Where we are with Chase

[novemberbg]

We are in the middle of a BK 7(just some background)
We have been trying to get a mod since February and after going round and round to all the different departments...
We have sent countless emails..
Anyway last week they called and wanted to schedule a conference call with us. So on the call was our negotiator and a bunch of loss mitigation specialists etc on the call.

They basically told us our "new" payment would be higher than what we are paying now!

Long story short, there is nothing more than can do that they have guidelines and have to adhere to them. Its all so ridiculous. Now we arent having a problem getting anyone to call us back but what they propose makes NO sense.
Our current payment is 3687.00 (interest only).
Paid 806k in Dec 2006 (put 20% down)
Loan balance is 698k
Brokers Price Op is 525k

They proposed to us an interest only payment of 3685.00 and then in 5 years it jumps to 4700.00
WHAT THE #%^@%$ Is wrong with these people???
Given the BK, we can just ride this out and walk and they cannot come after us for the balance when we do sell BUT we have to be current (we are now about to be 3 months behind) So we can make up what we owe and stay current and ride thru OR we can stop paying get more attys involved and with a good lawyer not get foreclosed on for a year.

Im heartbroken. I want to keep our house and I love our neighborhood. We have 4 kids (all under 6) and the thought of moving is gut wrenching BUT my husband says we would be stupid to stay, and I see his point too... its just to rent we will pay almost what we are paying now so why not stay and ride it out???

This has been the most ridiculous, illogical process. Why they want this asset back I have no idea.

[hereforinfo]

If you can't rent for much less than that (also consider the tax benefits you currently have), then you might as well stay and ride it out and live rent free until they foreclose. In the meantime maybe there will be a new program out there to help you.

[eddiep]

Did they consider stretching the loan out to 40 years?
Were you hoping for a principle reduction?

[novemberbg]

Stetching out the loan did basically nothing. What we need is a Principal reduction- and I dont know why the banks arent doing it. They essentially have to do it if it goes to FC anyway so just let the homeowner stay in the house and do it!

It just doesnt make sense to us to stay in this house after a BK when its underwater 200k. We will definiately not reaffirm..so more waiting..more games..

The mod they gave us- according to them- is our perm mod. It would be effective 10/1/09. Cant see how that makes sense and dont want to give them money to go into a black hole. We might start paying it but we wont sign anything.

[CCCrazy]

They will change their turn once you get discharged and closed. They want your money, not another house to sell. When they know you can walk and they'll get stuck with a house, you'll get closer to what you want. Just hang in there!!!

[DeadManCrawling]

If you have Private Mortgage Insurance (PMI), and you probably do on a loan that size, the lender has no incentive to work with you, and every incentive to foreclose.

If a foreclosure occurs, the PMI YOU have been paying for will make the lender whole, meaning they will be paid by the PMI company for their loss. If they work with you to extend the terms or reduce principal, there is no chance of them collecting the PMI payment.

I cannot imagine they (or you) would be able to reestablish PMI with the original company or a new company either.

End result is that it would actually be profitable for them to foreclose on you. The lender has, at this point, banked all the payments you have made, can sell the house (even at a loss) and will be paid the difference through PMI.

The PMI company may well come after YOU though for the deficiency, if the lender does not, if you are in a state that allows such. Also, they may send you a 1099 and you will be forced to pay income tax on this phantom money.

Note that the 1099 is also subject to different factors, and you may be able to avoid it by filing a declaration of insolvency with the IRS. Insolvency is automatically assumed if you file bankruptcy, but I am not sure if you still need to send the form to the IRS.

Good luck in any case

[StartingOver08]

Just to add to DMC's post - even if you don't have borrower paid PMI - if the loan was originated this decade there is most likely 'lender paid mortgage insurance'. So there is zero incentive to modify your loan with a principal reduction by the bank. In fact, the servicer makes more money servicing a loan in default than a loan that is current.

Everyone says the banks don't want another house to sell - it is just not so. The banks have incentives (for the bank, not the consumer) built into the system for these foreclosures.

Why do you think there are so few actual modifications? And, when you check the terms of the modifications, the terms are good for the banks and not good for the consumer. That is why the rate of defaults are so high on the modified loans. The type of loan mod offered to you is typical of the type of loan mod that is happening with these lenders - its good for them and not good for you. The modification you describe is designed to fail - don't fall for it. Just surrender your home and start again with your fresh start in BK. Don't saddle yourself with the house payment and large negative equity. Stay in the house for a long as the foreclosure takes and save your funds while you are not making the house payment. At $3700/mth you will have a nice little nest egg to start after a year of not making mortgage payments. Here it is still taking 12 to 18 months to foreclose. You might have quite a savings by the time you leave.

[hereforinfo]

Also, they may send you a 1099 and you will be forced to pay income tax on this phantom money.Good luck in any case

If this is a primary residence, there shouldn't be taxes to pay on the forgiven debt. (Mortgage forgiveness debt relief act). I do agree that in many cases the banks do have incentives to take the homes rather than modify the loans, unfortunately. But hopefully it can work in your favor somehow.

[CCCrazy]

Well, I hope I'm right - but it looks like I stand corrected with the PMI rationale, esp. since this is a 1st Mortgage. I am still paying my 1st mortgage on my upside down house, but stopped paying my 2nd months ago and it is now charged off, just sitting there not accruing anymore late fees or interest - according to Wells anyway. Now that it's charged off I wonder if they will continue to send me monthly statements.

[StartingOver08]

If this is a primary residence, there shouldn't be taxes to pay on the forgiven debt. (Mortgage forgiveness debt relief act). I do agree that in many cases the banks do have incentives to take the homes rather than modify the loans, unfortunately. But hopefully it can work in your favor somehow.

Remember, this Mortgage Forgiveness Debt Relief Act only forgives loans on your primary residence (like you said) up to the amount of the original PMM (purchase money mortgage). If you took cash out in a refinance, that part of the debt can not be forgiven. Look at this:

Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.

Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

[hereforinfo]

Yes, that is true about the cash out. I assumed the OP didn't do a refi cash out since they put 20% down when the loan was taken.