2 years later - the aftermath

[Daedalus81]

So, this August will be 2 years since we closed our Bankruptcy thanks to all the help we received here. We were now looking to buy a house and we've run into some issues and I was wondering if anyone has had similar experiences.

No asset CH7

- I have an 80/20 loan (neither under my wife's name).
- Both were on the BK and we did not reaffirm
- The first was modified and is current
- The second was due to be modified, but was sold off and I wasn't contacted until recently so this one is 3 years past due
- The value of our house is still underwater
- My name is still on the deed and were never served foreclosure papers
- We have the option to settle the second mortgage for much less than its current outstanding value.
- Credit scores and income are excellent

The FHA mortgage broker is saying that since it "looks" like we were foreclosed on that no one will give us a mortgage until 3 years from the end of the BK. What's worse is the second lien is also causing some havoc due to its non-payment status and that settling it may delay us even further.

Has anyone run into a situation like this?

[Drazil65]

Hi, if there was a successful foreclosure your name would no longer be on the deed so that is your first clue that there was not a transfer of title due to foreclosure (plus there was no reason to foreclose). Also if you had a 80/20, did you have 2 separate payments? We had an 80/20 on our out of state home and did have 2 diff payments so we were well aware that 2 payments needed to continue to be paid or if we stopped making payments there would be a default? I am confused when you state that the note was sold and you were never notified so now the 2nd is 3 yrs behind? Please clarify that and was this noted as IIB on your credit report so you thought it just disappeared? Maybe the 2nd was forgiven as a result of the bankruptcy and that is why you did not receive any kind of late payment notices after discharge (more than likely the 2nd bank just was neglectful in sending them)? What was your thought process that made you think you no longer needed to pay the 2nd at some point (modification or not still needed to be pd)? Confusing...

Be aware that many bank and mortgage people do not understand how bankruptcy works (they seriously do not) and will give you false information based on how they believe things work (and it looks like the FHA guy is one of them and is assuming bankruptcy equals foreclosure). Because your mortgage was discharged in bankruptcy and may show a zero balance on your credit report does not mean it was foreclosed on (you know this right?). Most of us have had to stay on top of that situation and push for foreclosure as the banks are very slow to move that inventory because there is still so much of it. It is easy enough to check the public records online to look at the transfer history on your title/deed.

You have been paying your 1st mortgage on time so there was really no reason to foreclose as they were getting their money (and your 1st mtg bank would be the ones to initiate foreclosure as they are in the 1st position to do so). So you either settle with the 2nd (if it was not forgiven) and then sell the house or you stop making payments on the 1st and to try to force a foreclosure by the 1st mortgage company. If your 2nd still exists (and it looks like it does as you are behind) you will not be able to sell the home without settling with them to clear title. The 2nd will probably settle but the late pays do not go away easily. So you will need to clean this all up before even thinking of purchasing another house.

One last thing, ultimately the whole bankruptcy thing and the follow up is your responsibility, I am sorry but there is no such thing as "we were not notified so we never paid the 2nd", by the time you were discharged you should have be well aware of how this whole thing works. I do not mean any disrespect but you are too far into this not to know how it all works. This stuff does not just go away and it will fall to you to stay on top of it. Good Luck...

[Daedalus81]

First, thanks for the reply!

Second, I in no way was trying to absolve my responsibility for payment on the second - I apologize if it sounded that way. I was not attempting to obfuscate or mislead.

So, here's the details on the 2nd. We attempted a loan mod on both loans at BoA. The first finished and they dropped they dropped the ball on the second after repeated calls. Then just as they said they were getting it going again they sold both loans off and I would guess they wrote them off after the BK. So the 1st went to one place and we made payments. The second went to another and when we contacted them about payments they told us the only way we could make payments would be a lump sum to catch us up (something like $4,000). We asked about a loan mod and they said they got no info from BoA. And at this point we were not longer able to pursue a new loan mod, because I got a raise.

Since we could not make such a large payment we started trying to save (no one to give us a loan and no family able to help). During this period we made no payments. That company again sold the 2nd off to another and we sent them a letter stating that if they wanted they could contact us for a settlement. We didn't hear anything for a while longer and just recently they sent a letter so we've been negotiating settlement and we're ready to make a payment.

My name is certainly on the deed unless the city hall would not be up to date... Is there another place I can confirm that my name is on the deed?

you will not be able to sell the home without settling with them to clear title. The 2nd will probably settle but the late pays do not go away easily. So you will need to clean this all up before even thinking of purchasing another house.

If we settle what is the best way to go about doing this? Or is it just a time factor after settling?

[Drazil65]

clarification: did not think you purposely did not make the payments just confused that as to why the payments were not made.

Thank you for additional details, so it is my understanding from your add'l details that you were behind on quite a few payment on the 2nd when you were seeking the mod with the new servicer once loan was sold? My guess is that you stopped the payments (unless you were behind with the original bank that held the 2nd) while the mod was being worked on and it put you behind.

So if you are getting the current servicer to settle make sure you get the terms in writing especially the part that states how the loan will end up being closed out (ie: satisfied and paid as agreed or whatever verbiage you need to clean up the default) and that it states you will get a lien release on title (that will clear the title). Do this BEFORE you pay them, tell them you want to see the document and will pay the agreed upon sum to settle once they sign and you see the document with the correct language (have an attorney review it if you need to before you sign anything and be the last to sign). The only time you have leverage to get what you want in writing is when you are holding the money they want, banks are notorious for withholding things like the lien release or very slow at filing the release or satisfaction, do not trust a verbal agreement!!!

Your money will be important to them because they know the loan was discharged and they are not in a position to foreclose (and I am sure they are not interested in owning the property) so your settlement will be the only way they are probably going to see anything come back to them. Use that to get what you want when you want it done. Good Luck!

[Daedalus81]

Thank you so much for the advice!

If I get the settlement along with that aforementioned document in writing does that "clean up" my payment history?

[Drazil65]

A lot will depend on if they report it to the CB, you will have to stay on top of it for sure BUT as you have a bankruptcy already on your credit report you already have the bottom of the barrel reported on you. Not sure exactly how it will read but keep up on it and have the document ready to show whomever you need to show to get things back to the way you will want to see it. It may take awhile and you will need to pull your credit periodically to continue to monitor.