Not Reaffirming a Mortgage

[Dj1995]

I have read many posts on here about how one should not reaffirm the mortgage. Our attorney told us to not reaffirm our mortgage also. My question is, is there anything bad that can happen if you DON'T reaffirm the mortgage? We have NEVER been late or missed a payment on the house. Can the bank take the house back just because we don't reaffirm?

Thanks

[StartinOver]

No, the creditor is still bound by the terms of the mortgage. If you are current, they don't want your house, they want your payments every month.

[BROKEDED]

I have no proof behind my feelings but considering the robo-signing debacle and plentiful stories of bank foreclosure nightmares, my fear with a pay and stay would be that 10, 15, 20 years from now when there's potentially lots of equity in a property, banks will "find" a reason to foreclose on property owners.

The banks really have no reason to want a property right now as long as the owner is still paying. The housing market is trashed and the banks would be sitting on empty deteriorating properties that they'd have to pay insurance, taxes, lawn service, HOA fees, etc... and more than likely have to take a loss if they sold. Whereas a few years from now the property will be older and may need a few repairs but probably be no worse than comps in the area. BUT, they will have received years of payments building equity in the property while hopefully for them the market will have improved. What a perfect time to try and take advantage of those mortgages in a less than perfect situation.

I'm not saying this to scare you but anything is possible. I would definitely make sure that I had a plan in place to always have my payment paid well in advance of the due date and keep detailed records even if it meant paying extra fees to pay by phone and have it credited instantly. I would NEVER do a Pay and Stay and rely on the postal service or a bank Bill Pay service. Too many ways for the mortgage company to claim they hadn't received the payment or got it late. Just a thought.

Edit: I am not suggesting you reaffirm your mortgage. Just consider potential problems with pay and stay.

[IHateToBeEmo]

...my fear with a pay and stay would be that 10, 15, 20 years from now when there's potentially lots of equity in a property, banks will "find" a reason to foreclose on property owners....

If a bank could foreclose, as in the above example, they still wouldn't get any of the equity. They would only get back the balance of the loan when they sold the property. You would get the cash for your equity.

I believe they won't foreclose though. I agree with StartinOver that the lender wants your loan payments, not your real estate.

[debee]

The banks are bound by state law. State law protects all of us from banks just drumming up reasons to foreclose. They can't do it unless the borrower defaults. Even after bankruptcy, the debtor is still the legal owner of the house. So long as debtor makes their payments on time, maintains insurance, and pays the taxes there is no default.

The equity that builds up in the house belongs to the debtor. Anytime the debtor wants to sell the house to pull their equity out, they can do that too. When the loan is paid in full, they will own the house outright.

The best reason not to reaffirm is just in case you actually do default. If you haven't reaffirmed, you don't have to worry about it. You can walk away from the house (if there's no reason to stay) and the bank can't pursue you for a deficiency. But if you reaffirm, you get no added benefit in terms of home ownership or the rights therein, but you get a truckload of added risk.

[BoxerLover]

Is you don't reaffirm your mortgage, are they still required to report your payments to the credit bureaus?

[debee]

Is you don't reaffirm your mortgage, are they still required to report your payments to the credit bureaus?

No, they aren't required to report. That is why it is recommended that you keep your own records of having made the timely payments. You can use them when applying for credit in the future to establish your payment history with the mortgage post-bk.

[BROKEDED]

If a bank could foreclose, as in the above example, they still wouldn't get any of the equity. They would only get back the balance of the loan when they sold the property. You would get the cash for your equity.

I believe they won't foreclose though. I agree with StartinOver that the lender wants your loan payments, not your real estate.

Your're right about the equity. I sometimes forget and confuse the issue. I have two mortgages. The house is worth more than the first but less than the first and second combined. In my case the second mortgage hasn't made a peep. I sometimes forget they're there. So when the first does foreclose, any extra above their loan, if any, will go to the second.