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

[sh9730]

Babsy,

Yes I still get a statement every month and can access all my account information online....so I can see my balance go down every month just like always, as well as see where my escrow payments go etc.... There are disclaimers on all the paperwork saying "if discharged in BK no liability etc...".

If your desire is to stay in the house, just keep paying and dont reaffirm. You ll be fine.

[IBroke]

Bank rep said all I had to do was get attorney and remove house from BK and reaffirm, and then they would see if they could drop the interest rate a couple of points. HA!

That is really funny. I'd love to see how a debt can be "removed from Bankruptcy" and I'd also love to see a judge approving such a reaffirmation -which, IMO, is impossible to get after discharge in the first place.

And if you want to move out once you found a new place to rent, stop making payments. Staying current until you move out is a waste of money.

[babsy]

Thanks sh9730 and also thanks to all for the good input on this subject matter. One question is would you still be receiving your mortgate statement reflecting payments are made. I read on another trend that the statement has for information purpose only noted on it.

[larryt]

thx 9730,

i posted cause there are many on this thread discussing this, and just to show how stupid some BofA reps are, I know they do mods after BK, as most banks do, they were hoping I didn't know that apparently. when daughter graduates, and couple more things are taken care of, they will get the house quickly. the point is do not reaffirm, if it is cleared and you stop paying they can (but probably wont)
faster.

[sh9730]

LarryT -

Two points.

First, if you really are going to leave, AND the mortgage was discharged, why keep paying? You can use the money you save over those months to help you with new place to live or have a nice cushion in place for emergencies.

Next, that BofA response really surprises me...I think you spoke to someone who doesnt know what they are talking about....I have read numerous stories on other forums where BofA has done mods with BK loans. I also believe that if you request a HAMP modification package they MUST review it, and the HAMP guidelines specifically say you cannot be denied because of BK. I would try again.

Probably any further discussion on the specifics of a mod after BK should be in a different thread though since this one actually is supposed to be about whether to reaffirm or not.

[larryt]

Hi all, Just talked to Bank of America about a mod and thought Id share. We are 1 year past chapter 7, house was not affirmed as it was/is 100K upside down. Thought we would ask for a mod since interest is 6.5, don't really care if we stay in house or not. Bank rep said all I had to do was get attorney and remove house from BK and reaffirm, and then they would see if they could drop the interest rate a couple of points. HA! I asked if they couldn't modify anything without me doing that and she said BA doesn't do anything if the mortgage isn't reaffirmed. I think we are going to have to rent and give it back to them, I am not putting the hook back into my mouth on this house. We are current and will stay current until we move out. thanks to all for the helpful information you have given us the last 2 years!

[sh9730]

Snax,

I loan MODIFICATION is not a completely new loan. My loan was modified AFTER discharge, but it is the same loan number, just adjusting the terms of THAT loan. I am still not liable for any defiency should I default (although in my state its no recourse so it wouldnt really apply anyway). NOW, a REFINANCE is a different story. THAT is a new loan and all of the protections go away....but if you get a good offer for a modification, dont let any worry you would be back on the hook for the loan be a concern. Mine, and others I have heard about in this situation all have language similar to "if this loan was discharged in BK there is no personal liability for the loan etc.etc.".

There was a seperate thread here just recently about how a discharged mortage loan cannot be reaffirmed later and how a MODIFICATION is still the same loan as far as BK protections are concerned.

[Snax]

I'm also currently in the process of filing bk. My bankrupcty attorney said she WOULDN'T let me reaffirm my primary home and I'm a little disappointed. My thoughts are if you are paying for it why not get credit for it. I'm also scared the lender can forclose at anytime they choose to. I'm very confused and can't seem to decide. My attorney would allow me to reaffirm my car but not the mortgage. If I don't reaffirm, is the title still in my name, can you write off the interest and taxes at the end of the year. I got a modification on the property not too long ago with a 2% interest rate with BAC for 5 years which makes my payment affordable and don't want to loose the home even though I don't have any equity in the home. I plan on staying in the home for a long time. Also I don't know if there is any provision in the modification contract about bk.
If you sell the property in the near future what happens? Any advise would be great. I'm new at this and need help.
Can you ever refinance in the near future 7 years from now or so.

In addition to sh9730 comments, there is one other thing you may want to consider if there is ANY chance you will not keep the house. Abandoning it to the lender during BK gets a pending foreclosure off your back immediately. That means that you will be able to acquire a loan on a another home sooner than if you drag it out for several years and end up defaulting on it anyway. That is one of the things my wife and I struggled with.

We decided to pay to stay at first, but have stopped paying since then, and we are now 6 months into pocketing the cash with no Notice of Default Filed toward official foreclosure proceedings. The up side to this of course is that we are able to take care of other things like getting our new car paid down more quickly etc., but every month of delay is another month added to when we will again be able to purchase another home. It's a smaller trade-off for us because our VA guarantee (that wasn't on the discharged loan) kicks back in after 2 years post-foreclosure, but it is also making us edgy looking around at all of the housing in our area that is now priced back where it should be and interest rates that are unprecedentedly low.

Either way, reaffirming does absolutely NOTHING to improve the outcome no matter which route you choose to go.

