Urgent Question--Breach Letter

[azballer]

Maybe I am fooling myself into thinking that I don't know the answer to my question, but I will ask it anyway. Situation:

Mortgage 1 (GMAC): $470k
Mortgage 2 (CitiMortgage): $170k
Value of home: $425k
Date of Breach Letter: September 1st
Filing Ch 7: First week in October 2010

When I started this bankruptcy process (late May), my objective was to get my 1st mortgage modified and let the 2nd go--obviously not reaffirm either and assume that the 2nd would not foreclose after discharge. I have skipped my June, July and August payments to both while under the impression it would give GMAC incentive to push my modification through (LOL).

Long story short, I have submitted my modification paperwork 4 times as my Profit & Loss statement has changed on a monthly basis (self-employed) and am waiting for their latest answer on an in-house modification (the previous answers have been "you can't afford your mortgage", "you can easily afford your mortgage" and back to "you can't afford your mortgage"). At this point I would settle for keeping the same interest rate and just bringing my account current so I can file Ch 7 and ride-through. I would love to bring it current myself, but it would take $8300 for the 3 past months and another $2600 for September.

The urgency is that they have informed me that my Breach Letter expires on September 1st (3 full months of non-payment) and they may be moving ahead with the foreclosure process after that date. Of course they said if I can pay June's payment now (by tomorrow), it will buy me another month before I am in the same situation and they will be able to continue working on the modification (not sure if this is a tactic to get me to pay or if they will really stop working on it once the date of the Breach Letter passes).

I guess my question is what advice can you guys give me at this point? I am not holding my breath for GMAC to mod my loan and bring it current, but paying them over $10k would use all of my free cash at this point. I guess all signs point to letting the underwater home go, but if we can keep the $2600 payment on the 1st as our only payment (which we can afford in our budget), that isn't a bad "rent" for our area. Thanks in advance for your help.

[azballer]

Anyone?....Thank you!

[ryan]

Well, I would be skeptical of the lenders promise to hold off with FC if you make one payment. OR, to hold off if you are still negotiating a modification. At least with BofA they will say that routinely and then still proceed with FC. (GMAC may be different.)

They may not hold a sheriffs sale as scheduled, if you are close, but the FC clock usually keeps ticking right up to it, in my experience.

As far as keeping the house, I guess I'd be unlikely to do that, based on the numbers you're showing. Its seems heavily underwater, and even with no second its still underwater, and may be going lower.

Also, $2600 a month for rent I would think would get you an awful nice place in Georgia? or maybe I'm not up on GA prices - I know in Chicago it would rent a VERY nice place.

[willsurvive]

If you are asking what I'd do, I'd not free up all your cash . . . .

We were prepared to walk away, didn't pay for 20 months (filed bk ch 7), foreclosure process finally started in June, and in July sent in modification papers "just for the heck of it" thinking NO WAY they would do a modification (this is Bank of America). Anyway, they came back with modification that tacks on all late payments (no not wonderful), interest rate to 2% for 5 years, and steps up to 4.25% at 8 years. Anyway, long story short, they modified our loan to something we can easily afford (compared to rent around here). I'm not sure what we did right (other than do nothing). Again, we were 100% willing to walk, no nagging them, nothing and we were offered a modification. Oh, and another wonderful thing, let's say in the future we want to move, or can't pay the mortgage, we will be able to walk away without a deficiency because of the bankruptcy. We call this a win/win for us as we are still protected from the bankruptcy if in the future something were to go wrong. But for now, we can't imagine going anywhere else, and planning on planting our roots and raising our family here forever. It's been a huge blessing. Once again, if I were you, I wouldn't throw all your good cash into something bad at this point . . . you never know something might happen like it did to us. Good luck!

[azballer]

Thank you both so much for the advice. My wife and I are of the opinion that we will just "wait and see". We love our house and would love to stay, but without some sort of guarantee in the writing that the clock will stop for 30 days, I think at this point we will let it play out. If we file in October, that should buy us at least 4 more months in the house. Plenty of time....

ryan...go bears!

[donnaeve]

I am curious as to why you are not filing a Chapter 13 and lien-stripping the second mortgage?