To reaffirm home or Not reaffirm Mortgage

[tcreegan]

Hi skweakalee,

Don't take it personally if none of the previous posters answer, the thread was a year ago..probably all moved on by now...

Tom in Colo

...oh, almost forgot, it would be a motion to approve the reaffirmation. Your scenario is essentially correct.

[skweakalee]

The key is, you have time. You can reaffirm at any point before discharge.

If it were me, I would wait and see if the lender does anything. If they file a motion in your BK, THEN you can reaffirm. No need for you to make the first move.

If the lender does not file anything in the BK, and you get your discharge, the lender cannot foreclose based solely on the fact that you failed to reaffirm. (just keep making your monthly payments on time and in full).

What type of motion would they file?

How would this affect the reaffirmation situation (described below)?

As I understand this whole reaffirmation situation:
The court requires a statement of intention. One could intend to reaffirm. If the reaffirmation terms are "great" and you really want to keep the house, go ahead and reaffirm. If the terms don't improve, then don't reaffirm. Check state law & note terms to see if bankruptcy constitutes a default - if it doesn't, stay and pay on time and you get to keep the house. If bankruptcy does constitute a default, you can still stay and pay, but you are gambling with the lender's desire to foreclose. Should the lender choose not to foreclose relatively soon, you have a case in equity (laches) against foreclosure.

[hamletsdead]

Why reaffirm?

In California, you have no personal liability for purchase money mortgages -- that is, the loan you got when you bought your house. The bank can only come after you for a deficiency judgment on refinance money, or HELOCs, or 2nd mortgages all taken out after the initial purchase of the real property. When you get your discharge in Chapter 7, you wipe out all personal liability for any deficiency judgment, which simply puts you in the same situation as everybody who bought a house in California and simply didn't refinance. The contract is still good, still binding, EXCEPT for the part where you personally guarantee the loan in the event of a default. After discharge, the only security the bank has is the property, and they are legally bound to abide by the terms of the loan agreement as long as payments are made. They can't foreclose, unless you stop paying.

The lame thing is when they stop reporting your payments to the CRAs. Logically there is no reason for this because post-discharge you are in the exact same position as someone who just bought a house. Purchase money loan = no personal liability. So it should show up on your credit report.

[treadingwater]

Reading with great interest...

We have a very unique situation. We have a 1st and 2nd on our home with BB&T, but it's a construction to perm loan that has never been modified as the construction (remodeling) is still very incomplete. Had our 341 on Nov. 3rd, Trustee abandoned interest. Hired a separate atty. to negotiate a new mortgage and now, 45 days into the process, BBT wants a reaffirmation to even begin negotiating. My instincts is NO way. We have somewhat of an upper hand in that the house is not worth anywhere near the mortgage and is still very much a construction/remodeling mess. The atty. says, file the reaffirmation and then if you don't get the terms you want, rescind it -- she says the law gives you 60 days to rescind a reaffirmation. I feel if we sign the reaff. we give up any bargaining power. any thoughts...

[jgordo52]

The only potential issue is the fact that the lender will not report your payments to the credit bureaus. So when it comes time to refinance or sell (if you ever decide to), you may have to request payment history from your current lender in order to show that you have been making on-time payments.

Other than calling the lender and requesting after not re-affirming to report your payments and payment history to the CRA's, what is your options to get it reported? I mean can the lender pick and choose what to put in there. Say you paid on time for 6 months and the 30 days late, can they only put the 30 day late and not the previous months?

THanks,

Jeff

[laurannm]

I'm thinking no, they cannot come after you for the insurance. Typical part of the note states that if you do not keep the property properly insured, then you are at default, in which case they will reposess.

When you say you stopped paying, do you mean you are now intending to surrender the vehicle?

[Keebler]

I honestly would not be worried about not reaffirming. Again, your "mortgage" or lien still exists, regardless if you affirm or not. If you decided to sell or refinance, you should not have any problems.

The only potential issue is the fact that the lender will not report your payments to the credit bureaus. So when it comes time to refinance or sell (if you ever decide to), you may have to request payment history from your current lender in order to show that you have been making on-time payments.

I understand the logic that the mortgage still exists and so the agreement is still in place. However, take a look at the next situation and tell me how to look at it.

