how far underwater

[catleg]

It may take several tries to settle. A lot will depend on the banker's willingness to book a loss on the 2nd at any given point in time. So obviously success will depend on who holds the note. If you get rejected at a given price point, it doesn't necessarily mean your price is wrong, but maybe the bank isn't ready to take the loss. Don't necessarily raise your bid, just wait a few months and try again.

This is purely conjecture on my part, based on my understanding of the banking system and its [in]solvency.

[Ann]

What PCN said is correct. If there is no money for the second to get by foreclosing, it would actually cost them money by foreclosing. That is why alot of people totally quit paying the second. The only downside is if the market turns around and the property is no longer upsidedown on the second. At anytime in the future, the second could foreclose. So if you plan on keeping the property forever, you either have to keep paying the second or settle for some amount and get the lien released.

They will not settle if you are current on your payments, even if the loan is 100% underwater. Why would they? they are getting the payments they want.

In my case I am only willing to skip about 6 months worth of payments, because I want to stay in my house for a good while. I don't expect the second to no longer be underwater, but even paying the first and second, it would be cheaper than renting in my area.

I am going to put the missed payments in savings and get caught back up if the bank won't settle. It all boils down to how much risk you are willing to take that the bank might foreclose at somepoint down the road.

And as far as your credit rating goes, you don't get any ratings at all for paying off discharged debt. If you pull your credit report, it's only going to show discharged in BK, whether you keep paying or not.

Sounds like an excellent plan. One in which I may try to do for my situation. Again, pardon my ignorance here but if you are keeping your home in a bankruptcy (chapter7) why is it considered a discharged debt? and why is it not being reported? Does this mean that even my first mortgage will not show as me making payments? Does this mean that any debts (mortgages and cars included) that you are still paying on before the bankruptcy will not show up anymore and only new debt will show? I'm really confused on this. The whole topic of getting rid of my second mortgage is very interesting to me. I cannot stand the fact that I am making payments on a home equity loan when there is virtually no equity there!

[BCA2009]

Sounds like an excellent plan. One in which I may try to do for my situation. Again, pardon my ignorance here but if you are keeping your home in a bankruptcy (chapter7) why is it considered a discharged debt? and why is it not being reported? Does this mean that even my first mortgage will not show as me making payments? Does this mean that any debts (mortgages and cars included) that you are still paying on before the bankruptcy will not show up anymore and only new debt will show? I'm really confused on this. The whole topic of getting rid of my second mortgage is very interesting to me. I cannot stand the fact that I am making payments on a home equity loan when there is virtually no equity there!

Unless you re-affirm, ALL of your debt is discharged in BK, but until the bank forecloses on your home, it is still in your name and you can voluntarily keep making payments. The bank has the legal right to foreclose if you don't re-affirm but if you do keep making payments they have no incentive to foreclose have been letting people stay in the home.

Because the debts have been discharged, that is what they will show on your credit report. Since you are not obligated to make payments, they can't report to the crdit agencies if you stop making payment and conversely they don't report if you do keep making payments.

If you do decide to re-affirm. You are re-obligating yourself to pay back the note. In this case they will report to the credit agencies your payments history and if yopu stop making payments they can come after you for the deficiency and get a judgement against and you.

There is no guarantee that you will be able to settle the second after discharge in a chap 7, but you can always just walk away if you don't re-affirm.

I would basically consider not re-affirming the same as renting, but with alot of options.

[Ann]

Unless you re-affirm, ALL of your debt is discharged in BK, but until the bank forecloses on your home, it is still in your name and you can voluntarily keep making payments. The bank has the legal right to foreclose if you don't re-affirm but if you do keep making payments they have no incentive to foreclose have been letting people stay in the home.

Because the debts have been discharged, that is what they will show on your credit report. Since you are not obligated to make payments, they can't report to the crdit agencies if you stop making payment and conversely they don't report if you do keep making payments.

If you do decide to re-affirm. You are re-obligating yourself to pay back the note. In this case they will report to the credit agencies your payments history and if yopu stop making payments they can come after you for the deficiency and get a judgement against and you.

There is no guarantee that you will be able to settle the second after discharge in a chap 7, but you can always just walk away if you don't re-affirm.

I would basically consider not re-affirming the same as renting, but with alot of options.

Will the home still be considered my home if I do not re-affirm? What if I re-affirm my first and not my second? Is that an option?

[iv65536]

I wouldn't reaffirm the 1st, let alone the 2nd. My thinking is to use the threat to stop paying the 1st to force the 2nd to settle for pennies on the dollar, perhaps get rid of a $35k 2nd and its lien for less than $1k.

