Loan Mod (BoA) after Ch7 Discharge

[btbeme]

May, I'd stay as long as I possibly could and bank the payments you would otherwise be making. It will take months to get you out, and as I outlined above there are plenty of "delaying actions" you can do. Take your time, and find the right place.

I'd be cautious of month to month, but you can check the ownership status by looking at your county recorder's website to see what liens, mortgages, etc are on the home. When we rented, we did a search for any and all properties owned by the landlord, just to see if we was indeed solvent (he was).

[sh9730]

OP,

Well, first of all....you may want to seriously consider STAYING in your place as long as possible after you stop paying, unless you really really need stability. You will have enough notice to move as the foreclosure process rolls along, and you get to keep all the money you would be paying in mortgage (or rent) for all those months. It adds up! Additionally, you can TRY for a loan modification after your BK, which you might get (I DID!), or at a mimimum that will buy you even more time without making any payments. All without additional liability as your lawyer points out.

[may]

The house we're looking to rent is not in foreclosure.

[mountanddo]

If the house is in foreclosure does the mortage company have to honor the lease?

[may]

I think what he was saying was that we don't have to commit to 6 months or a year. The house is not in foreclosure. It's been paid for.

[Resigned2BK]

Month to month would scare me. Have you checked to make sure this house isn't in foreclosure?

Yeah, I'd want either a 6 month or 12 month lease in that situation.

[ValleYum]

Month to month would scare me. Have you checked to make sure this house isn't in foreclosure?

[may]

Ok. So I want to make sure I have this straight...

I contacted my attorney and this was her response.

You can surrender your home and not be responsible in a Chapter 7 even after discharge. Your personal obligation has been discharged. The only security they have now is the home.

So we can walk away from this home and will not be obligated to anything. We can just cut the power off and lock up.

We have been looking at renting a home to save some money. We found a house that is a cheaper monthly payment, closer to our jobs, bigger, and little to no work to it. The landlord does not require a deposit. He said just month to month. He doesn't do a lease agreement. We can paint the walls and pretty much do whatever we want. With the option to buy. We actually know of this landlord. He owns a shopping strip that our friends photography studio leases. He and his family are well known. We want to jump on it! But I don't know if we have to/need to do anything before we move out. (As much as I hate to say that. )

[Resigned2BK]

The thing to watch out for is to make sure you are modifying the mortgage and not refinancing it. A refi creates a new debt that isn't subject to the prior discharge.

Hmm, good point to remember. I figure I can't do anything for months, I just like to think about what strategies to pursue now that the BK is filed and essentially on autopilot.

So what I'm learning here is don't worry about the HELOC and move to try to modify the 1st after discharge if that's possible. We might be that tricky case mentioned. Our home is potentially worth about $10-20K more than the 1st mortgage, although realistic selling price for the soft market puts a value at more even with the 1st. In that tricky sort of case, if a debt is settled, it's my understanding that it is considered Paid As Agreed, so liens and foreclosures from the settled HELOC shouldn't be legal. I would think....

[LadyInTheRed]

Found it!

From the official hmpadmin.com website, buried deep in the FAQ download in the resources section (and absolutely nowhere else that I could find):

Q - Am I eligible for HAMP if I have received a chapter 7 bankruptcy discharge?

A - Yes, even if you have received a chapter 7 bankruptcy discharge, you are eligible for HAMP. If you did not reaffirm your mortgage debt, the following language must be inserted in the Home Affordable Modification Agreement:
“I was discharged in a chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”

If that language is required by HAMP, it is to make sure the borrower understands that they still get the benefit of their discharge so that the lender can't later try to convince the borrower otherwise. If it is required by the lender, it is probably to protect the lender from accusations that they are attempting collection in violation of the BK court's permanent injuction.

The language is very helpful for clarity in the future. But, even without it, the modification cannot be a reaffirmation of the discharged debt. You cannot reaffirm any debt after it was discharged in bankruptcy, even if you sign an agreement saying you are reaffirming it. A reaffirmation agreement must be filed with the BK court before discharge. Even if it is filed before discharge, it can be revoked by the debtor after discharge. All of the requirements of reaffirmation are in 11 USC 524(c): http://www.law.cornell.edu/uscode/us...4----000-.html

The thing to watch out for is to make sure you are modifying the mortgage and not refinancing it. A refi creates a new debt that isn't subject to the prior discharge.

[DirkDiggler]

then I'd stop paying one or both mortgages immediately after my Notice of No Assets.

Just curious about this. I am planning on trying to do a modification on our first mortgage after our Ch 7 is discharged, but was under the impression we would have to keep current until discharge....can we stop paying after the Notice of No Assets? That was just filed today

[2manybills]

Per your question regarding foreclosure...nothing will happen until after your discharge, unless the bank asks for a lift of the automatic stay. They usually only do that if they have already set an auction date, unless they are just plain mean and do it anyway. But after the discharge, they might move very quickly to foreclose.

