Modification question ... please advise

[marchelala]

Here is our situation. Me and my husband filed and discharged Ch7 separetly few years ago. At the time we had 1st and 2nd mortgages, where first mortgage is just on his name, and second was on both of our names. We settled second v WF a year ago. Now, 1st mortgage is current with BOA, and we would like to modify it.

My question is – when they look at 31% … do they look at household income or just at the person who is responsible for the mortgage (my husband only in our case) ? This is crucial for us, because with 2 incomes we are making too much to qualify, and with just his income will be fine.

Please advise.

[HHM]

Depends what they ask for, there is no set rule as far as I understand. I am sure the application asks for all sources of income.

But, one issue you will probably face, the bank is not likely going to work with you unless you default on payments. Strictly speaking, if on combined incomes, you can afford the mortgage, then there is nothing to modify. Modification is for those that cannot afford their present mortgage payment but are in an otherwise stable situation and with some "minor" adjustments, could afford a slightly reduced payment. Sorry, but we can't all have our cake and eat it too

You should probably look at refinancing, that would be better long term once you reach the window (about 2-3 years from BK) of opportunity.

[marchelala]

Thanks HHM. I just look at BOA site and it says: 'In order to provide proof of residency and income, you’ll need to collect a set of the following documents for everyone listed on your home loan.' mean juts my husband.

Re being current on the payments, it is my understanding that HAMP program will work with current homeowners, am I wrong?

We are in a stable situation, and can afford our mortgage that is why we are current. But it is 5.8%, if we can lowred why not? As far as refinancing, I dont want to do that ... because I will loose my non-reafirmed-mortgage-discharge-in-bankruptcy thing

[HHM]

Let me ask you this, do you file taxes separately? If not, when you submit copies of your tax returns, they will see the combined income.

Legally, you don't need to be in default to get a modification. Practically, very few banks will devout resources to helping someone who is current on their mortgage.

I don't think you will get a modification. You can try, it doesn't hurt.

Also, understand that HAMP expires at the end of the year. As such, most banks are winding down their modification departments. No harm in applying, but you are facing significant head winds.

[marchelala]

We file together ... I already thought that this will probaby be a problem. re No harm in applying... so if I apply and is denied can I just go back to my mortgage terms ? I am asking because it seems to me, everyone who is denied heads to foreclosure, or walking away .... Thanks

[LadyInTheRed]

so if I apply and is denied can I just go back to my mortgage terms ?

Yes. The only harm in applying is the time it will take to submitt everything the bank requests.

Keep an eye on California Senate Bill 1069. It's still in committee but is set for hearing on Monday. If the bill becomes law, California's anti-deficiency statute will apply to a loan that refinances a purchase money loan. A similar bill was passed by the state legislature in 2010, but was vetoed by Arnold Schwartzenager because it applied retroactively and for that reason may have been unconstitutional. To address that, this bill was revsied to apply only to refinance loans made after the effective date. So, if the bill passes and you refinance your loan after the effective date, you will not have personal liability for any deficiency if you default later.

[HHM]

We file together ... I already thought that this will probaby be a problem. re No harm in applying... so if I apply and is denied can I just go back to my mortgage terms ? I am asking because it seems to me, everyone who is denied heads to foreclosure, or walking away .... Thanks

Well, the main reason those denied head toward foreclosure is because the bank required a default on mortgage payments. Once the modification was denied, there was no feasible way to claw back the arrears, and the house was so upside down anyway, not worth saving.

But correct, no harm in applying.

[marchelala]

Yes. The only harm in applying is the time it will take to submitt everything the bank requests.

Keep an eye on California Senate Bill 1069. It's still in committee but is set for hearing on Monday. If the bill becomes law, California's anti-deficiency statute will apply to a loan that refinances a purchase money loan. A similar bill was passed by the state legislature in 2010, but was vetoed by Arnold Schwartzenager because it applied retroactively and for that reason may have been unconstitutional. To address that, this bill was revsied to apply only to refinance loans made after the effective date. So, if the bill passes and you refinance your loan after the effective date, you will not have personal liability for any deficiency if you default later.

thanks this info!

[HHM]

One caution...if they put you on a "trial modification" be careful. If the modification is later denied (which happens very often), you will be in default of the mortgage since you were paying less than the normal payment during the "trial modification". So be sure to save as much money as possible so you can "cure" if the modification is eventually denied.

Understand, it will likely take 6-9 months, by then, HAMP will expire Not sure it is really worth it, you probably will be better off to refi not withstanding the loss of the discharge. Since the 2nd mortgage is settled, there really is little downside risk to a refi. The only other issue is how upside down you are in your house. If you are 15% or more upside down, you probably should walk anyway. it will take more than a decade to get back to just even.

[Pandora]

One caution...if they put you on a "trial modification" be careful. If the modification is later denied (which happens very often), you will be in default of the mortgage since you were paying less than the normal payment during the "trial modification".

100% agree with HHM; DONT put yourself into a situation where you will be in default. Also noteworthy is if you arent currently behind in payments, you will be behind once they modify / put you into a trial. The 31% is GROSS income not net and yes, they do look at all sources of income regardless of who is on the note.

Make sure you understand how everything works prior to even applying, read the fine print and know what you're getting yourself into. Would hate for you to jump into the fire when its not needed.