I have a broken Suburban that I halfway expect the Credit Union that's 1,000+ miles away to abandon. I indicated that I wanted to reaffirm it but they only offered to reaffirm it plus a credit card and an overdraft line of credit. I now have no interest in reaffirming it. The contract requires me to keep it insured and failing to do so will cause the credit union to obtain single-interest insurance at my expense.

If I choose to drop the insurance, can't the credit union obtain insurance for me and charge me? After I'm discharged, the charge will fall outside of the bankruptcy and thus be enforcable? As long as they fail to reposses the truck, I'm worried I may be stuck with some of the obligations in the contract. I stopped paying months ago but it is still licensed and insured.

Thye attorney tells me "I'm the attorney, don't worry about it" and it doesn't make me feel any more assured.

[laurannm]

Wow! Thanks for noticing the new picture.

We are SO LUCKY and blessed that I can't even describe it all. We're litterally going to be debt free because we're not keeping ANY vehicles and the mortgage was not reaffirmed.

I'm not without obligation because I got a long-term loan from my Sister and I scored a newer Suburban than the one that I'll surrender and it's going to cost me almost the same amount.

I got this one-owner Suburban for HALF of what retail price should have been and it's perfect for our needs. (It's a 2003 with 117,000 Miles for $5,400) It's kind of dirty inside, and there's no shortage of minor things that haven't been taken care of, but I'll have it all fixed up in no time and we'll be doing fine.

I'll proceed on faith that not reaffirming was the right thing to do despite the fact that it seemed like the wrong thing in my case.

I tried to get transcripts of my hearing to share but they charge a fortune for them. The cheapest thing I could do is get an audio CD for $26 and find a way to host it on the Internet. I'm not sure anyone would learn enough from it beyond the value of entertainment so I probably won't bother.

I honestly would not be worried about not reaffirming. Again, your "mortgage" or lien still exists, regardless if you affirm or not. If you decided to sell or refinance, you should not have any problems.

The only potential issue is the fact that the lender will not report your payments to the credit bureaus. So when it comes time to refinance or sell (if you ever decide to), you may have to request payment history from your current lender in order to show that you have been making on-time payments.

[Keebler]

Keebler
You got new wheels NICE your hearing went well LOL

Wow! Thanks for noticing the new picture.

We are SO LUCKY and blessed that I can't even describe it all. We're litterally going to be debt free because we're not keeping ANY vehicles and the mortgage was not reaffirmed.

I'm not without obligation because I got a long-term loan from my Sister and I scored a newer Suburban than the one that I'll surrender and it's going to cost me almost the same amount.

I got this one-owner Suburban for HALF of what retail price should have been and it's perfect for our needs. (It's a 2003 with 117,000 Miles for $5,400) It's kind of dirty inside, and there's no shortage of minor things that haven't been taken care of, but I'll have it all fixed up in no time and we'll be doing fine.

I'll proceed on faith that not reaffirming was the right thing to do despite the fact that it seemed like the wrong thing in my case.

I tried to get transcripts of my hearing to share but they charge a fortune for them. The cheapest thing I could do is get an audio CD for $26 and find a way to host it on the Internet. I'm not sure anyone would learn enough from it beyond the value of entertainment so I probably won't bother.

[TEW]

Just got home and I need to head of to work.

The whole hearing was surreal. We got there with ten minutes to spare and my attorney barely said anything to me. (I wasn't too interested in small talk either.) We then sat and waited while a few attornies shot the breeze.

The people before me reaffirmed an engagement ring they bought under their name for a Brother-in-law.

We were the last ones to get called before lunch and the judge was in the mood to be long winded. I litterally said nothing and stood there as he delivered a sermon on how reaffirmation should never be allowed and he's against it. My attorney chimed in saying "I don't even know why I should bother filling out these things" as she motioned toward the paperwork.

He went on and on and on about the economy and how more companies will be failing and how nobody is safe. His whole point was how he's somehow giving me a fantastic gift by NOT letting me reaffirm.

At one point in his sermon he asked hypothetically if I really wanted to reaffirm and I just shrugged my shoulders while my wife and attorney were shaking thier heads "no". I really wanted to argue my reasons for reaffirming but I decided it wasn't worth it.

