mortgage reaffirm as modifcation leverage

[porkchopcash]

Ok, I have read the stick on why not to re-affirm on mortgage in bk7 and appreciate the sentiments in it. However, I do believe there may be situations where reaffirming is not a bad plan.
Once such scenario would be if you had significant equity (so you would definitely sell instead of just walking away in the future) and you could use the carrot of reaffirmation as incentive to cause the lender to agree to modified terms beneficial to you.

I.E. we have a ARM which is great right now, but could go up and be unaffordable in the future. If we could get lender to agree to reaffirmation at a locked rate similar to what we have right now, the reaffirmation would be a real positive for us.

I am interested in whether anyone has had experience holding out on reaffirmation agreement until lender agreed to modify terms. It seems like a plausible situation because once you file, the leverage changes from them to you.

Please advise me of any such experiences.

[BAR]

I have never tried this but if you look at the other side of the coin.

The bank knows what the house is worth and how much is owed on it. If you walk away, its money in their pockets. If they forclose, still money for them. If you dont reaffirm....what do they care, look at the two previous statements, they make moeney either way. But that is only if they can sell it too, so there is your side of the coin too.

I dont think they would go for any kind of leverage in your case.

Now a case where the house is upside down they may try to do a mod.

But this is all speculation on my part, and playing the devils advocate.

[shark66]

Good luck with the ARM...you do understand that they can pretty much push you into foreclosure any given day, correct?

I very much doubt that you'll get anywhere unless you're dealing with a small local bank that would rather have your money than your house. Big boys don't care...

[justbroke]

I would never use a reaffirmation as a "modification" tool. However, if you want to modify the terms of the note in the reaffirmation, that's a better way to go. I was going to do just as you noted. I was going to leverage the 60 days and force my bank to modify or have the debt discharged.

They offered me a modification (from ARM to fixed and a re-amortization) without the reaffirmation. I tend to agree with shark in that there really isn't much leveraging. I received a modification without a reaffirmation.

[GWBcasualty]

How would you feel about your reaffirmation if in 2 years prices are down another 20%-25%??

http://www.doctorhousingbubble.com/

IMO don't reaffirm. Pay and retain if you like the house but do not relinquish any of the freedoms regained by filing bankruptcy.

[Chowder]

Another vote against reaffirming.

Getting your bank to modify will depend on equity, NPV, and your overall financial picture.
If the numbers are in your favor, maybe (very big maybe) you'll get a meaningful mod.

[porkchopcash]

What do you mean that they can push you into foreclosure any day, just because of an ARM?
I am current on my payments and have the ability to pay if ARM increases.

[porkchopcash]

JB, that is somewhat my thinking. I would like to modify the terms in the reaffirmation. I am not really looking to modify the principal, drop rate, or lower payments. I just want to convert from ARM to fixed.
Do you think that is easier than other more nefarious modifications?

[justbroke]

JB, that is somewhat my thinking. I would like to modify the terms in the reaffirmation. I am not really looking to modify the principal, drop rate, or lower payments. I just want to convert from ARM to fixed. Do you think that is easier than other more nefarious modifications?

I believe it would be easier to get a fixed rate, but that tends to take time since the "investors" must approve (because they stand to lose money -- which always was interesting to me because if you surrender, they will lose money).

I will tell you though... I've read very few reaffirmations that included a change in terms. The ones that I did read were usually those that ended up in litigation years later because the bank didn't apply the terms correctly. I actually have that situation now with the car I reaffirmed and just refinanced. The bank possibly made an error giving me, effectively, a 0% loan, but they actually charged me interest. I'm thinking of challenging, now that I refinanced.

[Chowder]

JB, that is somewhat my thinking. I would like to modify the terms in the reaffirmation. I am not really looking to modify the principal, drop rate, or lower payments. I just want to convert from ARM to fixed.
Do you think that is easier than other more nefarious modifications?

ARMs seem to complicate the process somewhat. Some investors -IIRC Fannie being one- set the rate higher for ARMs, resulting in modest reductions and frequent increases in payments.

[nodebtnomore]

Don't do it, you're crazy if you do. They will promise you "yes we will modifyif you reaffirm" and after you sign your life away to them AGAIN they will deny you, foreclose and sue for the deficiency balance once it forecloses.

[porkchopcash]

nodebt,
I was not going to sign based on promises. My question was whether the mod could be negotiated as part of the reaffirm agreement and included.

[IamIrene]

They offered me a modification (from ARM to fixed and a re-amortization) without the reaffirmation. I tend to agree with shark in that there really isn't much leveraging. I received a modification without a reaffirmation.

This is what I am hoping to do. My lawyer said he could help me do it...is there anything I need to know before we file Chp7? If we could get out of our ARM into a fixed rate without reaffirming...I suppose that would mean if we still had to walk away we could. Is this correct?

[porkchopcash]

What if I do not reaffirm with an ARM. Does the lender have to follow the specifics of the original mortgage with regard to the rate adjustments?
Do all of the terms apply?

[Chowder]

Does the lender have to follow the specifics of the original mortgage with regard to the rate adjustments?
Do all of the terms apply?

Yep.