Foreclosure after Chap 7 and deficiency payments.

[rickisbroke]

I filed Chapter 7 and was discharged last fall. I re-affirmed my mortgage and continued to make payments. I was never late on the house payments and the house wasn't really the issue.
Now, for various reasons, I just want to give the house back to the bank...or let them foreclose. I owe about $95k (only one mortgage), would be lucky to sell it for $75k in this market. I imagine a foreclosure auction sale would net $40-$50k at most for it. How likely is it that the mortgage company will come after me for the difference of what it sold for and what I owed?
If it's very likely they will want me to make up the deficiency, I need to find a way to stay there and keep it at least until the market turns around and I could sell it for what I owe.
I guess I'll share that I'm just squeaking by, month to month, and have had to deal with roommates (which I hate!) to make ends meet. Right now, my garage door is broken and I can't afford to fix it, and that's not even a major expense. What scares me is when I need a new roof in a few years or if the furnace dies or something. I read a story here about a homeowners sewer problems, and it was enough to make me never consider buying again!
Any advice in this matter would be appreciated!

[justbroke]

You are exposed. By that I mean that you reaffirmed the mortgage, so now you are responsible for any deficiency. However, you may live in a non-recourse State (such as California). Generally speaking, the major entity that has been suing after foreclosure, has been the Principal Mortgage Insurance (PMI) policyholders!

Even if it's not the case where the PMI policyholder will come after you... the Banks have been very smart and selling the deficiency to Junk Debt Buyers (JDBs) who will hound you forever!

[rickisbroke]

I somehow don't have PMI. I think that was a deal because a bank holds the mortgage and as long as the payment was made from my checking account with that bank electronically every month, I could avoid PMI. I'm in Michigan, if that helps one way or another. I guess it sounds like the JDB's might come after me, then, huh?
What about my figures? Say I owe $95k and they sell it for $45k. Is it typical for them to be looking for the whole $50k or is it usually a percentage of?

[justbroke]

I somehow don't have PMI. I think that was a deal because a bank holds the mortgage and as long as the payment was made from my checking account with that bank electronically every month, I could avoid PMI. I'm in Michigan, if that helps one way or another. I guess it sounds like the JDB's might come after me, then, huh?
What about my figures? Say I owe $95k and they sell it for $45k. Is it typical for them to be looking for the whole $50k or is it usually a percentage of?

The JDB would want the whole thing, at first... but could settle. You just never know.

As for your deficiency, in Michigan, you can claim that the lender didn't get "fair market value" (FMV) for the foreclosure. So, if you owe $95K and the FMV is $75K, the deficiency can be challenged if it's more than $20K.

[rickisbroke]

Thank you! I appreciate the advice!
I think I'll try to keep it for now and find another roommate to get me by until I win the lottery...

[Tom_Mi]

If the lender collects any insurance that THEY paid (and you don't know about), is there any law that requires them to disclose and reduce the deficiency by that amount?

[justbroke]

If the lender collects any insurance that THEY paid (and you don't know about), is there any law that requires them to disclose and reduce the deficiency by that amount?

They technically can't lie about having been paid. Whazt usually happens though, is say that a Private Mortgage Insurance (PMI) policy was on the property and that the insurer did in fact pay the lender.

Guess who comes after you for the deficiency? The insurer!

[Lajazz947]

You are exposed. By that I mean that you reaffirmed the mortgage, so now you are responsible for any deficiency. However, you may live in a non-recourse State (such as California). Generally speaking, the major entity that has been suing after foreclosure, has been the Principal Mortgage Insurance (PMI) policyholders!

Even if it's not the case where the PMI policyholder will come after you... the Banks have been very smart and selling the deficiency to Junk Debt Buyers (JDBs) who will hound you forever!

So why in the world would anyone in California which is a non recourse loan state ever reafirm?

Am I missing something? I have refused to reaffirm.

[justbroke]

So why in the world would anyone in California which is a non recourse loan state ever reafirm?

Re-affirmation should only be done where you would lose the property to foreclosure or repossession if you don't sign it. If underlying State non-bankruptcy law prohibits a lender from foreclosing upon or repossessing collateral solely for bankruptcy, then you would never re-affirm the debt. All the smart Judges and attorneys know this!

I don't know which specific States have come around to the now majority opinion, but the Bankruptcy Code seems to not require reaffirmations on real property. It appears the Bankruptcy Code only talks about the debtor needing to choose for personal property. 11 USC 362(h)

So, the attorney needs to decide what's in the best interest of the debtor before having them sign any reaffirmation agreement. If you filed pro se, then the Judge needs to review the reaffirmation agreement and the Judge should weigh this as well. (Noting that most Judges don't like to approve reaffirmations anyhow.)