Why not Reaffirm the Mortgage???

[RedLight]

OK, so my atty told me that we will need to reaffrim our cars, but said that in the state of Texas, most people do not reaffirm their mortgages. She actually made it sound like it is a bad thing. I have read through other posts regarding this topic and maybe I am missing something. The house is just over a year old, we bought it new and have a whopping $800 in equity in it. In reality, we just got our appraisal for this year and our house appraised at almost $10,000 less than we paid. Guess they definetely won't take the house. ;) So, if we plan on making payments on time for the next few years while we live here, why wouldn't we reaffirm when they could take our house at any point?

[keepmine]

First of all, they won't take your house. Banks want money not. your property.
Reaffirmations are a bad idea because, should you default on the mortgage post bk, you will be liable for any deficiency balance.

[hnhlvr]

How much is your monthly mortgage payment?

[AngelinaCatHub]

In this case, the lawyer is right. "Keepmine" is usually always right, and I am right. Oops forgot hnhlvr is right too. Real estate is not the "IN" thing at this time. It used to be the "blue chip stock" of investment, but not now. If you like your house, maybe even negotiate down the mortgage?? Or if you can handle it now and like the house pay it. Apartments probably won't be cheaper. About the cars, that is a judgment call. 'Hub

[deafbroke]

I would say pretty close to 80% of bankruptcy filer origionally want to reaffirm their mortgage for a couple reasons. One is they might want to stay in home and the other is they might think it will help build their credit faster after bankruptcy. BUT, what that 80% doesn't usually know is IF they reaffirm they are setting themselves up for a potentially huge problem later.

I'll use 2 examples, same house same person, one reaffirms the other doesn't.

1) Filer one, reaffirms the mortgage. Payments are current. wants to stay in home.
2) Filer two ,doesn't reaffirm, payments are current, wants to stay in home.

Months after filing BOTH filer one and two lose their jobs.
Mortgage company (Dewey Chetham and Howe) starts foreclosure process on both filer one and two for being months behind on payments.
At foreclosure sale BOTH filer one and filer two's homes sell for 20K less than the filers owe on the home.

Filer one recieves notice in mail that he is being sued in court for the difference in the sale amount and the amount he owes.
Filer two gets another place to live and is not sued by lender.

The difference as stated in post above is reaffirming the mortgage allows the lender to go after you for the difference between the foreclosure sale and what is owed on the house. If you reaffirm IT WILL HAPPEN EVENTUALLY.

You can choose to not reaffirm and still stay in the house and make payments on time. You are not obligated to reaffirm. There are exceptions, check with your attorney, but most of the time you can choose to not reaffirm and everything will be fine and if something happens later you can walk away from the house and not owe anything. If you reaffirm you are SCREWED if you are foreclosed on and can end up having to pay back a lot of money and you will not be able to file bankruptcy to save your butt for 7 years. So while it may seem like the logical thing to do by reaffirming the mortgage it is anything but!

DB

[PoorGrammyinBK7]

To reaffirm or not reaffirm - that is the question....

I'll use 2 examples, same house same person, one reaffirms the other doesn't.

1) Filer one, reaffirms the mortgage. Payments are current. wants to stay in home.
2) Filer two ,doesn't reaffirm, payments are current, wants to stay in home.

Months after filing BOTH filer one and two lose their jobs.
Mortgage company (Dewey Chetham and Howe) starts foreclosure process on both filer one and two for being months behind on payments.
At foreclosure sale BOTH filer one and filer two's homes sell for 20K less than the filers owe on the home.

Filer one recieves notice in mail that he is being sued in court for the difference in the sale amount and the amount he owes.
Filer two gets another place to live and is not sued by lender.

The difference as stated in post above is reaffirming the mortgage allows the lender to go after you for the difference between the foreclosure sale and what is owed on the house. If you reaffirm IT WILL HAPPEN EVENTUALLY.

You can choose to not reaffirm and still stay in the house and make payments on time. You are not obligated to reaffirm. There are exceptions, check with your attorney . . .

DB

For most people this is probably the right advice, but not for all. Why do you say "if you reaffirm it will happen eventually"? How do you know that? Are you assuming we are all a bunch of deadbeats just because we are filing BK?

Yes there are MANY people in this country who have gotten in WAY over their heads. Others have been hurt by the real estate market.

Our lawyer advised us today not to reaffirm anything - the house or the cars. But not sure we will follow that advice.

Why? Well for one thing the 1st mtg and both cars are with a credit union. And you know how they can be. We either should reaffirm it all or none of it cause they probably have everything cross collateralized. We have had several loans with them (mostly for cars, but also signature loans, etc) over 25 years - always paid, always on time, and are current on all our payments now. And even though the condo may not sell today for any more than we owe (1st and 2nd mtgs) - and possibly less,, I really believe the market will rebound within a year or two. We do not live in a big fancy place. Its just a 2 bedroom 1 bath condo - less than 800 sq ft. Our payments are $425 PITI (5% interest) and the HELOC (bank - not credit union) is $345. That's $770. Try to find a place to rent for that around here - you can't (well maybe a studio apartment but nothing comparable). Condo fee is an extra $225 but that includes cable, water, sewer, trash, insurance on exterior and exterior maintenance, pool, etc.

