Why No Foreclosure Notice?

[henrut]

I am more than halfway through a BK13 plan (discharge in 4/2014) and am current with Trustee payments. However, I am 15 months behind on my mortgage payments but have not heard any foreclosure rumblings from the lender (formerly Aurora and now Selena). I originally filed BK13 to save the house and are still hoping to modify the original loan (10% interest ARM) to save it yet. Any guesses on what may be holding the lender off from beginning (again) the foreclosure process? I'm located in Mass.

[justbroke]

Did you surrender, not include, the home in the Chapter 13 Plan? There really is no telling what is in the mind of the lenders these days, especially the ones that have had major trouble with foreclosures and bankruptcy (like Aurora). The automatic stay may be stopping them. They may have "forgotten" (because the account is flagged as in bankruptcy). Just too many things to speculate about.

I still have too many questions. Such as, were you supposed to be paying directly (not through the Trustee)?

[henrut]

I was about a year behind paying mortgage in early 2009 and had received a foreclosure notice then. That is why I filed 13. That arrearage was bundled into my trustee payment. I was to continue paying the ongoing mortgage directly to the lender. We've since fallen behind again by about 15 months but are current with the trustee payments of around 3K a month. We'd still like to keep the house and can make reasonable mortgage payments. Right now the house is underwater by half and the entire area is depressed. On top of that I'm paying close to 10% interest on a ARM. Our strategy, if you can call it that. is to not pay the mortgage we can't afford (around 7.2K a month) get our finances in order and go to the lender (formerly Aurora, now Selena) to trial to modify the loan. Possibly, even get a write-down on the principal. We figure why try to modify before we get a foreclosure notice? But, at 15 months and counting, what's taking them so long?

[LadyInTheRed]

We figure why try to modify before we get a foreclosure notice?

Because they may not send a foreclosure notice before you complete your plan. If you don't modify your plan to surrender the house, the mortgage will not be discharged and you may be on the hook for a deficiency later. Since you can't afford the mortgage and the house is so far underwater, talk to your attorney about modifying your plan to surrender it.

[justbroke]

What's taking so long? It's the bankruptcy itself, since your discharge is pending. I can only speculate, but you could get yourself into some trouble since you have been diverting $7.2K a month to something else... unless you're in a 100% payback plan anyhow. Additionally, the lender should be entitled to "adequate protection" in the least -- meaning enough in payments to hopefully cover any depreciation.

I'm surprised that Aurora hasn't done anything, but, again, it may just be due to the fact that you are in an Active Chapter 13, and they are probably getting the "arrears" through the Trustee. They may not really understand that there is something terribly wrong with your Chapter 13 Reorganization.

Have you informed your attorney? Again, while only speculative, I'm afraid that this could affect your case and your discharge once your creditor and, more particularly, your Trustee discovers what is going on.

My suggestion would be to contact my attorney and to find out just what type of issues I may have caused or may be causing. Your attorney may be able to suggest a strategy for getting this right. Hopefully you're in a 100% payback plan so that the $7.2K of additional "disposable income" -- since you're not spending it on housing -- does not present a problem as well.

[henrut]

To be clear, there is no disposable income that would come close to covering the 7K mortgage. The bulk of my income comes from a pension and whatever writing assignments I manage to procure. All this was disclosed to the trustee.

[henrut]

I've got two years remaining on my plan. If the lender moved to foreclose before the plan was completed, wouldn't I then have the ability to surrender the house under the auspices of the court and not be on the hook for a deficiency later?

[justbroke]

I've got two years remaining on my plan. If the lender moved to foreclose before the plan was completed, wouldn't I then have the ability to surrender the house under the auspices of the court and not be on the hook for a deficiency later?

Yes, but if you wait until the end, could the creditor complain to the court that you purposefully allowed them to get to end-of-plan expecting payments from the Trustee that were never going to come? In other words, the deficiency is declared to be non-dischargeable.

This is why I asked that you speak with your attorney. There are certain things that could cause you trouble later down the road, and this is certainly an item which could lead to some controversy (contested issues).

If you can't afford the mortgage and the Trustee knows this... how did your plan get confirmed? This just doesn't make any sense to me as an outsider looking at your Chapter 13. What I meant by additional disposable income (DMI) is this. Since you are now not paying the $7.2K and it is included as a budget item on your Schedule J and Form B22C (Means Test), then that money is not going to the lender. Therefore, whatever you are not paying (whether it's $1K or $7.2K a month) is actually now DMI.

I suggest that you disclose your plans with your attorney and find out, for sure, what the impact of your non-payment will be on your plan and discharge.

[henrut]

I will absolutely do that. Thanks for your help.

[justbroke]

Your attorney "may" suggest that you continue to do what you are doing, and that's nothing! The attorney may also suggest a motion to modify the confirmed plan and "surrender" the home so that the debt can be discharged. This may awaken your lender and they may then be in the mood to talk about a modification. I would still discharge the debt since it appears you can't afford the payments anyhow.

[henrut]

I will know by the end of summer whether keeping the place is really an option, at which time I'll contact the lender to see if they're amenable to modifying the loan or surrender the home. This is all assuming that the lender doesn't foreclose first. Thanks again.