Reaffirmation - Lender Refuses to Work with Pro Se

[trigabyte1]

I had a very interesting development today. Finally got our Trustee's Report of No Distribution (18 days after the 341 - YAY!).

I was following up with the holder of our home equity loan to check on the reaffirmation agreement. I was told that they WILL NOT enter into a reaffirmation agreement with a Pro Se debtor.

Does this sound wacky to anyone else? Obviously, there's nothing I can do to force the issue (though it does seem like discrimination). Any ideas?

[StartingOver08]

Why do you want to reaffirm a HELOC? Is it your second mtg? I hope you did not reaffirm the first either....

In the case of mortgages, especially HELOC's, it makes much more sense to 'retain and pay' if you are not upside down. You get the benefit of keeping your home as long as you pay PLUS the benefit of not being personally liable for the HELOC and the first mtg if you do have to walk away. There is no downside if you do not reaffirm.

[trigabyte1]

Well, there is a downside. If you don't reaffirm the account history wont be reported on your credit report. This is a major advantage in rebuilding credit post-bankruptcy.

Second, yes, this is a HELOC, but (knock on wood) we are in no danger of having to walk away. We have about 10% equity in the property and, as this is a variable rate and the lender won't send statements, I don't want to risk screwing up the payments.

We are going to reaffirm the first mortgage and the lender (Wells) was happy to do so. (Its a 6%, 30-year fixed.) I see your point regarding the personal liability, but that's only applicable in recourse states. Our state is not one of them.

[justbroke]

Well, there is a downside. If you don't reaffirm the account history wont be reported on your credit report. This is a major advantage in rebuilding credit post-bankruptcy.

That should never be a reason to reaffirm.

[trigabyte1]

JB - I'm curious as to why you say that. Having worked in the lending industry, I know that a mortgage tradeline can greatly impact your credit score. Plus, while all your other tradelines will be "closed" this line will be dated from the point of origination. In our case, that's 5 years of credit history.

While no one wants to get back into debt after discharge, I think it is very reasonable to be prepared for the future. We're comfortable in our house now but we may need to move in a few years. Having a mortgage history will make it much easier to get a new mortgage should we need.

If I were upside down on my house that would be one thing - and I agree, it would not be a good reason to reaffirm. But living in a non recourse state, I don't see the downside on reaffirming.

[StartingOver08]

You will have a mortgage history. You have already signed the reaffirmation on the first mortgage. Don't sign the second/HELOC. Protect yourself. You just came through BK. If you have to prove your HELOC was paid on time through manual underwriting in the next few years, then keep a record of your payments.

[trigabyte1]

You make a good point StartingOver. There's also the possibility of doing a manual tradeline update. There are reporting companies out there that will collect the payment information and then update your information at the bureau level. This factors it into the credit score.

My main issue was getting monthly statements. This variable rate HELOC issue bothers me a bit. I was really hoping to reaffirm at a fixed rate... C'est la vie.

[justbroke]

JB - I'm curious as to why you say that. Having worked in the lending industry, I know that a mortgage tradeline can greatly impact your credit score.

And I have designed decision-support systems or banks. The reason I don't usually don't, and many Judges won't, allow reaffirmations where it's not legally necessary, is that it's not in your best interest.

As to the tradeline, you already have a mortgage tradeline since you have reaffirmed the first mortgage. Most desktop underwriting can have some "manual" updates to a tradeline at the database level (from what I remember). I do agree that it's reasonable to prepare yourself and to "establish" credit (or maintain credit). I don't agree that you should re-encumber yourself just to have a tradeline, especially where the reaffirmation is not necessary and only being done for the tradeline.

But living in a non recourse state, I don't see the downside on reaffirming.

Actually most Judges in non-recourse States would never approve a reaffirmation for that reason alone!

My main issue was getting monthly statements. This variable rate HELOC issue bothers me a bit. I was really hoping to reaffirm at a fixed rate... C'est la vie.

Two additional reasons not to reaffirm.

[trigabyte1]

You make some good points. Thanks for the input.