Interesting - Why do so many Chapter 7 filers want to keep an UPSIDE DOWN home loan?

[clevelandmom]

I am staying and paying and staying until I die. Hopefully that will be in about 50 years or more. I love my house, I love my neighborhood, and I love that this is my daughter's home. I love that I can have a dog (or as many dogs as I want). I am not upside down on my 1st mortgage, but $50,000 on my second. The truth is, this is not just an investment for me, it's my home. I'm not going anywhere God willing. Should I run into some kind of disaster in the future, then fine, I walk away. But as long as I'm going to be paying to live someplace anyway, I'd rather put it towards something I will own one day as opposed to paying rent. BTW, my parents and dh's parents are still alive, and one day (hopefully a long time from now), they will pass away and we will get an inheritance. The inheritance will be enough to pay off my house, so it's not like I have to wait 30 years (unless they live to be 115 years old )

[Memphisbelle]

I am not underwater...yet?....but I love having cocktails with neighbor and not risking a DWI. Having as many animals as I want...I have one dog and painting my house what ever color I want, pounding nails and watching it transform in the exact place I want to like live. Landlords want you to live in their investment property the way they want you to protect their investment. Mostly, I love the cocktails with my current neighbors:~)

And yes, as of this state of financial affairs, I will have no mortgage someday and some cash if I sell. I'd take the risk that this would be the way it would work out, to live as I do.

[BK2PD]

There are a lot of reasons why people stay in their house and nobody in this forum has any right to criticize or instill fear to anybody that follows a path other than yours. "Constructive Reaffirmation" as you say it is a hard sell to the lenders and there is no binding or written contract associated with it. Look, this is a traumatic time and a life changing event for an individual and their families and I don't even think they are holding on to their homes because it is a monetary investment but more of a personal one. Some people buy houses because they consider it home and not thinking about selling it later as a primary goal while others similar to you looks at it as a financial move. I am not defending one from the other but to be judgmental and sound condescending is quite laughable, because if anybody here was that smart in financial decisions or act like a Mortgage and Rental GURU, we would not be here including yourself GMAN.

[diesillady]

Hello All,

I have the same quandry as many on this board reference stay and pay or rent. Currently, I am 350K upside down and our house will NEVER appreciate back to the highs of 2005 again or anywhere near the balance I owe anyway. Once my 7 goes through and I don't reaffirm, I have to make the choice to stay and pay the modified payment or just move on, live rent free for a year and put this all behind me.

We received a loan payment modification at the beginning of this year that is very affordable and maybe even a little less than the going rental rate. This does not however factor in the taxes, insurance and maintenance I must pay every month and the loan mod is only 48 months and then back to the insane payment.

Housing will never in my opinion and that of almost every expert, and I use that term lightly, ever return to the highs of 2005 for many reasons, especially here in SoCal.

Too may factors have changed, lending options, lending rules, demographics of once high-end neighborhoods, high-end incomes and jobs leaving, abandoned foreclosed homes etc etc. Those overinflated manufactured highs were just a fabrication anyway. I am sorry I bought into it.

Putting all this together makes the option clear. It's not if we are going to leave this house it is just when. Should we stay and take advantage of the tax break for a few more years or just leave and get this behind us.

Smart money says just stop paying now and GET OUT!

One thing that has not been mentioned here is the stay and payers must resolve their mortgage issue if they are EVER to get another mortgage and move on. Remember, it is going to be at least 3 years after you dispose of your current house until you can get into another one as an "owner." Doesn't matter if you don't owe the debt, you must still complete the transfer (foreclosure) process and then start the 3 year wait until you are minimally qualified to get a mortgage again. You could stay and pay for 5 more years, have rebuilt strong credit and maybe a solid savings and decide, hey, things are looking good, maybe we should move now and get into that better neighborhood or school district. Fine, but you will move as a renter and NOT an owner because you have not yet resolved the issue with your current stay and pay situation.

If your neighborhood continues to deteriorate, your neighbors foreclose in the future and renters start taking over the place then you may decide its time for you to go. Title transfer back to the bank and then 3 years wait so you become a renter anyway.

