why not modify?

[angelasdad]

Hello,

MY background. My BK was discharged 8/2011. I did not reaffirm. My mortgage is approximately 24 months behind, I'm still in my home. I "owe" about 200k + about 33k past due. My house is probably worth about 180k. A foreclosure was filed 3/2011, but is on hold. Since my BK, and my lack of a mortgage, my financial life has turned around considerably. My credit score is 660ish and rising, a few credit cards for emergency use, a manageable car loan and I have money in the bank. I am employed at the same job for years and have no intentions on going anywhere.

I do not want to leave my home. I have no problem living here for the foreseeable future. I am currently attempting a loan mod with Chase. I attempted previously and they denied me, stated I had too much income. They contacted me about 30 days ago to reapply for a mod because of the new mortgage settlement modifications. I figured, why not try.

So, why not modify? If I am approved and go for it, my obligation to this debt is still discharged under my chapter 7, right? I would have to pay rent anywhere and my original payment would be manageable now without the other debt. I would be paying on an underwater house yes, but I would be underwater, like 90% of homeowners, anyway regardless of my BK, foreclosure, or if I was current.

Once the foreclosure is dismissed and I am current with Chase, if I decide to sell, I could sell it like a normal house and buy again, as long as 2 years have passed from my BK if my thinking is correct. Right?

I know it's kind of vague, but I just hear people say just to ride it out and just wait to be evicted, why pay on the underwater house. I just can't seem to come up with a real downside if I can modify. Any thoughts?

[SMinGA2]

As I see it - no harm in trying to modify. My understanding matches yours, that a discharged home loan stays discharged even if you modify. The modification changes the terms of your original loan, it does not create a new loan. It still allows you the option to 'walk away' down the road, if you can't sell it for what you owe & you're ready to move on.

When I modified, it was just the missed interest that was added on to the principal. (Which makes sense - the part of the missed payments that would have reduced the principal were ALREADY principal.) Be prepared to have to work a little at straightening out your escrow for taxes & insurance. If you have been paying those all along, it might not be an issue. Ours were always escrowed, and so when the mod went thru my escrow fund was a bit lean. I had the option of paying extra to balance our escrow account OR paying extra for the next 12 months.

[pcn]

Please tell more about the new mods. I thought that I had heard on the news that you had to be current to qualify. If not, we might look too, as we are 24 months behind. Thanks.

[angelasdad]

To update...Chase denied me for the new gov't modification. Stated I made too much money. A few days later they called and offered me a modification. Payment dropped by almost $400. It included a "step" rate that would be 2% for 2 years, 3% for 3 years and back to my old rate of 4% after that. Old terms of the mortgage, pay off date,etc did not change, so they didn't just extend me out another 10 years. If I stay current for the next 5 years, they'll removed $6k of principal, each year, which almost takes care of my 2 years of no payments. According to my loan rep and my BK attorney this does not change my liability, which is none, since my BK. All I got to do is sign and I'm back in the game. Pretty happy, and I feel I have nothing to loose, considering I do not want to move and I'd pay about 50% more on a rental.... Thanks for the replys.

[KevFinnerty]

Thanks for this thread.

I'm in a similar situation and am pretty confused, like you were I guess, about loan modification and exactly what the ramifications are.

I'm about 24 months delinquent on my mortgage. My mortgage was included in my BK, which was discharged last summer. Chase completed my foreclosure last year as soon as the BK was discharged & I have been awaiting eviction following a sheriff sale but the sale still hasn't even been scheduled yet (once it gets on the county schedule it will still be at least 3 months away).

In the meantime I have been trying to sell my house so as not to lose the equity in it, since it is no longer part of my BK estate. As late as last November I had resigned myself to losing the home & moving in with a relative but vowed to stick it out as long as possible to get cash for keys if the house didn't sell - but as of December my luck changed and I have been able to get a job (paying me less than half of what I used to make 10 years ago but at least it is a job), get caught up on my delinquent HOA fees, pay off a bunch of bills, and start to get back on feet financially - although I haven't been able to save a penny with constant car repairs wiping me out. Living rent free is obviously a huge help but I still have a lot of bills to pay each month.

Chase is now telling me I am eligible for a mortgage modification - I am working on the paperwork etc for that now. I'd like to try to keep my house, but if not, if I can get a loan mod then at least I would have better luck selling it if it was no longer a "foreclosed" property (I actually got an offer on it but it was insultingly low, with the buyers obviously trying to steal it from me thinking I would take anything rather than lose it outright - eff that!).

A couple things I am still confused on but think are touched on in this thread:

- If I do get a loan mod, yet lose my current job and fall behind again, I'd still only be liable for my original loan which has been discharged right? They could only take the house/go to sheriff sale/I'm not liable for any costs etc? And would they have to go through the whole foreclosure process again (I am in a "judicial" state)?

- My taxes & home insurance are paid through escrow, which is probably already exhausted. How does or will that affect my "modification"? I have no money saved yet to be able to fill up my escrow reserves or pay existing taxes etc.

- Although I am anxious to get a modification & the peace of mind of knowing I can save my house, I'd like to keep going as long as possible like now as rent/mortgage free so I can try to build up some cash reserves. If a mod is offered does it come with an expiration? I assume the bank would want to push it through asap if I am approved since that way they start to get some $$ for my mortgage again, but I on the other hand am in no hurry to start making mortgage payments again, I want a mod, but I want to try to save some more $$ first, or get a better paying job.


Are there good resources on the 'net to learn more about loan modifications, how they work, what terms are up for negotiation, details I may not be aware of etc? I've only started to research this as of today & am kind of overwhelmed.