5/1 ARM Converting to fixed during ch 7??

[dragonnfly]

Hello, I have a 5/1 ARM. For anyone whos lucky enough to not know what that is its a adjustable rate mortage that you have 1 chance in the first 5 years to convert to a fixed, usually a certain percentage above prime. Mine is 2% above prime. As you can see I filed Apr 8th. The feds dropped the prime rate again to 5%. That means I could convert my largest mortgage to fixed at 7%. Question is has anyone ever managed to get them to convert it after or during Ch7? If it was you would you convert now or wait it out and see if it falls again?? I have until Aug of 09 to convert.

[HHM]

Well, you probably cannot convert during an active BK 7, but once it is discharged, you can pursue conversion.

My understanding of a 5/1 is that the first 5 years are at a fixed rate, and then the rate is adjustable after that. This type of loan is generally used with the anticipation of refinancing at the expiration of the initial 5 year term.

Is the conversion automatic as soon as you inform the lender you want to do it, or do you have to qualify again. None of the sources I have checked mention any sort of automatic conversion option, you typically have to refinance out of these ARMs. I would assume that if you have to re-finance or otherwise re-qualify, that the BK could make it very difficult to get the new fixed rate loan.

Also, there is an open question about reaffirmation. If you do not reaffirm, I do not think the bank is obligated to honor the conversion request (assuming the conversion is something you do not need to qualify for).