'included in BK' w/ a zero balance. Then start doing some credit rebuilding, you would be amazed at how fast you can pull your score up.

For one thing, your debt to income ratio never looked better....

Tom in Colo

[tay666]

FWIW, my mortguage is still reporting like it always has.
Sure, I just got discharged last month, but my bank never even reacted to my BK.
Possibly, because it is held by a local bank (I don't get a bill, as it is a passbook mortguage)
But when I checked one of my CRs just after discharge, my mortguage didn't even note iib.

[SunshineGal]

Keep proof of your payments by either cancelled checks or bank statements. As long as you can show your payment being paid every month on time the lender should accept that. Don't count on a lender to offer a verification of mortgage, some of the banks get really nasty when the loan isn't reaffirmed.

[tcreegan]

Hi all,

I saw a post like yours tay666, it was Citi I believe, they just kept reporting like nothing happened.

Stranger things have happended I suppose...

Tom in Colo

[tay666]

I just hope they keep reporting just like that for the next 30 nonths (which is when our mortguage will be paid off)
Will make rebuilding my credit a whole lot easier