Ironically today those that went through the first wave of foreclosures in 2005 and 2006
are now buying homes again at the market bottom. One of our neighbors that left in 2006 and rented for 4 years just closed escrow on a very similar home they left with a mortgage of 690K. Their new mortgage is only 289K and their new mortgage payment is less than my modified payment today.

I stayed here hoping for a turnaround in the market, a new federal program that would have helped, a loan mod or principle reduction I could live with or any other way to save the home I built and loved. Just not going to happen.

I understand those that are only under water a little trying to stay and hope for the best but in my situation this is not an option. I will be a renter this time next year for sure.

Good luck to all.

ST

Wow!!! This the same exact conversation my spouse and I had about keeping our home. We to live in California Inland Empire we purchased our home in 2004 with 80/20 loan of $272k/50k. The home is currently worth $118k lol so there is no way we ever see par on value. We're doing a no assets chapter 7 and will not reaffirm either loan and will not seek a modification either. Currently PITI RUN $1566 on a ARM loan of 5.375% 26 years to go. And we have a second with PNC that's $249 IO 20 yr. bal we stop paying it about 8 month ago. I keep telling there collector who call to ask for a payment, just go ahead and foreclose on the home per the contract. Since we refuse to pay them anymore that's there only legal remedy, but that just pisses them off when I do that lol. We will pay rent for a home for more money to stay in a neighborhood we like. So renting will not be cheaper for us and we lose tax advantage as well so why not just stay? Because of the ability to move on in the future is out of my hands if we stay. I do want another home in the future and as long as our names are on this home we can't. The sooner they foreclose the better for us we just want that 36 month clock to start running ASAP. We filled Friday 10/22nd for bk 7 the last house payment was September payment if we are lucking BAC will do NOD in January after our discharge and NOS by April. We plan on moving out in May/June even if they have not foreclose. I will ask for cash for keys to push the issue through faster if necessary in April we just want to move on with our lives.

[tobee43]

That is where the banks still have us by the balls. I look at my neighbor who has been trying to get her house out of her name since 2008. So if it takes another 2 or 3 years for this bank (and lucky me has my mortgage with this same bank) to foreclose on the property that becames very unfair for the person looking for a fresh start as their fresh start is waiting on a bank to do their job

fallon...we are in the exact same position as your neighbor...well...perhaps a bit different...we surrendered, however, had left almost 2 years prior...and really because we waited over 1 year for a loan mod, but in it's stead got served a summons of foreclosure...not to repeat my entire story here is the present situation.

a deed in lieu is not acceptable to clear title...it's a warranty deed...

we, in fact, do have an fha..loan that had pmi, there are federal guidelines which are NOT being followed by the banks to release the names off the deeds. there are two ways to remove them.

1. a warranty deed and signed general release
2. the completion of a foreclosure

the fha will not honor the mortgage insurance until one of those two choices have been completed on the banks behalf.

actually, after me, personally filing so many complaints against chase for not continuing the process, i am and will be filling with the "top" or head of the bank food chain the office of controller currency...they are the actual true overseer of the banks in this country. they will...or should finally help me complete this transfer.

in as much as us wanting a new mortgage...we do and will within the next few years want to purchase this home...if not i believe i have devised a way to assume the mortgage...but that's another entire book...

the way it's reported is supposed to be as follows:

...if you filed your bankruptcy, and it was discharged and surrendered your home within that bankruptcy, then the mortgage is included in the discharge....however, if the bank failed to foreclose prior to the discharge, they CAN foreclose, however, then cannot later foreclosure and turn around after the discharge and report a foreclosure.......sound confusing?? well..it's just the tip of the iceberg.

wheeeeeeeeweeee

[Fallonedward]

That is where the banks still have us by the balls. I look at my neighbor who has been trying to get her house out of her name since 2008. So if it takes another 2 or 3 years for this bank (and lucky me has my mortgage with this same bank) to foreclose on the property that becames very unfair for the person looking for a fresh start as their fresh start is waiting on a bank to do their job

While a surrendered property in a bankruptcy proceeding is discharged and can't be reported as a foreclosure, many underwriting guidelines will treat the actual foreclosure or deed-in-lieu transaction as a foreclosure. It's a difference of what's reported, and what's used for underwriting purposes.

