Why disclose my home when it was IIB

[gophertee]

I am working with a lender who is including my current home as we are trying to apply for a FHA on a new home. As you guessed it, because of my current home I am unable to get the full FHA loan amount for the second. My current home is a "pay-n-stay" scenario.

Question is this - why would they be using my home when it was IIB and no reaffirmation was signed? Yes my name is on the title but it was never reaffirmed and per my BK attorney, I have no finanical obligation.
Some people say I can surrender it but I dont think its that easy. To me, surrending means short sale and short sale means I need to wait out 3 years before re-applying.

So tell me, if my home was IIB via CH7 and no reaffirmation was signed, can the underwriter still use my monthly payments which is obviously killing my debt-to-income-ratio.

Thanks all!

[gophertee]

By the way - I have been on BKForums for some time - 500 posts (gophermn) but apparently I am unable to get that old account setup. So I created a new one :-)
Thanks again for reading my post all!!

[justbroke]

Yes. Since you are paying it, it affects your DTI! Also, FHA -- and any smart underwriter -- would certainly want to know how you're going to dispose of the "pay and stay" property anyhow. Remember, underwriting has become MORE strict since the housing meltdown.

[gophertee]

Agree justbrok, underwriting are throwing EVERYONE under a microscope regardless if you filed BK or have a 800+ credit score with $100K in savings. I am just trying to prove a fact that because of the BK and no reaffirmation, I am not financially tied to the property. I could go a month, two months, three months not paying and the lender would not call.
My home is close to $100K upside down and sitting on a 9.25% rate which is KILLING me. I would like to move into a new home and perhaps rent my current but I am given little options besides walking away and renting for three years and then getting the loan.

So basically I am trying to help the economy by purchasing a new home and rent my current, but they would rather scrutinize me and force me to walk away from my home which we all know helps nobody. Especially my neighbors because some investor just bought it for $140K and everyone else on the block are sitting on a home once valued 8 years ago close to $290K.
Sigh!

[Sweetpea3829]

Gopher, you do have other options. I just posted our post-bk home-buying experience. You may not quite qualify for our situation, but I know another poster on here was able to obtain conventional financing even though they were in a pay-and-stay situation. If I remember correctly, they had to do some convincing but involved their attorney with proving that they had no liability to the pay and stay home and therefore the situation with that home ought not to affect a current loan.

We did run into the same issues when we were attempting to purchase through FHA. I did have a mortgage broker tell me that had I not disclosed the first home, they may not have known about it. I don't think that's necessarily true in today's lending market, BUT...if you are married, one of you could quit-claim off the house's title and apply for the new loan. It's possible that by doing this, FHA wouldn't ever see that you had the first home. But....that's just a theory...I'm not sure how it would actually play out. It was one of the theories my husband and I were exploring through our home buying journey.

Good luck!

[gophertee]

Sweetpea - very good scenarios and yes I thought of them :-)
I am trying to get the broker to discuss with underwriting that I can have my BK attorney draft a letter stating exactly what you said "I am not obligated or financially responsible because of the discharge." I also thought of the QuitClaim but unfortuantely my wife is a stay-at-home mom so with no income I don;t think that would go over.
My biggest issue is that I think there is a communication barrier between the mortgage broker and underwriter. I feel like what I am telling the broker IS NOT getting across.
The advice in this forum is awesome! Ugggh! if I could only get someone to understand that my current pay-n-stay payments SHOULD NOT be applied to my debt-to-income when it was never reaffirmed.

[Sweetpea3829]

Gopher...maybe I'm not understanding, but what you could do is quit-claim yourself off of the title to the property. As you have the income, it would be your income that FHA would want to count. If you leave your wife holding the bag for the pay and stay property, it's not really going to harm her as she doesn't have any income anyways.