So, we'll keep making payments and keep living here for as long as we'd like.

My bet is that some day in the future something will happen, like trying to sell the place, and we'll find that the lack of a mortgage will cause us some different kind of trouble instead. But, we'll just have to deal with that when it happens.

Keebler
You got new wheels NICE your hearing went well LOL

[TEW]

I thought PMI( primary mortgage insurance) was regulated under the terms of FHA. If so, I don't think it this would be possible. I would like to hear how you came to this conclusion about PMI. I understand what your saying and it makes sense to me in the general idea of signing. If would please share with us how you came to the fees.. and PMI concerns.. Thanks. MI

If I am reading what you posted correctly you have an asset case and the trustee is going to give you the $3500 for the exemption. What are you reaffirming?

[happy_ira]

Furthermore, I am within striking distance of 20% equity.

I am assume you are taking Homestead exemption? If you are sitting on 20% equity (and if that is a huge number), unless exempted, I believe the Trustee will happily take a keen interest in this... Couldnt he force a HELOC (or such) to pay off other creditors?

[laurannm]

I filed chapter 7 yesterday pro se and plan on fighting to the teeth to have my mortgage reaffirmed. It just doesn't make any sense to not have some sort of legal agreement in place when sending money month after month. Without a mortgage agreement, what obligation does the lender have to apply your payments to the principle? They could arbitrarily create fees that consume your entire monthly payment and you would have no legal recourse! Furthermore, I am within striking distance of 20% equity. Under my current mortgage agreement, I have a right to be freed from private mortgage insurance (PMI) at 20% equity, but with no reaffirmation there is no agreement. The lender can decide that I must pay PMI indefinitely and set any price they want. Without a legal reaffirmation, I could end up "owing" more on my home 5 years from now than currently. Without the legally binding protection of a mortgage, I might as well just give the bank my home.

Hold on....I believe this is completely incorrect. If you do not reaffirm, it is true, your personal liability is discharged. However, the terms of your mortgage (i.e. the note and everything in it..interest rate, escrow, and all other terms) still survive the BK and thus remain legally binding.

Also, if I am not mistaken, PMI is governed by law and not by your mortgage agreement with the lender. Thus choosing to not reaffirm has no bearing on PMI

[Mi Bankruptcy]

I filed chapter 7 yesterday pro se and plan on fighting to the teeth to have my mortgage reaffirmed. It just doesn't make any sense to not have some sort of legal agreement in place when sending money month after month. Without a mortgage agreement, what obligation does the lender have to apply your payments to the principle? They could arbitrarily create fees that consume your entire monthly payment and you would have no legal recourse! Furthermore, I am within striking distance of 20% equity. Under my current mortgage agreement, I have a right to be freed from private mortgage insurance (PMI) at 20% equity, but with no reaffirmation there is no agreement. The lender can decide that I must pay PMI indefinitely and set any price they want. Without a legal reaffirmation, I could end up "owing" more on my home 5 years from now than currently. Without the legally binding protection of a mortgage, I might as well just give the bank my home.

I thought PMI( primary mortgage insurance) was regulated under the terms of FHA. If so, I don't think it this would be possible. I would like to hear how you came to this conclusion about PMI. I understand what your saying and it makes sense to me in the general idea of signing. If would please share with us how you came to the fees.. and PMI concerns.. Thanks. MI

[learnmore]

Everyone who says there's no reason to reaffirm...

I filed chapter 7 yesterday pro se and plan on fighting to the teeth to have my mortgage reaffirmed. It just doesn't make any sense to not have some sort of legal agreement in place when sending money month after month. Without a mortgage agreement, what obligation does the lender have to apply your payments to the principle? They could arbitrarily create fees that consume your entire monthly payment and you would have no legal recourse! Furthermore, I am within striking distance of 20% equity. Under my current mortgage agreement, I have a right to be freed from private mortgage insurance (PMI) at 20% equity, but with no reaffirmation there is no agreement. The lender can decide that I must pay PMI indefinitely and set any price they want. Without a legal reaffirmation, I could end up "owing" more on my home 5 years from now than currently. Without the legally binding protection of a mortgage, I might as well just give the bank my home.