[BCA2009]

Will the home still be considered my home if I do not re-affirm? What if I re-affirm my first and not my second? Is that an option?

I would not re-affirm just one. Actually I woulnd not re-affirm either unless I had a fairly sizable amount of equity.

I can't think of a good reason to re-affirm the first and not the second. Maybe someone else knows one.

If you do not re-affirm the house is still yours. The deed will still be recorded with clerk of court in your name. There will still be a morgage listed against the deed (these terms are in florida, other states might use different terms but they mean the same).

Until the Bank forecloses it will be in your name. And you have all of the rights (and obligations - Taxes, HOA fees, etc) that you had before discharge. You can still sell it, if you pay off both the first and second. The only difference is you are not obligated to make payments and the bank has the right to foreclose at anytime.

I have read that in some states that the bank can't foreclose if you are current on payments, but I don't know for sure if that is true. I have never looked it up for myself. But you might want to check with a real estate attorney in your state just in case.

[catleg]

A mortgage is just a loan to you, secured by a certain property (your home).

Bankruptcy severs your obligation on the loan.

What remains is the security interest in the collateral. You still own the collateral. As long as you keep paying, everything's good. If you stop paying, or let the homeowners insurance lapse, they can protect their rights in the collateral with a foreclosure.

[BCA2009]

A mortgage is just a loan to you, secured by a certain property (your home).

Bankruptcy severs your obligation on the loan.

What remains is the security interest in the collateral. You still own the collateral. As long as you keep paying, everything's good. If you stop paying, or let the homeowners insurance lapse, they can protect their rights in the collateral with a foreclosure.

Close, but not exactly. A mortgage is not a loan. You sign a promissary note, which is the "loan". You then spend the money the bank loaned you to buy the property. You get a deed that is recorded which shows you own the property. The bank requires you to sign mortgage which gives them a security interest in the property until the promissary note is paid in full. This all happens at the same time at closing.

In BK, the prommisary note is discharged, but the mortgage remains.

Because all of these documents are signed at the same time and normally the mortgage is not removed until the loan is paid off, it is common to use the terms interchangably. But a mortgage by itself is not a debt.

The mortgage is what allows the bank to foreclose and recover the collateral for the promissary note. Just because you keep making payment doesn't prevent the bank from foreclosing, unless there is some other state law that prevents foreclosure if you are "current". But technically after you are discharged you can't be "current" or "late" because you have no obligation to repay the loan.

But obviously in practice if you continue to make payments in compliance with the discharged loan (being "current") the bank won't foreclose because it is not in their financial interest to do so.

[BCA2009]

A mortgage is just a loan to you, secured by a certain property (your home).

Bankruptcy severs your obligation on the loan.

What remains is the security interest in the collateral. You still own the collateral. As long as you keep paying, everything's good. If you stop paying, or let the homeowners insurance lapse, they can protect their rights in the collateral with a foreclosure.

Close, but not exactly. A mortgage is not a loan. You sign a promissary note, which is the "loan". You then spend the money the bank loaned you to buy the property. You get a deed that is recorded which shows you own the property. The bank requires you to sign mortgage which gives them a security interest in the property until the promissary note is paid in full. This all happens at the same time at closing.

In BK, the prommisary note is discharged, but the mortgage remains.

Because all of these documents are signed at the same time and normally the mortgage is not removed until the loan is paid off, it is common to use the terms interchangably. But a mortgage by itself is not a debt.

The mortgage is what allows the bank to foreclose and recover the collateral for the promissary note. Just because you keep making payment doesn't prevent the bank from foreclosing, unless there is some other state law that prevents foreclosure if you are "current". But technically after you are discharged you can't be "current" or "late" because you have no obligation to repay the loan.

But obviously in practice if you continue to make payments in compliance with the discharged loan (being "current") the bank won't foreclose because it is not in their financial interest to do so.

[catleg]

I didn't expect the Spanish Inquisition....

[BCA2009]

I didn't expect the Spanish Inquisition....

I wasn't challenging you catleg. Just pointing out the difference between the parts of the home purchasing process.

I think its important to understand the difference between the promissary note and how the deed works becuase after BK, but before foreclosure, the house is still 100% yours. You just don't have any responsibility to pay back the prommisary note. But you really don't have any fiduciary responsibility to take care of the home or keep it in good shape for the bank.

Alot of people seem to think it's automatically the Bank's house if they don't reaffirm.

[catleg]

Oh, no problem at all. I was just a little lazy about writing it up, I'm glad you took care of it. It is certainly more than a little confusing. If you throw MERS and "who holds the note" into the mix I'm surprised they can foreclose on anyone.