Balloon payment on 2nd mortgage coming due

[momof3b1g]

We filled a 7, 2 years ago. We have been keeping the 1st and 2nd mortgage payments current. We have not reaffirmed either. But we have a balloon payment due on the second this fall. What happens if we do not pay the payment or refinance the loan?

The 2nd is only $13,000. I am pretty sure the house is worth at least what we owe on both.
There arent many choices if we decided to walk away from the house. Not to mention the cost it would take to move etc.

[helpmeout]

I wouldn't refinance as it would put you back on the hook for the money owed. And you may end up with a higher interest rate and a higher payment.

Yes, there are choices if you decide to walk away. You can live in your house rent free and save money until the bank(s) foreclose. Or you can not pay the 2 nd mortgage and see if they will settle. But if the FMV is enough to cover both mortgages, they just may decide to foreclose.

[despritfreya]

If you want the house but cannot work out an extension from the 2nd, discuss filing a 13 with a local attorney (you can file a 13 you just won't be entitled to a discharge but, you probably don't need one anyway). You should be able to force an extension of the balloon over the 5 year Plan.

Des.

[momof3b1g]

But how do you get out of paying? its connected to out checking account. We are expected to pay the balloon payment in Nov. We could walk away an have it worse then we do now. Living on the street or paying rent for a crappy rundown 2 bedroom place.
If we cant afford to pay what we pay now. How do you think we could afford another home? Or qulaify for one?
How do you force an exdtension?

[helpmeout]

But how do you get out of paying? its connected to out checking account. We are expected to pay the balloon payment in Nov. We could walk away an have it worse then we do now. Living on the street or paying rent for a crappy rundown 2 bedroom place.
If we cant afford to pay what we pay now. How do you think we could afford another home? Or qulaify for one?
How do you force an exdtension?

Close that account out and change banks.

BTW, I thought that it would be worse giving up the house and having to live in a 2 bedroom apartment (I have two opposite gender kids) was the worst thing. I found one that was way less than the mortgage (not hard given that my mortgage was $2K a month) and was decent. I really don't want to be a homeowner, but there have been people who have bought houses after BK and foreclosures. Have you looked at apartments within commuting distance to work? It may not be as bad as you think. If you are trying to stay in the town you are in for your kids, while that may be a noble thought, it may not be feasible if you can't find a decent apartment to rent or come up with the balloon payment.

As mentioned before, a Chapter 13 would force an extension. But it would mean two BK's on your record.

[momof3b1g]

Close that account out and change banks.

would they even let me close it with the loan attached to it?

BTW, I thought that it would be worse giving up the house and having to live in a 2 bedroom apartment (I have two opposite gender kids) was the worst thing. I found one that was way less than the mortgage (not hard given that my mortgage was $2K a month) and was decent. I really don't want to be a homeowner, but there have been people who have bought houses after BK and foreclosures. Have you looked at apartments within commuting distance to work? It may not be as bad as you think. If you are trying to stay in the town you are in for your kids, while that may be a noble thought, it may not be feasible if you can't find a decent apartment to rent or come up with the balloon payment.

We live on 4 acres and these houses with land are hard to come by. 4 kids/teenagers its not easy moving into an apartment.

As mentioned before, a Chapter 13 would force an extension. But it would mean two BK's on your record.

so a 13 is the only way to force an extension?

[despritfreya]

You are missing the point. If you want the house you MUST deal with both mortgages. If you cannot pay the balloon when due and are unable to work something out your only alternative (other than walking away) is to do the 13 (who cares if there are 2 bks on the CR if you want the house).

Paying $13k, with a reasonable interest rate (say 5 to 6%) over 60 months will cost you approximately $250/month. Your Plan payment will be higher because you have to factor in the Trustee's fees, legal fees and payment of any other debt (like a vehicle) you may have. If you can't afford the Plan payment you can't afford the house.

As to the bank account, simply don't use it if you can't close it.

Des.

[btbeme]

First, I have to ask what you original intention was when you filed you Ch 7. If it was to stay, I am a bit surprised that the balloon payment issue snuck up on you like this. If it was to ditch the home, I am surprised you stayed and paid. Maybe something in your plans changed...

