DSELP loan question

[BKlooker]

DSELP loan question

So my mortgage is being included as a retain and pay on my BK. I have a question.

When I purchased my home, I got it a DSELP loan (Downpayment and Settlement Expense Loan Program), which provided an extra $3-5 grand towards my mortgage as a downpayment thus reducing my interest rate). The loan program was a deferred loan which is repayable when you either refinance the home or upon sale or transfer of the house, provided the house was financed through the loan program I got.

I have a question. Right now, my schedules, etc. lists my mortgage (and the outstanding balance there on) as the only outstanding secured debt I have. My credit report does not show this DSELP loan (assumingly because it’s really rolled in with my mortgage, and used to bring down the balance outright). Both the mortgage and loan program was a state-funded program specifically for first time home buyers.

My question is this: should I get my schedules updated so specifically include this ‘loan’ and have my schedules amended, or leave it be? Would it be included automatically in my BK, since it was attached to the first mortgage, has the same loan servicer (assumingly), and could not be obtained without the first mortgage from the same program? I guess what I am saying is, legally is the loan also discharged with the 1st mortgage, or should I worry about declaring it? I would rather not have to pay my lawyer an extra 200 bucks to amend this if it’s not necessary, but I also don’t want them to be able to come after me for this later. My understanding is so long as I don’t reaffirm anything (as in fully reaffirm with the mortgage company), it’s should be alright regardless.

I am going to talk to my lawyer about this tomorrow (I forgot all about the thing, because it’s not a second mortgage in the normal sense), but is it worth listing? I don’t even know who the creditor would technically be to list.

[tobee43]

i think some people may not know what a dselp loan program is....

down payment and settlement expense loan program (DSELP)
this program....the down payment and settlement expense Loan Program helps eligible borrowers purchase a home by funding a portion of their closing costs.

since the dselp loan is a deferred loan that is repayable when you payoff or refinance the home or upon sale or transfer of the house you financed through CDA...i would also list them as a creditor on your petition...at least this seems "logical". actually, most of these types of loans are "rolled" into your mortgage...is yours listed separately???

[BKlooker]

it's not listed at all at the moment....that's the question...to list it or not bother...would have to pay the lawyer to amend (probably)

[tobee43]

it's not listed at all at the moment....that's the question...to list it or not bother...would have to pay the lawyer to amend (probably)

BK...i meant was it listed or included with your mortgage payment...many times DSELP loans are rolled into the actual mortgage and as long as it's included you should be fine and not have to amend, however, if not and the amount is..i.e. 5k...i would pay to amend the petition.

[BKlooker]

That's just the thing...i don't pay on it at all, period. The idea is you don't pay it at all unless you sell or transfer the property, with the intention that one would in fact fully pay off mortgage loan #1, at which point it's supposedly forgiven. That's why i don't even know what to list (or who), honestly.

If i just list 'Maryland CDA' and the amount of the loan, should that do it?

[tobee43]

that's exactly what i would do...however, make certain you have a "correct " address and account number...even if you only have your mortgage loan number. it's really important that they get "proper" notice. you may want to take a quick glance at your closing papers...it may have the exact info you need...but either way list it!!

[SunshineGal]

DSELP loan question

So my mortgage is being included as a retain and pay on my BK. I have a question.

When I purchased my home, I got it a DSELP loan (Downpayment and Settlement Expense Loan Program), which provided an extra $3-5 grand towards my mortgage as a downpayment thus reducing my interest rate). The loan program was a deferred loan which is repayable when you either refinance the home or upon sale or transfer of the house, provided the house was financed through the loan program I got.

I have a question. Right now, my schedules, etc. lists my mortgage (and the outstanding balance there on) as the only outstanding secured debt I have. My credit report does not show this DSELP loan (assumingly because it’s really rolled in with my mortgage, and used to bring down the balance outright). Both the mortgage and loan program was a state-funded program specifically for first time home buyers.

My question is this: should I get my schedules updated so specifically include this ‘loan’ and have my schedules amended, or leave it be? Would it be included automatically in my BK, since it was attached to the first mortgage, has the same loan servicer (assumingly), and could not be obtained without the first mortgage from the same program? I guess what I am saying is, legally is the loan also discharged with the 1st mortgage, or should I worry about declaring it? I would rather not have to pay my lawyer an extra 200 bucks to amend this if it’s not necessary, but I also don’t want them to be able to come after me for this later. My understanding is so long as I don’t reaffirm anything (as in fully reaffirm with the mortgage company), it’s should be alright regardless.

I am going to talk to my lawyer about this tomorrow (I forgot all about the thing, because it’s not a second mortgage in the normal sense), but is it worth listing? I don’t even know who the creditor would technically be to list.

Generally speaking, DPAPs will be filed along with the Deed and 1st mortgage in the public records of your local court. If your county offers online record searches this will be easy to find out, if not, pay a visit to the local courthouse, chances are you will find they have a 2nd lien on your property. If you don't list them in your BK and the 1st lender forecloses, than you run the risk of being stuck with the balance of that 2nd lien. If it were me, I would pay the $200 to correct the paperwork.

[tobee43]

Generally speaking, DPAPs will be filed along with the Deed and 1st mortgage in the public records of your local court. If your county offers online record searches this will be easy to find out, if not, pay a visit to the local courthouse, chances are you will find they have a 2nd lien on your property. If you don't list them in your BK and the 1st lender forecloses, than you run the risk of being stuck with the balance of that 2nd lien. If it were me, I would pay the $200 to correct the paperwork.

exactly....one does not what to be penny wise and dollar foolish when it comes to this...additionally, no matter what form they are listed in your search....NAME them!

