Chapter 7, then divorce and now loan modification?

[NoMoreCards]

I am asking this for a friend (not that it matters) Background=
2006 - Married couple file and obtain CH 7 discharge, then divorce. Husband gives ex-wife quit claim for the house and it is filed in the county of residence. Fast forward to present. Wife wants a loan modification, mortgage still has both husband and wife on the loan, wife unable to obtain refinance in her name only. Ex-wife has been doing a stay and pay, Mortgage NOT reaffirmed.

ex-wife wants ex-husband to fill out loan modification paperwork, listing his income and expenses to help her qualify for the modification. However, he does not live there and does not contribute to the household income. Ex-wife does receive (for 6 more months only) SSI for child care as ex-husband is disabled and child graduates in June.

Ex-wife claims that since the loan has been discharged, it does not matter and he would not be liable for the mortgage payment after-the-fact. So it shouldn't matter if he filled out the modification paperwork to help her get a loan mod.

I think it would be fraud to put down that his income is going towards her household income and expenses. Ex-husband wants to help her keep the house, but does not want to commit fraud to do so, or be liable for her mortgage should she not pay.

What do the experts say? Thoughts?
This is in Michigan, if that matters.

[HHM]

First, let's back up and be practical, even if she got a loan mod, could she afford the mortgage. I suspect not since she cannot qualify on her own. Also, there is the flip side, odds are, if you include the non-resident spouse income, that may likely put them over on the modification guidelines and the mod will be denied.
Basically, the mortgage payment needs to be 31% of gross monthly income...and that payment must be able to service the debt in some meaningful way. So, if wife earns $2,000 per month, that means a mortgage payment of $620, but if the mortgage is $200,000, forget it. If husband is earning $4,000 per month, then combined with wife's $2000, that is a mortgage payment of $1860. Is the mortgage payment already less than that number? Do you see what I am getting at? But, the answer will come down to the specific circumstances, but the math is pretty basic.

Assume you include husbands income...multiply all income by 0.31, what is that number, then ask (1) is that number higher or lower than the current mortgage payment, if higher, modification is a non-starter. If lower, then (2) could the wife realistically afford to pay that number on her own?

On the technical side, husband's submitting info is Fraud with a small 'f'.

What I mean is, yes, if he submits information to the bank that is misleading or outright false (i.e. that he resides in the house and his income is supporting the payment), that is fraud (no different than lying on a credit app). Will it ever become an issue even if it is found out, not likely.

1. Submitting his info for the loan mod will not upset the BK or the discharge.
2. The risk is, that if there is a default later (most mortgage modifications end up back in default), then the bank would have a post BK claim against husband and wife for any damages resulting from the fraud. What those damages would be is speculative, and whether the bank would have suffered any damage is likewise, speculative. So in that sense, yes the act is fraudulent, but is any party actually harmed by the fraud, not likely, so therefore, fraud with a little "f".

I don't think I would recommend the husband participate, time for both to move on with their lives as much as possible, no point in embroiling himself in a scheme that will end in failure anyway. I suspect that at best, if husband participated, all it does it buy time and delay the inevitable, wife is losing the house at some point, might as well get it over with now (also, it is in husband's credit rebuilding interest to lose the house ASAP, he is on the mortgage, if the house forecloses, that starts the 3 year clock for him on buying another home, regardless of the BK).

[NoMoreCards]

Thank you for replying HHM. I am in complete agreement that he should not participate in this at all, however I did tell him I would inquire here and see what the experts thought.

Ex-wife claims she earns 1K a month (self employed, so who knows what she really makes), and ex-husband gets 1K disability. Now keep in mind the ex-wife also gets 500 a month from SSI. So at best there could be claimed a household income of 2500, but even that is questionable because the SSI is only for 6 more months. So 31% leaves pmt of 775, which is not realistic with a true income of 1K. Mortgage amount is 90K. The math does show it just isn't realistic.
Thanks for your in depth reply, it is very much appreciated. I hope he takes the advice.

[HHM]

The fact that wife is "self employed" (sounds like a stay at home mom type of thing) makes it even harder just because you now have to sell the bank that this "self employment" is verifiable and consistent.

The payment $775 could at least service a $90K mortgage debt, but it sounds like in 6 months, wife wouldn't be able to pay (she really can't even pay it now, that is 50% of income going to just mortgage) so the issue is moot, at least IMO.