Chapt 13 Letter from Mortgage Company

[car67]

I am filing another Chapt 13 to clear up some taxes and lates on the house.
341 hearing is Nov 10

Everything is going good no hassle so far. However the weirdest thing I have seen to date just happened. My Bk attorney received a letter from AHMSI telling him they would like to explore loan modification options since his client is having a hard time. BLAH I already tried for loan mod prior to filing to be told no on HAMP and that my file was being considered for in house mod. I got tired of waiting and didnt want to risk foreclosure backdoor so I filed 13 to catch arrears and get on track........ Now that AMSHI wants to explore a MOD I wonder how this affects the 341 and any monthly payments I was planning to make to AHMSI in liu of new modification discussions. I have not heard of this angle in all of my reading here..... Any veterans wanna chime in what to expect?

[justbroke]

It would only affect your payments, to the extent that it frees up more "disposable" monthly income (DMI) which would just go the the unsecured creditors in the pro rata pool. In most cases, your payment to the Trustee would not change -- if you pay your mortgage through the Trustee. That's because the difference freed up by any modification would go to the unsecured pool.

In any event, this may be a SMART move by the creditor. If you get a modification, your payment may actually go up, unless they reduce the interest rate. Here's how. Imagine that you owe $200K and owe $20K in arrears. The modification would take the arrears and put it into the loan. You now owe $220K. Most of them will keep the same terms and just re-amortize the payment. This means that if you had 20 years left of 30, they'll amortize that new $20K in for 20 years at the same interest rate. Voila... you now have a higher payment!

Smart move by them, because they get to make money (interest) on the amortized arrears. Could be good for you, because you'll be current, and if you didn't need the Chapter 13 except to save the home... you could technically just get out of the Chapter 13. However, considering other factors, exiting the Chapter may not be a good thing, especially if you did any lien strips.