[tcreegan]

Hi all, Hi BK,

Around here, you don't pay on the state-funded assistance but it stays on as a lien against the property. ie: if the property is sold or transferred the state needs the funds paid back. Don't rely on the credit report, it is likely the state agency does not report to the credit bureaus. Check w/ the county or wherever the deed is recorded, they will have a record of the lien (if there is one) If it was rolled into the mortgage note, they should have no lien from the state agency.

Hopefully it got rolled into the mortgage, otherwise they need to be listed as a secured creditor.....

...and like they say, no admendment is good admendment....

Tom in Colo

[SunshineGal]

I've never seen a county assistance program get rolled into a first "purchase money" mortgage, it defeats the purpose. It would also make it impossible to forgive the amount once the time period has passed. Now, if the house has been refinanced, than the lien would have been paid, and NOW it would be included in the first mortgage. Check the Official Records, I would bet the lien is there. One more thing, it may or may not list your actual address, the mortgages attach through legal description so it will say something along the lines of Block 38, lot 5, subdivision, as recorded in plat book 114, etc.

[BKlooker]

Hi guys,

This is to update this. I have an appointment tomorrow with the paralegal at my lawyer's to review the paperwork. She thinks, based on other cases similar to mine using the same loan program, that we should list it just to be sure. But that being said, from a legal standpoint, that a BK does legally 'break' any true 'ownership' I had on that loan, unless I reaffirm, so long as it was a debt incurred before the filing.

In addition, it's technically the same loan servicer for both loans (and the same original lender), and since the first has already been notified of the BK by the courts, they should update the record on the 2nd. BUT, she did say it's better to play it safe and get it listed because they could try to come after it and tie me up in court to stick me with the difference, even though they would likely lose the case, which would cost me money to pay a lawyer to defend, so it's less hassle to pay to get it amended.

I'll update after I meet with her tomorrow. I am going to be bringing her the original paperwork in from the purchase of the home, and she says if she can't find it in there, she can check the county courthouse records online and make the amendment based on the creditor listed therein (yes, they are online in our state, as someone else mentioned).

Sunshine, the house has never been refinanced...the DSELP loan was done at the same time as purchase of the 1st loan. What they do is use the DSELP and pay down the balance on the 1st mortage, as a means of providing a higher downpayment, thus lowering your interest rate. It's not rolled in with the payment because there is no payment, but it is rolled in with the loan in effect.

Tcreegan hit it on the head...it's "technically" a second note, but mostly just in notation. We have to check the record to see if they are even a seperate creditor, and if not, no need for an amendment, which is indeed a possibility.

[tobee43]

good luck with the meeting....i'm really not liking the reaffirm part of the situation...and i also do not think it as a second...it's just an additional note attached....but i'm really curious to see exactly how this is listed...

best of luck at your meeting....up date us!!!

[BKlooker]

Thanks tobee....i wouldn't reaffirm it or any part of the original, either it was just saying that it may cause a legal 'limbo' state if I don't declare it and note a retain & pay on it.

But I have no intention of keeping this home in the sense of reaffirming it, just want to keep living there for a while until i can get this whole matter cleared out in February and the move somewhere cheaper to rent and start fresh. I hope to do some moving around to be with family across the country in a year or two so it's for the better i not reaffirm, and the house totally upside down by a sizeable chunk, so it's stupid to try and keep it, especially since the ARM reset.

[tobee43]

Thanks tobee....i wouldn't reaffirm it or any part of the original, either it was just saying that it may cause a legal 'limbo' state if I don't declare it and note a retain & pay on it.

But I have no intention of keeping this home in the sense of reaffirming it, just want to keep living there for a while until i can get this whole matter cleared out in February and the move somewhere cheaper to rent and start fresh. I hope to do some moving around to be with family across the country in a year or two so it's for the better i not reaffirm, and the house totally upside down by a sizeable chunk, so it's stupid to try and keep it, especially since the ARM reset.

yes, i totally understand, and that will give you an opportunity to save some money...we did the same thing and i'll tell you, even though we lived in that house for 33 years it was hard and first but the BEST decision we ever made! that house...still NOT foreclosed...it's been almost 3 years...2.8 years now....and it's upsidedown over 225k now!!

we sometimes just need to make the best business decisions and keep our emotions out of it, as difficult as that is sometime...good luck and let us know what happens!!

[SunshineGal]

Hi guys,

Sunshine, the house has never been refinanced...the DSELP loan was done at the same time as purchase of the 1st loan. What they do is use the DSELP and pay down the balance on the 1st mortage, as a means of providing a higher downpayment, thus lowering your interest rate. It's not rolled in with the payment because there is no payment, but it is rolled in with the loan in effect.

Tcreegan hit it on the head...it's "technically" a second note, but mostly just in notation. We have to check the record to see if they are even a seperate creditor, and if not, no need for an amendment, which is indeed a possibility.

The purpose of a DPAP is to reduce the loan to value on the first mortgage. For example, you buy a $100,000 house. DPA gives you $20,000. The mortgage is never paid down, rather, your loan amount simply becomes the $80,000, or 80% loan to value. When your period of time specified has passed, that loan is then forgiven. However, every one I've ever seen has been recorded as a second lien against the house. When there is a lien against your house for any amount of cash, it is technically a second mortgage regardless of what they call it. Believe me, if that property is sold, or the first mortgage is refinanced within the time required, that DPAP money becomes due and payable on the title work. Now, instead of owing $80,000 you owe $100,000, or, whatever the payback terms are on the original agreement. Some forgive a certain amount for each year you live in the house, others require the full amount if you sell one day short. They are usually different for each county.