I believe that the GSEs (government-sponsored entities, Freddie and Fannie) and FHA set the guidelines and they are generally that 3-4 years must elapse from the time of foreclosure to the time a new loan can be underwritten, except in extenuating circumstances.

[justbroke]

While a surrendered property in a bankruptcy proceeding is discharged and can't be reported as a foreclosure, many underwriting guidelines will treat the actual foreclosure or deed-in-lieu transaction as a foreclosure. It's a difference of what's reported, and what's used for underwriting purposes.

I believe that the GSEs (government-sponsored entities, Freddie and Fannie) and FHA set the guidelines and they are generally that 3-4 years must elapse from the time of foreclosure to the time a new loan can be underwritten, except in extenuating circumstances.

[Fallonedward]

I asked my attorney this question as it had been festering in my head since it was posted.

My Attorney stated that a disposed mortgage that I will discharge in my CH7 BK does not count as a foreclosure if I walk away from the house, the lender would be illegally reporting a false statement.

My attorney told me the important thing is to get the house out of your name.

I have a neighbor that has not paid on her home since 2008 and the bank has not foreclosed. She wants them to foreclose because they live in another state.

So in this family's case they walked away, stopped paying, and the bank has done nothing and she has been trying to get the title transfer back to the bank. She would love to buy a new house when they retire but she worry's that this house will take years to get out of her name.

This whole thing is such a mess

That's interesting. Are you sure that a "disposed" mortgage discharged in a CH7 BK still counts as a foreclosure if the borrower decides to walk? I do know, however, that the lender is certainly not allowed to report it as such on the borrower's credit-report..

[Resigned2BK]

I don't think we are upside down. It's more like even in our case. Zillow puts us around $7-10K above what we paid. BUT, we've been looking into renting and unless we want to try to rent something a third the square footage and still shell out who knows how much to store the excess furniture (hubby has a lot of stuff he kind of "inherited" that I guess he must be sentimental to and it's not like it'll be worth anything to a trustee ultimately), we scarcely save that much. If we can somehow finagle the gov't modification, we'll have the house for the going rental price of houses about 60% our size.

[gman]

Gman, I'm curious because we are both in Georgia -- do you know Georgia's laws regarding not reaffirming but continuing payments? If I file, I would not reaffirm (unless I got a super deal). According to Zillow, I am underwater by about $15K -- but that does not include the $50K I put into the house to finish off the basement.

However, I will stay in my house because I am renting the basement for $650 a month. I could probably ask at least $100 more, but this price lets me be picky about who I rent to. That rent brings my payments (including escrow) to $750 if you don't deduct for extra utilities (probably $100 a month). I definitely could not rent for that. The house is still fairly new, so not too much maintenance needed.

Any info about GA you care to share, I would appreciate it!

Perhaps this link helps?

http://www.thebklawyer.com/thebkblog/category/reaffirmation-and-negotiation/

[tobee43]

Candidly - I do not know if they report it or not.

I have read in many places that they no longer send the homeowner (is that the right term? haha) any monthly statements.

Maybe someone with real-life experience can chime in?

I'd just hate for people to solve one problem and potentially create another....Again, better safe than sorry.

If one is going to have only one good crack at a Chapter 7 - you might as well get it right the first time.

the banks DO report it...othewise they themselves cast a bright light down on them with the IRS. they MUST report all taxes and interest being paid under someone's SS number.

even so, the tax deductions does not outway the pains of owning.

my daughter recently relocated and "rented" the house she owns with an option to buy to someone.

she told me she could care less if she ever owned another house....at first for me it was be still my heart, then my second reaction was whewwwww....so that $150k we spent on her education was worth it. she just made too much sense. i.e. i don't want the cost associated with the upkeep...i don't want problems with the town here and there...when it's too old to fix...not my problem or out of my pocket. she then asked me or told me...."i know that over the past 30 years you put upwards and way over $100k into your old house...now if you had the money today? (that was just the cost of the pool area and outdoor kitchen) terrible. although at the time we had the money and did not charge but paid cash...although as the years went by everything needed repairs etc.

she's correct.