Actually, on most cases in California, the banks are filing a motion to lift stay, especially when folks are way behind. It just depends on the lender, but it still doesn't mean that they do anything. I know some people that are still in the house a year and a half later, and the bank actually tried to do a mod, and now are paying them to leave the property.

It goes back to depending on which bank, who you are dealing with, etc. There is no basic procedure that's for sure!

Resigned, once you are discharged, I would give a shot at a loan mod on your 1st. It certainly can't hurt. Then if that works out, I would attempt to settle your HELOC.

[btbeme]

Will they strip the 2nd (HELOC) though? Like as in, HELOC is pretty much not anything to pay on at all after discharge? If that were possible, that would knock about $300-350/mo off what we had been paying each month before we defaulted last March. And if it was just the 1st loan only that we would pay, that'd be about like renting a house instead which is what we assume we'll be doing however long the foreclosure process might take when they ever initiate that.

HELOCS and second mortgages are in "second place" behind your first mortgage. If you do not reaffirm either one, your personal responsibility will be discharged. However, the lien on the property still exists.

Strategies on a second vary, depending on the amount owed on the first and second individually and combined, and the home value. Lets take a few scenarios. Lets say your first is $150,000 and your second is $35,000.

If your home is worth less than $150,000 - for sure - then I'd stop paying one or both mortgages immediately after my Notice of No Assets. After the discharge, call the second and offer a $3500 buyout for the release of lien. If they refuse, try again in a few months. And then again, but don't pay them until they agree to your terms. If you absolutely want to stay in the house, consider paying on the first and ask the bank for an in-house modification. If no luck, stop paying for a couple months and apply for a HAMP mod.

If the house is worth less than $150k and you DON'T want to stay, I'd still apply for a HAMP after not paying for a couple-three months. That will buy you more rent-free time. You can always accept the HAMP mod if you change your mind. If not, you can refuse to pay the trial payments and move toward foreclosure. Then, you might try a short sale to buy more time and/or see if you can qualify for some sweet deal to leave quietly (cash for keys, or a HAFA payout, or a rent-back from the new owners).

If the house is worth, say, $175k, this gets tricky, since the second might force a foreclosure if you stop paying them. You can apply for a HAMP mod on the first if you want to stay; you can then try to negotiate the second but don't expect a miracle. If you want to leave, try the short sale route, or just do what you can to stretch the timeline before foreclosure (and stop paying both).

Now...if the same bank owns the first and second, it gets interesting. You can ask for an in-house mod that will combine the two, or a HAMP that would do the same. But, if you stop paying one loan, you might as well stop paying both because the foreclosure train is coming!

Per your question regarding foreclosure...nothing will happen until after your discharge, unless the bank asks for a lift of the automatic stay. They usually only do that if they have already set an auction date, unless they are just plain mean and do it anyway. But after the discharge, they might move very quickly to foreclose.

[Resigned2BK]

We quit paying our HELOC about 3 months after discharge. I wrote a letter after a couple of months, but they wanted more like 20 cents on the dollar, which we didn't have. So, I waited about another year and kept not paying but continued paying my 1st mortgage. My letter to Wells was very simple, explaining hardship and the values of the properties, etc. Within about 2 or 3 weeks they called me and settled.

But Resigned, are you paying your 1st mortgage? I wouldn't settle anything on the 2nd until your 1st was firmed up.

Like I said, we haven't been paying on any mortgage for almost a year now. We just filed Ch7 a few days ago and will probably be case closed around March or April. I'm just thinking ahead. One of our concerns right now is that BofA might just decide since we are in Ch7 to just go ahead and get the foreclosure going for reals. If they want to not do anything at all, that's good because I reckon after the discharge we might be able to get them to stretch things out with more mod applications although the idea of getting a real mod that would work for what we need and can afford is mighty appealing.

[2manybills]

Will they strip the 2nd (HELOC) though? Like as in, HELOC is pretty much not anything to pay on at all after discharge? If that were possible, that would knock about $300-350/mo off what we had been paying each month before we defaulted last March. And if it was just the 1st loan only that we would pay, that'd be about like renting a house instead which is what we assume we'll be doing however long the foreclosure process might take when they ever initiate that. Ours was Countrywide all the way converted to BofA and probably robosigned which would not surprise me one bit -- personally I think it might be more interesting to see if a local law firm that's already fought BofA on predatory loan stuff might have or know of some sort of class action Countrywide thing we could be part of, but if we had a chance at in-house mod approving us and dropping that HELOC entirely, that'd sure be something to think hard about.

We quit paying our HELOC about 3 months after discharge. I wrote a letter after a couple of months, but they wanted more like 20 cents on the dollar, which we didn't have. So, I waited about another year and kept not paying but continued paying my 1st mortgage. My letter to Wells was very simple, explaining hardship and the values of the properties, etc. Within about 2 or 3 weeks they called me and settled.

But Resigned, are you paying your 1st mortgage? I wouldn't settle anything on the 2nd until your 1st was firmed up.