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Why reaffirming a mortgage is a very, very bad idea.

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  • Larger banks don't play the "Compel to Abandon" game.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • if you really want to keep the house then don't get behind. if your case is not too complicated go with another attorney instead of paying $3000. at first,my attorney did not want to reaffirm my mortgage in order for my loan modification offer to go through. then i told him that that's what i want, i gave him a lots of reasons and then he agreed to do it.


      • Hi all,
        Here's our situation:

        *Filed chap 7 in April 2010 and were fully discharged July 2010. Yea!!
        *Both FIRST and SECOND mortgages (Wells Fargo) were discharged.
        *We live in FL and are still in the home 'saving money'. We have not made payments in over a year. We have been working with Wells for months trying to get a loan mod only to buy even more time. We are WAY upside down with just the FIRST mortgage and DO NOT want to reaffirm this mortgage! Wells just offered us a very affordable TRIAL payment, no signature required, but the first payment is due Feb 1, 2011. This amount is about what we would pay for RENT around here if we moved out now. No terms were listed for the possible perm mod but I'm guessing there will be no principal reduction...due to our family events in the next 5 months (2 weddings and a graduation!) we would LOVE to move AFTER the events.

        1. Does PAYING a trial payment reaffirm the First mortgage? There are no signatures required on the trial mod docs
        2. If it DOES reaffirm the First, is the second mortgage reaffirmed as well?
        3. If we didn't pay by Feb 1st, what is the timeline for foreclosure post BK? How soon can we expect to have to be out of the house?

        Thanks so much for ANY insight!!!

        A few questions:

        1. If


        • Originally posted by mrslick View Post
          if you really want to keep the house then don't get behind. if your case is not too complicated go with another attorney instead of paying $3000. at first,my attorney did not want to reaffirm my mortgage in order for my loan modification offer to go through. then i told him that that's what i want, i gave him a lots of reasons and then he agreed to do it.
          Under the law, a reaffirmation is not a requirement for a modification (period). If the lender forced you into or coerced you to sign a reaffirmation in exchange for a modification, then they were wrong and the reaffirmation could possibly be rescinded. The lender could actually modify the terms in the reaffirmation agreement so having you do both is coercion to me.

          With the sole exception of an (ankle-biting) credit union or small bank compelling the debtor to redeem, reaffirm or surrender (in the 11th Circuit and several other circuits), there is absolutely no financial reason to enter into a reaffirmation agreement.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          I am not an attorney. Any advice provided is not legal advice.


          • I have a question for the above poster. I am in an unfortunate situation. I am coming through a nasty divorce. While still married to my slimy ex-hubby we had to get into a chapter 13. In the chapter 13 we were still in our house and paying the house notes. Several months and an affair later which the ex had, he blindsided me with divorce papers which also said he was giving up his interest in the house. Shortly after that I receive in the mail a notice from our mortgage company stating how far behind he was in the payments. I thought he was paying these notes. He wasn't. I had 2 children and at the time nowhere to go. He had left to parts unknown, only to appear for meetings with our attorney. Through the course of this he verbally agreed to pay the mortgage in lieu of spousal support and failed to do so. Financially for me things got quite bad. Somewhere in all of this he hired a new bankruptcy attorney and they filed a motion to split the 13, dropping me off. Our previous attorneys filed a motion to be dismissed citing conflict of interest. I couldn't afford a new attorney. Then after so many days his attorney filed a motion that forced me into a chapter 7. I was able to find a wonderful chapter 7 attorney who did the paperwork and included my mortgage company in the chapter 7. He assured me everything was fine and I wouldn't get stuck holding the bag regarding our house because at that point (10 months later), the ex still hadn't paid the mortgage. I just found out today via phone call from the sheriff's office that the mortgage company has filed paperwork, something about for a default judgement. Apparently because the ex gave up the interest to me, they were serving me for this. I am now worried sick about this. I have no idea what any of this means. I just can't afford to be held responsible for any of this mess he created. I thought the chapter 7 protected me from all of this.


            • Oh, I am sorry....this was for another poster whose user name started off with desp. He was an attorney. However, would love some feedback/reassurance if there is any that would let me know that the chapter 7 does protect me as far as the house mortgage company is concerned.


              • News I think keeps getting worse

                This forum is educational. Why the heck wouldn't my bankruptcy lawyer not share this news with me? I just did some research and found out lucky me...I live in a recourse state. From what I understand this means if there is a deficiency, the mortgage company can indeed come after me. I was forced to file a chapter 7 in the middle of my nasty divorce. At that point my ex was countless months behind in payments. And, somewhere in everything between the divorce papers he filed and his modification he did on his chapter 13 he gave me his interest in the house. I told my then divorce attorney I didn't want the house and nothing to do with it because I couldn't afford it and she did nothing to that paragraph and the judge signed the dang court order.


                • To shadowb,

                  I will assume the Chapter 7 has been Discharged and will further assume that you did not sign a Reaffirmation Agreement for the mortgage. If both assumptions are correct you have no financial obligation to the mortgage lender.

                  It sounds like you are being served with Judicial Foreclosure papers. Assuming I am correct you should accept service and just let the process move forward as the lender would only be seeking to regain ownership of the property. There should not be any request inside the Complaint for payment of $$ from you personally. The lender may ask for legal fees but that becomes part of the "payoff" for the lien on the property. The lender is simply foreclosing as is its right if payments are not being made.