That's how we did it. Like your wife, I'm a SAHM with no "real" income. We quit-claimed the wage earner in our home (my husband) off the title and had him apply for the loan. The rental income that our pay and stay property (which we're no longer paying on, btw) brings in is technically, my income. And the loan is technically mine as well. When we applied, we did not include the PITI payment for the pay and stay property because 1) We're not paying on it and 2) We're not obligated to pay on it.

Now...our lender knew about the first property. I disclosed it up front...and disclosed the situation surrounding it. We're using USDA so we have a bit more flexibility than FHA, but I would definitely try and at least speak with a supervisor at FHA directly. Try and bypass the broker, if you can.

In the end...when our first property does foreclose (if we decide to let it go), I'm the one left holding the bag and it'll mosty damage me. Because my husband's name isn't on the title anymore, and because the loan was discharged...I don't think he'll have any damage from the foreclosure. Lucky dog...;-)

[siamese]

If the lender/broker is unwilling to budge..find another lender/broker. If sweetpea was successful in getting her loan through then there is a legal way to get approved..either your current lender/broker is inexperienced or politics is at work.
I am seeing more and more people bringing politics into what should be a legal transaction..if you meet the requirements, you get approved..period.

If you quit-claim the person who is applying for the home loan off the first property's title and the home was included in the bankruptcy..and the approvers still don't budge..I smell inexperience or politics. Either way, it's time to find another lender/broker.

[gophertee]

WOW Sweatpea & siamese, probably the best advice I have seen. And it's only taken me a year to get this! Now did you disclose the Quit Claim with the BK attorney or mortgage broker or just went ahead and did it?
My only holdback is that the current home is ONLY in my name and not my wife's. I was alone at the time of closing. Hmmm - I might have to call the title comopnay to see if it really is my name or both.?.?
If it is ONLY in my name then I can't do the Quit Claim, right?

[gophertee]

Too funny! I called my mortgage lender and asked for the title company so that I can check to see whose name is on the title. The title company went out of business so I have no clue where it is (ugggh).
Maybe the title is lost which is in my benefit (wink)..

[Sweetpea3829]

Gopher...what you could do is use a Quit-claim to add your wife to the title...and then use a second quit-claim to remove yourself.

Now...this sounds like it should work in theory. But I would definitely speak to the real estate attorney you use to accomplish the quit-claim to make sure that it's 1) legal and 2) sufficient. You may not have the legal right to add your wife to the property's title...I vaguely remember reading somewhere that you might need the permission of the lien holder (ie the bank that holds the mortgage) to add anybody to the title. But I'm not sure.

Another option somebody else mentioned, and again, I'm not sure how this would work...but setting up a trust and then use a quit-claim to retitle the property from your name to the trust's name. Again...I wouldn't even begin to know how that would play out...but somebody here on this forum mentioned it in a recent thread.

[gophertee]

Sweetpea, thanks a ton! I will search the forum and ask an Real Estate attny about this. I have one broker who seems optimistic they will not use my current home because of no reaffirmation, BUT, until I am at closing and all docs are signed - I will then be optimisitc.

Thanks again!

[Sweetpea3829]

Good luck Gopher! And believe you me...lol, we may be under contract and officially approved for a USDA Direct loan right now. But I'm not going to *really* get my hopes up until I'm sitting at the closing with keys in hand. Then, and only then, will we truly feel as though this is all going to work out.

[gophertee]

Will keep fingers crossed for you! I will keep you (and the forum) updated on the Quit Claim extraveganza :-)

[upward]

This was all very helpful to read your posts. We were thinking the same thing about the quit claim. We were going to quit claim myself off the deed. Since our discharge we have opened a real estate company all in my name as broker of record. My husband has been on unemployment. We just recently decided to let the house go. We found a rental in the neighborhood, which we have lived in for 16 years. We have been paying, but we are so upside down and stopped paying on the second a year ago. We are ready to move on. Thinking short sale? At this point we just want to give it back and be done. If we quit claim my self off then maybe we will be able to buy in the next couple of years. How does the quit claim process work? How long does it take?