Mortgage and 2nd non reaffirmed show 0 balance on credit report

[maddog2112]

I converted from a ch13 to a 7 in Aug 09. I did not reaffirm my first or 2nd but have continued to pay on time for the last 2 years. I was able to get a auto loan at 7% interest last june. I checked my credit reports today and it shows a zero balance on the 1st and 2nd mortgage as well as included in ch7. My question is. When applying for credit in the future, what should I say when they asked what I pay for rent and also whether I own or rent? I will be needing another small auto loan next spring and am trying to get my ducks in a row. My income has increased substantially and I have managed not to need any more debt except a car loan. Thx in advance.

[dspii]

Own it............................

[maddog2112]

In other words. Who`s to say, I don`t own it outright?

[justbroke]

You don't OWE any debt on the property (period). And, technically, you do own it. However, the property is encumbered by the security instrument (mortgage/deed of trust) combined with the note. You're not legally obligated to pay the note, so your credit report accurately reflects what you legal obligation to pay for the home... $0.00.

Since you own it, you would list it as "own". If you want to put $0.00... I might not suggest that. You're probably paying something such as taxes and insurance.

This is a GREAT question though! I can't wait to read how others react.

[maddog2112]

Just broke, I`m not trying to pull a fast one or anything. I am just curious. If I fill out an auto loan app and they ask what my mortgage payment is, lets say I write it down. Then when they ck out my report it shows zero. I`m not worried about not having enough income for the loan, but I don`t want it to look like I`m lying and it`s not like they really let you explain. It`s either yes or no.

[justbroke]

I'm curious as well. I was hoping more would answer! To tell you the truth, I have the same question. I have put own and the amount of the "mortgage" payment. However, you have some us now asking... should we put "$0.00" and "Own"???

[SunshineGal]

Excellent question! Techinically, you do "own" the house. And technically, you DO have to pay the mortgage payment if you want to keep it. If it were me filling out an application I would list the mortgage payment. The lenders are looking for a total debt ratio, or simply, the amount of payments you're responsible for against your gross income. IMO, it's better to be safe than sorry.

[dspii]

Regarding your CR reporting $0....they would see the BK clearly, unless your lucky enough not to have it reported.

[maddog2112]

Yes. The bk shows up, but that doesn`t explain the mortgage at zero.

[SunshineGal]

Yes. The bk shows up, but that doesn`t explain the mortgage at zero.

Justbroke explained the zero balance above. Basically, the amount you owe was discharged in the BK. You can walk away from your home at any time and you don't owe the lender a dime. However, if you want to keep the house, or even sell the house, than the full balance of the money due has to be paid since it's a secured loan against your property.

[maddog2112]

I guess what was confusing me is this. If I`m looking at a credit report as a lender , and the person says he owns and pays 1000.00 a month, there is no record of that on the report. It shows discharged Zero balance, whether I live in it or gave it up. I know I have to pay the balance to stay in the house. It`s almost as if it looks like I am lying when I say I own with no more payment record. But, if I say Zero payment it makes me look like I own it free and clear or that I am homeless or living in someones basement.

[HHM]

First, your credit report is not a legal document...it is not an "official" report of the status of your debt.

Second, I guess I understand why this is confusing, but at the same time, the situation is not complicated. Basically, the bankruptcy has not substantially changed your relationship with your mortgage.

If you want to keep the house, you keep paying the mortgage (just as you did before bankruptcy). If you stop making payments, the mortgage lender can foreclose (just as they could before the BK). You are still the owner and you still have a mortgage payment (you are NOT renting) and there is still a balance due (to release the lien). Don't let the behind the scenes stuff of the difference between security interest and loan confuse the basic relationship because from the debtor's perspective, nothing has really changed (except that you can walk away from the house without risk of a deficiency).

Keep in mind, a bankruptcy does NOT extinguish a debt, a discharge is merely a permanent injunction against collection; so in that sense, the debt still exists (e.g. there is still a balance owed), it is merely that the bank cannot demand you pay it (but they can foreclose if you don't).

[momofthree]

Having worked in underwriting in the past, it will look worse if you put down your payment at $0 and check the "own" box. There are very very very few people who actually own their homes outright. They will question you about it, at which point, you'll have to explain and then it will look like you lied to try to appear like you're a more qualified borrower. Put down "own" and the payment amount that you must pay in order to keep the home. If they question you about it after viewing your report, you can then explain it, and they will process your application normally. This will be an issue that they are already familiar with...

[maddog2112]

Mom of 3, You nailed it. That`s what I was curious about, whether I should mention the mortgage amount during credit apps or not. Hope this helps others as well.