                  • Hey Des! Thank God you saw this. Yes, it has been discharged and I did not sign any reaffirmation agreement that I recall, for the mortgage. My attorney knew at the time I definitely had no wish to remain there nor could I financially afford it. I am feeling so much better. I was panicking because I read that I live in a recourse state and when I talked to the sheriff's office, they made it a point to reiterate that they knew my ex gave me his interest in the house in the divorce. I didn't do anything with my interest or his for that matter legally. As a matter of fact, I am all for the foreclosure and have no desire to stop it. Before the divorce was final, I tried to help facilitate a short sale and the ex wouldn't produce the paperwork needed for that, so the buyers walked. When you mention legal fees and it being part of the payoff what does that mean....could they come after me for that?


                    • Originally posted by shadowb View Post
                      When you mention legal fees and it being part of the payoff what does that mean....could they come after me for that?
                      I am glad I could ease some of your concerns.

                      A lender will add the "legal fees" to the payoff amount of the lien. This allows the lender (if it so chooses) to set the "bid/redemption" price for any potential buyer who wishes to acquire the property out of the foreclosure sale, at an amount that covers the balance owed on the loan and all additional fees. It just sets the amount of the "opening bid" and has nothing to do with future collection against you.

                      Hope I explained it so you understand.



                      • Des, thank you, thank you. You have this girl smiling once again! When the sheriff called me today it was somewhat out of the blue. I knew it was a matter of time. My real concern in addition to us being in a recourse state was the whole deal where my slimy ex signed over his interest in the house and property to me. My divorce attorney at the time kept saying it was "a gift", but I knew how badly upside down the house was. My ex has done nothing in the divorce unless it benefitted him. My divorce attorney found out months later how right I was once I started getting more correspondence from the mortgage company. When I filed the chapter 7, it was mostly because my ex had created a lot of debt inclusive of the house being SO upside down and at the time (and to this day), nobody really knew where he was. He also owes the IRS a lot of money (this is being paid through his chapter 13 thank God). Through the year of my divorce he would show up on designated court days, but then he would disappear. Weeks after I received my divorce papers, I started getting late notices and collection stuff from various companies, including utilities that I thought he had been paying. It turned out he was 3 months behind on everything. He wasn't paying his child support as ordered, he wasn't supporting the boys and I as verbally agreed on between the attorneys (he was to pay the house note in lieu of being assesed spousal support), and wouldn't provide medical insurance for us. I ended up having to apply for assistance, go on food stamps and applied for Medicaid. The chapter 7 was such a godsend! When the judge in the chapter 13 court saw how destitute I was thanks to my ex, in court he asked for any BK attorneys present to talk to me outside the court room to discuss with me my options. That was how I met my chapter 7 BK attorney. He held my hand and walked me through it, every step of the way. It ended up providing me with much needed relief and the time to be able to take a deep breath and try to move forward.


                        • I was planning to reaffirm my mortgage, but after reading through this forum (what a great resource!), I understand I don't have to and probably shouldn't. I live in Illinois and I want to keep my house. That said, here's the issue: My tax records say my home is worth 90,000. My first mortgage is current. I owe about 65,000 on it and have it financed through a bank. It has been over a month since my 341 and I had not heard anything regarding a reaffirmation, so I started thinking the bank just didn't want to. Well, today I got papers from my attorney telling me to immediately sign and send back so they can be filed before the discharge date. My interest rate is not great at 7.%, but I can live with it.

                          My second mortgage is about 23,000 at (I think) 12% to Citimortgage. I am not going to reaffirm this one for sure. I am a couple of months behind on this one--I was hoping to modify it. The way this one is set up is kind of like revolving credit--it's strange. Anyhow, I would like to get a low interest on this loan and set it up like a 'regular' mortgage, not like a revolving account or whatever it is that Citi does--if I could do that, I may reaffirm if that's what it takes to seal the deal. I can afford to make the payments; I'd just like to get a fair deal. I told my attorney right off the bat when I filed that I wanted to modify the mortgage(s). I thought he would go to bat for me, but he basically said you can't do that in a 7.

                          So, my question(s) is (are), does anyone have experience with Citimortgage modifying their mortgages? And should I just be content with the 7% on the first mortgage or try to get a better deal? AND, when would I do that? Since my attorney won't fight for a modification and the banks can't talk to me, what are my choices? Not to beat it to death, but please clarify/confirm for me: the banks have to go thru the same process to foreclose with or without the reaffirmation, and in the same manner as if you had never filed for bk. If you stay current--no problem, the home is yours to sell, remodel, whatever. Not that I plan to, but if I would miss a payment, the bank would treat it the same way they would if I had never filed bk (which I think would mean they send a late notice, you catch it up, all is well). Some posters have me sort of scared that without that reaff, miss one payment and your house can be taken in a matter of days. I just think that if the bank wouldn't foreclose for one missed payment before the bk, they wouldn't foreclose for one missed payment after the bk. Thanks for any help!


                          • Reaffirming a mortgage after a bankruptcy is completed and the filer receives his or her discharge is not authorized by the bankruptcy code. if service approaches you after your discharge and asks you to refinance your mortgage, this may be a violation of your bankruptcy discharge. For this you must consult with your BK lawyers.


                            • In California - we just got our Chapter 7 discharged - did not reaffirm the house. Chase would not work with us anyway. We just moved. Now what - contacted CHASE - dimwits - did not tell them we have left - regardless - do they not have to follow the procedure of foreclosure? Also - on our credit report - it states we did not reaffirm - when the property forecloses - does it again go on our credit report as a foreclosure when clearly the bankruptcy info states that we did not reaffirm?

                              Thank you for any help.


                              • As I general rule, DO NOT SIGN MORTGAGE REAFF'S. BUT!!! If you mortgage company is going to do a loan modification with an interest rate and payment you can afford and you want to keep your home then you should strongly reconsider my general rule.


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