Nonetheless, you are in a bit of a pickle.

To stay, you have to pay. I'd recommend that you get a real estimate of your home's value. If you are upside down you have a bit more leverage, though I am pessimistic that it would make much difference.

A Ch 13 would help you delay the inevitable, but I think you might have a shot at simply discussing your situation with your second mortgage holder. Are your first and second with the same or different banks? Most banks, most of the time, would rather find a solution for you to pay rather than foreclose or have you default. If both loans are with the same bank, this is easy for them to fix.

Get a value on you home, call your second, and ask for their help. Keep a Ch 13 in your pocket though.

And, seriously evaluate your circumstances and how you have arrived at this place. Maybe a change of game plan is in order, even if it hurts.

[momof3b1g]

Seeing we filed 2 years ago. The balloon payment didnt just sneak on up on us. We had all intentions of paying both. Now 2 years later we have to think about what to do with a balloon payment coming due. One problem is the economy. My dh jobs high time is summer. Where he normally works 60+ hours a week. So that gets us through the other months. When hours are less. But this year has not be anywhere near as many hours per week. So a big decrease in pay.
Everyone says dont reaffirm which we didnt. But now we have a balloon payment do. We have to do something.
The loans are with 2 different co's. We cannot refinance both into 1. Because of the bankruptcy. DH has been trying to find a better paying job, but no luck. He has his resume in somewhere and hoping for a call before the end of the month.

Oh I also lost my job a year after we filed. So unexpected. That also didnt help.

Looks like we will need to talk to the 2nd mortgage co. What do you suggest telling them? We wont have the balloon payment and will not be able to pay the monthly payment come fall?

[Pandora]

agree with all others; unless you can 1. file ch. 13 and pay that way; 2. let the house go - you are out of options. Lucky for you you didnt reaffirm, as now you can walk on both mortgages and wont get hit with any deficiencies or anything. Those are really the only options you have - unless you can get the 2nd to lock you into a fixed rate (doubtful) and extend the loan terms out by their "good graces" (again doubtful) without doing any sort of new loan paperwork / refi.

[albacore44]

13K is peanuts. The 2nd probably wont even bother to foreclose for that small amount. You will have to settle up some day to release the lien though.

[btbeme]

What do you suggest telling them? We wont have the balloon payment and will not be able to pay the monthly payment come fall?

I'd say that is the right thing to discuss. Advise them you are looking at all options - refinancing the 2nd, walking away, or forcing them to accept less over a longer period of time via Ch 13. All are legitimate choices - ask them which option would be best for them.

[momof3b1g]

We have been banging our head over this the past few weeks. What do you think our chances are they would except a settlement? I am just now looking at other posts but see most are settling because they owe more then the house is worth. We only owe $100,000. The house worth about $130,000.
Just read credit unions are not fond of settlements

[btbeme]

If you are not seriously underwater - and you are not - they basically have you by the short hairs, per your contract. Even if you did not reaffirm your mortgages in your Ch 7, the amount owed is secured by the collateral. If that collateral is worth more than what you owe (deducting the necessary fees and a typical discount for the foreclosure sale) they will almost certainly move to secure their interest via foreclosure if you do not pay.

You can call. You can try. You can halt payments and see how long it takes them to either foreclose or play ball.

But you cannot just "not pay" and expect them to do nothing. Banks do not want to foreclose, but sometimes - if you do not help them help you - they have no choice.

Now - let's say that you call to negotiate and you don't get anywhere. Filing a Ch 13 is really your only defense, and that is really nothing more than a delay. You have nothing to lose by trying to call and negotiate a settlement (or other terms) but they have little incentive to help you AND they have an awful lot of leverage. If you want to settle for 10 cents on the dollar and they think they can get 50 cents after fees and such well, ...

Stranger things happen every day...but every day you wait is a day in their favor. And as Albacore said, $13k really isn't a whole lot -that is probably the only thing you have going for you at this time. It will likely be half of that after a foreclosure. But it is all academic if you don't call and try. And try. And try...


Bottom line - you have four choices (in this order, really)
1. Call to negotiate
2. Don't pay and then see if they want to negotiate after a few months pass.
3. Ch 13
4. Pay them on their terms, whether negotiated or not