Above median income, negative DMI w/IRS standards

[BnkrptcyLwyr]

yeah, i guess mine isn't really a Mcmansion, it's the smallest most popular model at only 3200 sq ft + 600 granny flat, but more acreage than a standard Ca home. but I consider myself lucky. The hugh price escallation in this area flat out started with this builder. people are walking away from homes here they paid $900K new for, like Lemmings into the sea. mabee I was fooled but I never believed I would see $500k in equity just evaporate like this .

If you are go through bankruptcy make it WORK for you. This is a time for reorganization of finances.

While people view Chapter 13 as a way to "save my house" I tell them that bankruptcy is not about "saving" anything, but about reorganizing your finances so that you can live off the income your making, and undoing the bad choices (whether intentional or unintentional bad choices).

The simple fact is that retaining the bad choice (underwater home) is not helpful, and a waste of going through the bankruptcy process.

[HHM]

Exactly, the "academic name" for this concept is Opportunity Cost. The true cost of a decision, in this case the use of funds, is measured by what else could have been done with the money.

So ask your self, is your mortgage payment being put to its best use by paying negative equity? Or, could you be using that money in a more beneficial way (i.e. like actually buying a house at current market prices and actually "building" equity.

[albacore44]

Thanks

I really appreciate all the advice and wisdom found on this website. my situation is not quite as dire as some here (yet). I still have my employment of 30 years, and it still looks good for now, but who knows in this economy.

my plan is to try and negotiate a reduction in principal on both 2nd and/or 1st mortgage in the framework of a BK plan. If the 2nd see's they will receive next to nothing, if that , If I threaten to let them forclose, who knows ?? They may decide something is better than nothing. Negotiating a principal reduction would bring LTV more in line. if they refuse, then I'll have to make a business decision at that time.

mabee i'm dreamin, but I'll certainly give it a try and if successful share the results here so all may have benefit .

[HHM]

mabee i'm dreamin

You are, but no harm in trying?

What you have to understand, it is not simply a "decision" they make to write down the principal. These mortgages (and the derivative securities they support) simply are not designed to allow a principal write down. Keep in mind, foreclosures are at record highs because banks are still foreclosing. As logical as it may seem to say, well, they should accept or they get nothing, is actually not true. Keep in mind, these are large corporation, those "loses" offset gains and save huge money on the tax burden (the Republicans are right on this point, the US has one of the highest corporate tax rates). Moreover, in terms of the second mortgage, the JDB (Junk Debt Buyers) are starting to buy these, so there is a market for selling bad mortgage debt and they get to write down the loss for taxes...so they really do get something and in their picture, it is better than writing down the principal in an uncertain real estate market.

[justbroke]

HHM accurately reflects what Henry Paulson had been unable to explain to even Congress. Many of these mortgages are now part of what they called "asset backed securities". They are usually lumped together on top of that, and then groups of Banks or other financial services companies purchase them. Even individuals hold "shares" of these securities in the 401(k)... I do!!!

The problem is, and when I asked for certain things on my loan for modification, they have to find who actually owns the debt. This is difficult at best. If you're lucky, you may have a loan which is actually owned by your lender, and hadn't been sold as real estate securities to the masses.

The mess is that no one can value these things, and lending institutions and banks are itching to get them off their books... at all costs. And, strange as it may seem... there are actually companies making money off these foreclosures... namely the JDBs as HHM has mentioned! (Not to mention some savvy real estate agents pushing short sales. But, alas, I think the Banks are getting smarter than they were at the beginning of the downturn. I don't expect to see any record number of short sales or deed-in-lieu-of transactions until this works it'self out.)

As HHM succinctly wrote, it could actually be in the Bank's interest to foreclose and get what they can

[albacore44]

You are, but no harm in trying?

What you have to understand, it is not simply a "decision" they make to write down the principal. These mortgages (and the derivative securities they support) simply are not designed to allow a principal write down. Keep in mind, foreclosures are at record highs because banks are still foreclosing. As logical as it may seem to say, well, they should accept or they get nothing, is actually not true. Keep in mind, these are large corporation, those "loses" offset gains and save huge money on the tax burden (the Republicans are right on this point, the US has one of the highest corporate tax rates). Moreover, in terms of the second mortgage, the JDB (Junk Debt Buyers) are starting to buy these, so there is a market for selling bad mortgage debt and they get to write down the loss for taxes...so they really do get something and in their picture, it is better than writing down the principal in an uncertain real estate market.

Still dreamin........but whats great about this place, is the more questions you ask, it makes you think of another, and this develops answers for future pilgrims to follow.

so suppose you do a ride through, and sometime down the line, default on your 2nd. then your original leinholder sells off to a JDB, who would now hold your lein (I assume). now they (JDB) could impose forclosure, and try to get something on there investment, or they could sit on the lein waiting for you to sell and collect then. Or you could negotiate with the JDB for terms and pay them off........Just creative thinking here.

Thanks for all you do

[justbroke]

Still dreamin........but whats great about this place, is the more questions you ask, it makes you think of another, and this develops answers for future pilgrims to follow.

so suppose you do a ride through, and sometime down the line, default on your 2nd. then your original leinholder sells off to a JDB, who would now hold your lein (I assume). now they (JDB) could impose forclosure, and try to get something on there investment, or they could sit on the lein waiting for you to sell and collect then. Or you could negotiate with the JDB for terms and pay them off........Just creative thinking here.

