Want to keep house....questions!

[jleonardis]

I have a call into my attorneys office...still waiting for an answer.

My husband filed for Chapter 13 in June of this year and we are currently 2 months past due on both of our mortgages. We would like to stay in the house since my husband is making a steady income and it looks like we could pay for our mortgage. It will be tight but we can do it. We have an ARM and would like to negotiate with our lenders on both of our loans. I am not sure if we can afford our mortgage once it adjusts.

We can't negotiate anything until the automatic stay has been lifted. In order for the stay to be lifted we would have to be in default.

I would rather not be in default but if that gives us more leverage than we will wait.

Is is better to be on current on our mortgages in order to work out a modification or wait until we default?

Does anyone have any experience with this?

Thanks in advance,

Jessica

[wayne-o]

for clarification were you two months behind when you filed or have you fallen 2 months behind since you filed.

[HHM]

If the only way to afford your house is to "negotiate" with the lender, you might as well sign over the title...as the lender is not going to totally recast loan. Frankly, to do a loan workout agreement, you have to have a good reason, and you CANNOT be in a chapter 13. The only reason for the bank to lift the automatic stay is to foreclose.

Please answer the question about "when" exactly you went into default?

If you filed chapter 13 and then went into default, pretty much all bets are off...be honest with yourself; if you cannot afford your house, you cannot afford your house.

[jleonardis]

for clarification were you two months behind when you filed or have you fallen 2 months behind since you filed.

Fallen behind after we filed.

[jleonardis]

If the only way to afford your house is to "negotiate" with the lender, you might as well sign over the title...as the lender is not going to totally recast loan. Frankly, to do a loan workout agreement, you have to have a good reason, and you CANNOT be in a chapter 13. The only reason for the bank to lift the automatic stay is to foreclose.

Please answer the question about "when" exactly you went into default?

If you filed chapter 13 and then went into default, pretty much all bets are off...be honest with yourself; if you cannot afford your house, you cannot afford your house.

I don't understand...I thought the banks would rather work something out with you than foreclose on the property. I am not asking for them to totally recast the loan just a modification. I spoke to a my lender and they said as soon as the automatic stay is lifted than a modification would be possible. They know I am in Chapter 13.

[HHM]

I don't understand...I thought the banks would rather work something out with you than foreclose on the property. I am not asking for them to totally recast the loan just a modification. I spoke to a my lender and they said as soon as the automatic stay is lifted than a modification would be possible. They know I am in Chapter 13.

They would like you to believe that...but reality has been far different (why do you think the President is authorizing new regulations under FHA to help with this very type of thing, because banks are still primarily foreclosing on defaults).

It's one thing to be behind a few payments because of a short-term issue and come-up with a plan to make-up those back payments in some way (i.e. either overpay your existing mortgage payment, or have those missed payments tacked on to the back-end of the loan), but you still need to make your regular monthly mortgage payment.

It is quite another thing to need the bank to essentially modify the existing "terms" of the loan, i.e. lower interest rate, because you got into a loan you couldn't really afford in the first place. The reason they probably can't modify the terms is complicated, but has to do with the fact that most mortgage notes get securitized as investments, once that happens, there is very little that can be done to change the underlying terms because the note needs to comply with the investment disclosures of the securitized package.

Here is a thread that talks about foreclosure workout agreements http://www.bkforum.com/showthread.php?t=11877

I am NOT saying don't try. But the other aspect that counts against your is the real estate market...unless there is equity in your home, banks are reluctant to recast the note in any meaningful way (i.e. reamortization of the arrears). Also too, if you are seeking a lower interest rate, your credit and financial position must be sufficient to qualify for the interest rate under the lenders lending criteria.

One option you may have...if your chapter 13 plan has not been confirmed, you might be able to modify your 13 to pay those missed payments in your chapter 13.

Your chapter 13 simply makes this whole thing more complicated. The bank cannot do anything while the chapter 13 is pending. I honestly don't think simply lifting the automatic stay helps, because all that accomplishes is takes the asset out of the BK. Even assuming you got the modification, guess what happens to the money you saved, it going to get put into the chapter 13 as disposable income. So even if the best case scenario for you occurred, any savings your get on the mortgage payment, the chapter 13 trustee would want as disposable income.

[spell]

I thought the banks would rather work something out with you than foreclose on the property.

Banks are in business to make money.
Right now, you are costing them money in legal fees because of your Ch13.

You also have a contract with them that says once a certain date arrives, your loan will change into one that makes them money again.

By the fact that you are in a Chapter 13, they have unprecedented access to your budget and they understand exactly how much money you can afford to devote towards your mortgage.
They also know all of your other assets, which they'll look at as "stuff we can sue them for if they default"