We took out the HELOC to consolidate 3 credit cards (almost all business debt) at a payment and rate we can afford - 6.5%- not planning to file BK. 20 year fixed rate. Now we are going to have to file BK because we ended up with a huge judgment (business debt) - a surprise to us as we had never been through anything like that before. We thought it would be settled out of court, but it wasn't. We can't pay it - never will be able to pay it and don't want it to just suck the life out of us for the time we have left on this earth!

Right now we feel we should reaffirm - but then again, we may change our minds. I worry that we will not find anything decent to live in (not that this condo is that great - its not) and we won't be able to get a car loan for an affordable rate. (Ours are 5.5% and 6% with 17 months left on one and 3.5 years left on the other). Thats not so bad. We have to have a reliable car. We have been making all the payments on time - so why should our entire life be completely destroyed because of this freak thing?

Also, friends of ours filed in 2005 and reaffirmed their house, later sold it - didn't make much but were able to buy a few acres in the country and build a house 2 years out from Chapter 7. Their rate is about 7%. They feel reaffirming helped them "bounce back" from BK sooner. Who knows?

I agree - most of the time its probably better NOT to reaffirm, especially if there is a lot of negative equity or huge mortgage payments - but every case is different. Maybe I am being stupid here - I don't know. I would like to hear from more people who have reaffirmed and from those who have not.

Again, our attorney advises strongly against it.

[RedLight]

How much is your monthly mortgage payment?

Our monthly mortgage payment is $1,120. That also includes the homeowners insurance and taxes. We have a 30 year fixed rate of 6.2%. Without the CC debt, we will EASILY be able to pay this with no problem.

[hnhlvr]

Our monthly mortgage payment is $1,120. That also includes the homeowners insurance and taxes. We have a 30 year fixed rate of 6.2%. Without the CC debt, we will EASILY be able to pay this with no problem.

Wow, that is really quite low! I'd say do what you can to stay in the home as what was stated above, you won't find rent for much cheaper than that.

[deafbroke]

Not reaffirming doesn't mean you have to leave the house. YOU CAN CHOOSE TO NOT REAFFIRM AND STILL STAY. Not reaffirming is just protecting yourself if something happens in the future and you can't afford the house any more.
And I guess I could have worded it better, but if you reaffirm, and IF you are foreclosed on, you will most likely have a deficiency judgement against you. if you don't reaffirm, they can't go after you.

Either way, reaffirming or not reaffirming, you can still stay in the house, keep cars, etc. That's why attorneys say it's best to NOT reaffirm.


DB

[RedLight]

Deafbroke,

No hard feelings, I knew what you meant by that. I am still torn though whether or not to reaffirm. I feel as though I am just beginning to grasp all of this. It really is a lot to take in, in a short period of time...good thing for these forums.

[Stilltheone]

When we filed, our attorney listed us as wanting to reaffirm our mortgage. I had no idea about the "consequences" of reaffirming it.

Luckily, both mortgage companies let us do a ride through and we continue to make payments on it.

Had I known then what I know now about reaffirming, I would've been very uneasy about signing it...In the end, I probably would have signed it because we still want to keep our house.

Good luck!

[PoorGrammyinBK7]

Is there a grace period or something where you can change your mind prior to discharge?

[liz417]

Thank you for this valuable info guys! I had no idea what "reaffirming" meant and I thought that you HAD to reaffirm any loans you have outside of your ch 13 payments (we are keeping the house and 2 cars). I just turned in our paperwork yesterday, so when the lawyer bring this subject up again, I'll know what she means.

Question: Can the mortgage company force you to reaffirm?

[Brookamy]

I'm looking into filing soon. I just assumed that I would reaffirm on my mortgage. We do not want to lose the house and would like to stay there for a few more years until we have more options.

Let's say I get to file chapter 7 and a couple of years later (after I've been discharged) I want to sell my house? Does reaffirming or not reaffirming matter? Can I sell my house either way? Do i get the profit of that sale either way?

[RedLight]

I'm looking into filing soon. I just assumed that I would reaffirm on my mortgage. We do not want to lose the house and would like to stay there for a few more years until we have more options.

Let's say I get to file chapter 7 and a couple of years later (after I've been discharged) I want to sell my house? Does reaffirming or not reaffirming matter? Can I sell my house either way? Do i get the profit of that sale either way?

The way I understand it is Yes, you do get the profits, either way. I think we will reaffirm our house as I don't want to give the mortgage company any possible reason to take the house.