Pay escrow on NON reaffirmed mortgage?

[daveinIL]

Our BK was completed this year and we are retaining our home which we are current on the mortgage for. During the BK we did not reaffirm the mortgage and have always continued to make timely payments.

My question is should we keep paying the escrow on the loan or should I ask the bank to lower the mortgage to P&I only and take care of taxes and insurance myself?

Or should I not poke the sleeping dragon (BofA)?

[HHM]

Nope, you probably don't have the right to unilaterally cancel escrow. If you were to just stop paying, you would default and then eventually a foreclosure could be started.

Strictly speaking, the escrow part of your mortgage payment is NOT payment of debt, and as such, the BK has no affect on the contract rights between you and the bank vis-a-vis escrow. Escrowing is simply hiring your loan servicer to act as your agent to pay property tax and insurance. In most mortgage contracts that provide for an escrow, I believe it can only be terminated by mutual, written, consent.

In any event, you would need to review the terms of your mortgage note to find out your options with regard to the escrow. The Bankruptcy discharge does not change that relationship.

Your's is a common confusion because in bankruptcy, we often think of debts as eliminated, or the mortgage note is discharged. That is actually not what happens. A bankruptcy discharge is merely a permanent injunction from any attempt to collect a "discharged debt", the BK discharge doesn't void contracts or erase obligations. As such, an escrowing agreement is not part of the BK.

[daveinIL]

Nope, you probably don't have the right to unilaterally cancel escrow. If you were to just stop paying, you would default and then eventually a foreclosure could be started.

Strictly speaking, the escrow part of your mortgage payment is NOT payment of debt, and as such, the BK has no affect on the contract rights between you and the bank vis-a-vis escrow. Escrowing is simply hiring your loan servicer to act as your agent to pay property tax and insurance. In most mortgage contracts that provide for an escrow, I believe it can only be terminated by mutual, written, consent.

In any event, you would need to review the terms of your mortgage note to find out your options with regard to the escrow. The Bankruptcy discharge does not change that relationship.

Your's is a common confusion because in bankruptcy, we often think of debts as eliminated, or the mortgage note is discharged. That is actually not what happens. A bankruptcy discharge is merely a permanent injunction from any attempt to collect a "discharged debt", the BK discharge doesn't void contracts or erase obligations. As such, an escrowing agreement is not part of the BK.

OK, that's what I was thinking too. I fully understand that the note has not been eliminated, but simply rendered unenforceable. I was unsure if there would be any advantage to pursuing options with eliminating the escrow portion of the payment. (Interestingly, I am not paying any PMI).

[HHM]

Escrow is a pretty good idea. If you didn't escrow, you would have to come up with the money anyway. And if you are like 90% of homeowners, that level of careful budgeting is usually beyond ability

[daveinIL]

Escrow is a pretty good idea. If you didn't escrow, you would have to come up with the money anyway. And if you are like 90% of homeowners, that level of careful budgeting is usually beyond ability

I agree...I just wanted to make sure there wasn't a REASON to not escrow.