Thanks for all you do

There's a great article on Bankruptcy Law Network about foreclosures and right to foreclose on properties... in California specifically.

If the JDB doesn't transfer the title correctly and re-record it, they can't foreclose.

You may want to look at the article below from Mortgage Law Network. It's on recent California Legislation that may help you in the in-land EMPIRE!

http://www.mortgagelawnetwork.com/california-foreclosures-lenders-must-accept-loan-modifications/

[vicmost]

I'm in the same boat as Upside Down except I fall just below my states median income..
(I have negative DMI and need to do s second lien strip)...
Would it not be to my advantage to have some secured debt or arrearages to pay so that the trustee gets something? It seams pretty unlikely that they will approve a plan if they get nothing?

[justbroke]

I'm in the same boat as Upside Down except I fall just below my states median income..
(I have negative DMI and need to do s second lien strip)...
Would it not be to my advantage to have some secured debt or arrearages to pay so that the trustee gets something? It seams pretty unlikely that they will approve a plan if they get nothing?

It's not up to the Trustee to determine approving a plan. The Court -- read, the Judge -- approves plans. While an objection to confirmation of the plan can be a pain to fight the Trustee over, the Judge can overrule the Trustee's objections and they have many times. The Trustee has no legal basis to object to plan confirmation, because the Trustee isn't getting any money.

How Trustees make money in most Districts, is that the District has a local rule requiring all secured debt to be paid through the Trustee. My Trustee is getting up to $538 a month! To write checks!!!! My Trustee will earn more than $30K over the life of my plan. I guess that's why theydidn't object to my confirmation.

[vicmost]

There's a great article on Bankruptcy Law Network about foreclosures and right to foreclose on properties... in California specifically.

If the JDB doesn't transfer the title correctly and re-record it, they can't foreclose.

You may want to look at the article below from Mortgage Law Network. it's on recent California Legislation that may help you in the in-land EMPIRE!

http://www.mortgagelawnetwork.com/ca...modifications/

Excellent Article!
This could really help me since I live in the "Inland Empire"!
Keep them comming!

[vicmost]

It's not up to the Trustee to determine approving a plan. The Court -- read, the Judge -- approves plans. While an objection to confirmation of the plan can be a pain to fight the Trustee over, the Judge can overrule the Trustee's objections and they have many times. The Trustee has no legal basis to object to plan confirmation, because the Trustee isn't getting any money.

How Trustees make money in most Districts, is that the District has a local rule requiring all secured debt to be paid through the Trustee. My Trustee is getting up to $538 a month! To write checks!!!! My Trustee will earn more than $30K over the life of my plan. I guess that's why theydidn't object to my confirmation.

I see!
Thanks once again
I'm not sure what my district rules are yet but it seams that if the trustee gets something he is more likely not to object.... I've been reading the Nolo book on chapter 13 and various local lawyers websites. They describe 0 payment (or low payment) plans as possible but unlikely..
I'm so thankfull for finding this websitel. I really need this info so that I can make sure I get a good lawyer who is well versed in the subject...The lawyer I spoke to previously wanted to rubber stamp me into a chapter 7!

[IBroke]

Yes, you are correct. You would pay nothing to the Trustee. This makes them mad, because they make no money.

However, if you have a negative or zero-dollar DMI, then you pay nothing through the plan.

Now what about the time until you are discharged? I mean, how can you actually "pay" $0 for 60 months?

The 9th District Court ruled that if you have a negative DMI AND you're above the median, YOU can virtually decide how long your plan will be - even as short as a day..

[justbroke]

Now what about the time until you are discharged? I mean, how can you actually "pay" $0 for 60 months?

Yes. I am actually negative DMI, and pay nothing to unsecured creditors. However, I do pay "through" the Trustee for my secured creditors.

The 9th District Court ruled that if you have a negative DMI AND you're above the median, YOU can virtually decide how long your plan will be - even as short as a day..

Yes, I read that decision, and I concur with the BAP (or was it the Circuit Court of Appeals)? In that decision, they basically conclude that the "applicable commitment period" doesn't apply if you have a negative DMI. That's because you agree to pay the DMI over the "applicable commitment period", but if there's no DMI, then there is no "commitment period". I love it!

However, remember, that many people in a Chapter 13, are trying to fix arrearages on automobiles and/or a home (or other real property). They have no choice but to drag the plan out over some period, in order to cure the arrearages.

[IBroke]

Yes, I read that decision, and I concur with the BAP (or was it the Circuit Court of Appeals)? In that decision, they basically conclude that the "applicable commitment period" doesn't apply if you have a negative DMI. That's because you agree to pay the DMI over the "applicable commitment period", but if there's no DMI, then there is no "commitment period". I love it!

However, remember, that many people in a Chapter 13, are trying to fix arrearages on automobiles and/or a home (or other real property). They have no choice but to drag the plan out over some period, in order to cure the arrearages.

Do you know by any chance if this ruling only applies regionally (I'm not familiar with the districts) or is this a valid ruling on a federal basis?
I'm dreaming about dumping our second mortgage right away without waiting a couple of years...All other secured loans would be current.

[justbroke]

Do you know by any chance if this "unlimited timeline" only applies regionally (I'm not familiar with the districts) or is this a valid ruling on a federal basis?

What "unlimited" timeline. There is no such thing. The Bankruptcy Code is pretty clear that any plan must not exceed 60 months from the date of filing the petition.