I should add that our mortgage company however is again negotiating with us for modification (which is technically a totally new note given the discharge), although their terms so far are completely laughable. So until they get serious about making a fair business deal, we will continue to pocket our payments.

[IBroke]

I got a modification on the property not too long ago with a 2% interest rate with BAC for 5 years which makes my payment affordable..

Sounds like a HAMP (which is - in 9 out of 10 times - a good deal for the borrower).

[IBroke]

Bottom line is you get the benefits of keeping the house without the liability.

That pretty much sums it up - which brings us back to the title of this thread.

[sh9730]

Babsy,
Yes, it is confusing, but your attorney is giving good advice. First, yes the title stays in your name until you default on those payments. Yes you still get all the tax benefits you always have. No, the lender cannot foreclose on you unless you miss your payments. Your modofication terms should stay in place (some, like me even got modified AFTER the BK). If you later sell the property and there is any money left over, you keep it. Bottom line is you get the benefits of keeping the house without the liability. So, if at some future date you can no longer make the payments you can walk away and not owe anything. Of course, the bank can then still get the house, and you will get a foreclosure on your credit report, but you wont owe any money. Matter of fact you can stretch out the process and save money if you ever decide you arent going to stay, and there is no "additional" damage on your credit report since you arent responsible for the payments anymore, they cannot report you "late". On the other side, a little negative is that your payments every month will not report as positive on your credit....but most feel that is small price to pay for the other benefits.

Now, all that said I do believe you can still request to reaffirm, but without your attorney approval you will have to go in front of a judge to get it approved, and most wont anyway, protecting your interests. But you can request the court hear your argument.

[babsy]

I'm also currently in the process of filing bk. My bankrupcty attorney said she WOULDN'T let me reaffirm my primary home and I'm a little disappointed. My thoughts are if you are paying for it why not get credit for it. I'm also scared the lender can forclose at anytime they choose to. I'm very confused and can't seem to decide. My attorney would allow me to reaffirm my car but not the mortgage. If I don't reaffirm, is the title still in my name, can you write off the interest and taxes at the end of the year. I got a modification on the property not too long ago with a 2% interest rate with BAC for 5 years which makes my payment affordable and don't want to loose the home even though I don't have any equity in the home. I plan on staying in the home for a long time. Also I don't know if there is any provision in the modification contract about bk.
If you sell the property in the near future what happens? Any advise would be great. I'm new at this and need help.
Can you ever refinance in the near future 7 years from now or so.

[Me2Broke]

We reaffirmed our cars, but not our house. I certainly glad we didn't. We may have to give it up if I cannot find a job soon and the future does not look very good in my field of work. If we have to walk it will be hard. I guess we all learn from our mistakes. My mistake was thinking after 22 years at the same job that I was secure. What a lesson to learn at this point in my life.

[nceguyfromne]

I reaffirmed two automobiles in my Chapter 7 at my attorney's advice. They were approx 12 and 18 months away from being paid off and his rationale was that if I intended to keep them anyway, I might as well get credit for paying them off.

Three months after discharge, one of the automobiles - the one with the larger payoff - suffered a complete engine failure and (besides being towed to/from the shop for diagnosis) has been sitting in the driveway ever since while I continue to make monthly payments. The loan balance is just now reaching the point where I might be able to sell it as a 'mechanic's special' and break even on the payoff. To say that it hurts to write that check every month, though, is a gross understatement. Had I not reaffirmed, I could have stopped making payments immediately and walked away from it, not to mention remove it from my auto insurance policy and save a whole lot of money on my premiums!

Those couple potential extra points on my credit report DEFINITELY won't be worth the many thousands of dollars I've thrown away. Learn from my mistake. If you're going to get a fresh start, don't drag your old problems along for the ride (no pun intended)!

[msm859]

I have question I hope someone can answer:

First the story:

My wife has filed bk7 while we are going through a divorce, we have 3 accounts that are joint, Mortgage, car, credit card. Mortgage company (citi mortgage) will only tell me to keep making payments if I intend on keeping the house (wife is not going to reaffirm) but, they will not be reporting payments to my credit. I have verified that they have not reported for the last two months along with the car loan. Just as a side note the credit card no longer appears on my credit file. Citi has also said that if I didnt want the house that I could walk away free and clear since a bk7 has been filed on the loan. Here are my questions:

1. Is the bank correct in saying that I will not be held liable for the loan even though I did not file a bk, just my wife.

2. If the answer to questions 1 is yes, then what will happen to my credit report or score for that matter if I do walk away. What will Citi report on credit file.

3. If my wife quick claim deeds me the house in our divorce, and I decide to keep the house, will Citi ever report to my credit report that im paying?

If you did not file BK and you signed the note on the mortgage you are still legally liable. Having said that is it possible someone at Citibank won't figure that out and may simply see a flag on your mortgage that says BK -- sure. Your credit score would presumptively go down if it no longer shows your mortgage payments (assuming they were all current). Regardless of whether your wife quitclaims the property to you, you should be able to get Citibank to report your payments. However, unless you have positive equity in the house, are current, and intend to stay there I would not notify Citibank about anything.