Are we liable for a Reaffirmed Mortgage in CA?

[gi79]

Hi, I hope to get some insight to our situation.

We filed bankruptcy in July 2010. We got a letter from Chase stating if we did not reaffirm our mortgage, within 60 days of meeting of the creditors. If we do not sign a reaff, the Loan will be treated as a discharged upon receipt of the Chapter 7 discharge. Our intention was to keep our house because we were approved for a loan modification in March 2010. We signed a reaff agreement with Chase on 10/9/2010. We continued to make our payments, but we didn't pay the July or Sept 2010 payment because we were still deciding on whether or not to keep the house. Our discharge was in November 2010.

I contacted Chase to get our statements back to electronic and make a payment for January 2011, so I didn't have to send a check anymore and I could just use bill pay. When I spoke to the rep, she indicated we had a credit because our payments were in a suspense account and she gave that to us, and said not to make a payment until March 2011. I received a statement and all was current, until I had a notice in April that my account was past due 4 months. Once again I called and they informed me that the credit should have never happened and I needed to come up with the past due amount. I was also told to reapply for a new loan mod to help with the past due amount. I then received a letter of intent to foreclose. I've been denied for the new loan mod, and they are insisting for me to do a short sale HAFA program.

At this point, we are so fed up with the back and forth with Chase over the past 2 years and are ready to walk!

Our problem,
-We signed a Reaff
-We live in CA
-This is our 1st mortgage (not sure if it's original since we reaffirmed on a loan mod)
-Will we be liable for the deficiency amount if we walk

Please advise, we are at a loss of what our next step should be.

[AngelinaCat]

Hi gi79. Welcome to the forum. I moved your post into a thread of its own so that it will be more easily seen and responded to by the members. I also deleted the identical post that you placed on the Foreclosure board. Duplicate posts are not allowed as it becoming too confusing when posters are trying to follow and answer questions, when there is more than one thread with the same question.

As to your question, I would have to say that yes, you will be held responsible for the difference, if you do walk. This is why so many recommend against reaffirming a loan. I know that isn't what you want to read. Perhaps a California member will have a little more insight into your situation.

Good luck

[HHM]

Unless the reaffirmation was signed by the bankruptcy Judge and entered as an order granting reaffirmation in the bankruptcy court, then NO, you will not be liable for the deficiency. However, you may still have some practical hassle with Chase since there is a "signed" agreement, Chase may code the account wrong and you may get some collection efforts.

[gi79]

Thanks!

Where do I check to see if the reaffirmation was signed by the judge? We had an attorney sign the reaffirmation and he faxed it over to Chase.

[HHM]

Thanks!

Where do I check to see if the reaffirmation was signed by the judge? We had an attorney sign the reaffirmation and he faxed it over to Chase.

Well, things are NOT looking good for you.

First, Call your Attorney, that is the first thing you should be doing.

If the attorney is non-responsive (and he probably will be because no attorney worth anything would sign off on a reaffirmation on a mortgage), then you can get a PACER account and log into your case. (just google PACER)

If, in fact, the reaffirmation was filed with the court, then you WILL BE LIABLE for the deficiency if you walk away. Note, CA has some rules on deficiencies, so you will want to check whether you would be liable at all notwithstanding the reaffirmation.

[despritfreya]

But. . . and I have no clue. . . would the California anti deficiency statute help despite the loan mod and the reaff?

Des.

[debee]

Refinanced loans in CA are recourse, but they have to foreclose judicially which takes longer and costs more. It's not that common out here unless they know there's a pot of money at the end of the rainbow.

What they're likely to do may depend somewhat on OP's particulars. Property value vs. loan balance. Income/assets, age, etc.

[gi79]

Refinanced loans in CA are recourse, but they have to foreclose judicially which takes longer and costs more. It's not that common out here unless they know there's a pot of money at the end of the rainbow.

What they're likely to do may depend somewhat on OP's particulars. Property value vs. loan balance. Income/assets, age, etc.

Yes, but our loan is not refinanced, the terms of the original has changed, per CHASE. So I'm assuming it's still a non-recourse loan. How would I find that out?

[despritfreya]

@debee,

So, the next question is. . . and again, I have no clue under California law. . .

Assuming the modified/reaffirmed loan was the original PMSI loan, did modifying/reaffirming change the nature of the loan thus removing it from the protection of the anti deficiency statute?

This was always an issue for me in my state however, over the years, state court cases have made such an argument extremely unlikely but, I am still wary about it hence my adamant feelings against reaffirming.

Edit: Looks like OP understands the issue. . .

Des.

[debee]

Yes, but our loan is not refinanced, the terms of the original has changed, per CHASE. So I'm assuming it's still a non-recourse loan. How would I find that out?

If it's the same loan and same deed of trust (no date changes), then you should still be non-recourse. I would talk to a lawyer.

edit: Missed your post, Des. I have my typing window open for long periods because I have kids around so I sometimes miss posts. I'm no expert but I think even if the dates changed, because it's still the original lender, the original mortgage amount would be non-recourse because of substitution doctrine.

(Union Bank v. Wendland, 1976)

[gi79]

Should I contact a bankruptcy or real estate lawyer?

[gi79]

Well, I contacted the attorney and he stated he no longer will help us as our discharge was in 11/2010. So, where do I start?

[debee]

Real estate lawyer.

We were in similar position pre-BK. One cash out refi (recourse) and one that wasn't. In the end, we filed and didn't have to worry about it.

The research I did leading up to that decision suggests that what the banks sometimes do here is initiate a judicial foreclosure even though they have no intention of following through with it. It's a threat. From what I recall it takes about a year. They have to go all the way to get the deficiency judgment. What they often do is start the judicial proceedings and then foreclose with the power of sale clause (or whatever it's called) before anything ever gets to court. If that happens, because of the one-action rule, they cannot come after you.

edit to add: I sent you a pm with a link that I can't post in the public forum. Might help. Only mention it because you're new and might not see you have a pm notification. Upper right of your screen.

[gi79]

Thanks for the info, I just got a PACER account and CHASE did file the Reaffirmation with the court. Man, I'm kicking myself about signing the reaff....whoever reads this in the future..DO NOT sign the Reaffirmation, even if they threaten you with losing the house.

So back to our problem...walk and risk being sued for the deficiency, or short sale and risk being sued as well. We have drained all our accounts to save the home and now we are about to have nothing.

[debee]

I just looked up the HAFA short sale terms and one of them is that there are no deficiency judgments allowed. It's written into the deal. Aggravation and hassle, but no deficiency.

If your loan is non-recourse, then you don't have to bother with the hassle of the short sale. You would probably want to hire an attorney just to be sure. So less aggravation, but more out-of-pocket. Although you could probably make up the lost money by not paying the mortgage.

Meantime, I found a reference to this CA case which holds that an alteration, modification, renewal, or extension of a note does not waive a borrower's purchase money protections, even if the change results in favorable terms for the borrower. DeBarard Properties v. Lim (1999) 20 Cal. 4th 659

EDIT: As I mentioned before, I don't know if either of the citations are still good law. I hope so.