[tay666]

Also, the "rent is the same or more" argument is pretty weak. Owning a home almost ALWAYS costs more than renting when you factor in ALL the costs of ownership.

I know I am one of the exceptions to this.
My mortguage payment is $470 (which includes insurance and taxes)
Cheapest rentals we have seen in the area are in the $600 range.
Most of which are not nearly as well insulated or weatherized as our house is, so the heating costs in the winter would also be considerably higher.

So for us it would be a no brainer if we were slightly underwater.
Especially since we have been here for 18 years now and have lots of memories attached.

Thankfully we actually have equity in the house as it sits right now.

[sillywalks]

Just do yourself and your family a favor - talk to a few lawyers about the possibility that contractually you will be reaffirming the loan SIMPLY BECAUSE YOU CONTINUE TO MAKE PAYMENTS AFTER THE BK.

The law on this will be governed by state - not federal BK law - so I have no idea what the outcome would be in your situation.

Better safe than sorry.

Gman, I'm curious because we are both in Georgia -- do you know Georgia's laws regarding not reaffirming but continuing payments? If I file, I would not reaffirm (unless I got a super deal). According to Zillow, I am underwater by about $15K -- but that does not include the $50K I put into the house to finish off the basement.

However, I will stay in my house because I am renting the basement for $650 a month. I could probably ask at least $100 more, but this price lets me be picky about who I rent to. That rent brings my payments (including escrow) to $750 if you don't deduct for extra utilities (probably $100 a month). I definitely could not rent for that. The house is still fairly new, so not too much maintenance needed.

Any info about GA you care to share, I would appreciate it!

[screentest]

Yes, it should not be reported as a foreclosure on your credit report; however, you must still go through the process of title transfer back to the bank (foreclosure, DIL, short sale etc) even if you are not responsible for the debt. Until this is cleared, any new lender will find the pay and retain house in your name when they complete a title search.

The lien in your name must still be removed legally before you can proceed with a new mortgage. Whether or not it will be reported as a foreclosure on your credit report is heavily debated on loansafe.org. Because a foreclosure is a legal process, it gets reported on your credit report as a public record; however, the loan account attached to your mortgage will show IIB.

This public record of foreclosure will take at least 36 months of seasoning under FHA lending rules before you can get another mortgage. Longer for conventional loans.

There is also a debate about when title is transferred. Some believe title is transferred when the bank takes back the property while others report title transfers when the bank re-sells the property to someone else. After that transaction the 3 year clock begins, not before.

As you can see this can drag out the opportunity for a new mortgage many more years than people are prepared for. This is another reason why I am getting anxious to get my mortgage dealt with and move on.

I am no expert here, just studied these scenarios over and over agin for the last couple of years. For further info here go to loansafe.org and check mortgage bankruptcy.

ST

[IBroke]

One thing that has not been mentioned here is the stay and payers must resolve their mortgage issue if they are EVER to get another mortgage and move on. Remember, it is going to be at least 3 years after you dispose of your current house until you can get into another one as an "owner." Doesn't matter if you don't owe the debt, you must still complete the transfer (foreclosure) process and then start the 3 year wait until you are minimally qualified to get a mortgage again. You could stay and pay for 5 more years, have rebuilt strong credit and maybe a solid savings and decide, hey, things are looking good, maybe we should move now and get into that better neighborhood or school district. Fine, but you will move as a renter and NOT an owner because you have not yet resolved the issue with your current stay and pay situation.

That's interesting. Are you sure that a "disposed" mortgage discharged in a CH7 BK still counts as a foreclosure if the borrower decides to walk? I do know, however, that the lender is certainly not allowed to report it as such on the borrower's credit-report..