Wife and I disagree - Your advice requested

[PdxDavid]

We are planning to file Ch7 in the near future. We requested and were denied a mortgage modification by Citi several months ago and again about a month ago. We gave up and are now 4 payments behind.

I answer or call them back every couple weeks just so they know we are not dead. Today I called them back and even though we have given them the same numbers each time they have called... Somehow we qualify for a modification now...

Here is where the wife and I disagree...

She wants to accept and I don't.

Our current mortgage is a 7.49 3yr/arm that is already in the adjustable period. It would have actually gone down but it is in the contract that it never goes down.

They offered a 30yr fixed at 5% on the current balance. Saving about $126/mo. No repay of the missed payments etc... Sounds great, but...

My issue is that this is not going to change the fact that we need to file BK. The other problem is we owe 182k and the neighbor just sold his exact same house for 141k. This is one of the duplex (condos) that in my opinion will take many many years to break even on again. Plus the fact that it is in an HOA that I don't want to be part of anymore. It is getting more and more difficult to get ppl to pay each month. We are a 12 unit association that has 1 foreclosed, 1 being auctioned and 1 doing a short-sale.

My wife is afraid we will never be able to buy again. I tell her that is not true, especially since we are not the only ones this is happening too. She says that we will be throwing away money on rent. I used to agree. Now we would be throwing away mortgage payments until it is worth more than we owe again.

Tell me if I am wrong or how to spell it out for my wife. I think we should take this as a fresh start, completely.

[justplaintired]

Well, are you saying you still need to file BK because of other debt too? Or is it because of the house you want to file? You can file BK yet keep the house, do a ride thru. You will need to be current on the house however. So you best hold off on the BK until you have done the modifaction, and are current. If they ask to reaffirm and you still aren't sure on the house, just don't sign the papers, but stay current. Same rules will apply as before you filed BK. Then if you decide down the road you can't stay in the house, you can still walk away. Or as we all hope, the economy does turn around, your house regains it value and you can sell it for a profit and move on.

[LuciluS]

$41,000 underwater..could be worse. What bothers me is you know your HOA dues will be going up each year due to the lower sale of condo, foreclosure, short sale & possibly others you may not be aware of now and in the future.

Here is the Mortgage after BK section of this Forum:

http://www.bkforum.com/forumdisplay.php?f=18

I suggest you and your wife read some of the Threads. I believe you can obtain a FHA Loan 2 years after your condo has been deeded back to the mortgage. Now keep in mind, that date has nothing to do with the closure of your Chapter 7 BK which normally comes first. A Foreclosure could take a lot of time or could happen quick. Read some of the threads in the Foreclosure Section too, if you or DW has time.

With the economy like it is and supposed to get worse, you couldn't give me a Condo right now and I've owned one before. Sure it's nice to have the pool, boat docks, etc. but it's not fun when they impose an Extra Maintenance Fee of $2,000 and increase your dues each month by another $25 and this was over 10 yrs ago. Been there..done that.

Luci

[hereforinfo]

I agree, complete the modification and get the loan current. Then if you do file bankruptcy don't reaffirm, just ride through on the mortgage. The debt will still be discharged so if you need to get out of it later on you can do so.

[PdxDavid]

Well, are you saying you still need to file BK because of other debt too? Or is it because of the house you want to file? You can file BK yet keep the house, do a ride thru. You will need to be current on the house however. So you best hold off on the BK until you have done the modifaction, and are current. If they ask to reaffirm and you still aren't sure on the house, just don't sign the papers, but stay current. Same rules will apply as before you filed BK. Then if you decide down the road you can't stay in the house, you can still walk away. Or as we all hope, the economy does turn around, your house regains it value and you can sell it for a profit and move on.

We are filing because of CC debt, too. So you say do the mod and then file. Is there any chance that they could come back on about the house if we did the mod knowing that we were more than likely going to file BK?

Thank you for the input.

[PdxDavid]

$41,000 underwater..could be worse. What bothers me is you know your HOA dues will be going up each year due to the lower sale of condo, foreclosure, short sale & possibly others you may not be aware of now and in the future.

Here is the Mortgage after BK section of this Forum:

http://www.bkforum.com/forumdisplay.php?f=18

I suggest you and your wife read some of the Threads. I believe you can obtain a FHA Loan 2 years after your condo has been deeded back to the mortgage. Now keep in mind, that date has nothing to do with the closure of your Chapter 7 BK which normally comes first. A Foreclosure could take a lot of time or could happen quick. Read some of the threads in the Foreclosure Section too, if you or DW has time.

With the economy like it is and supposed to get worse, you couldn't give me a Condo right now and I've owned one before. Sure it's nice to have the pool, boat docks, etc. but it's not fun when they impose an Extra Maintenance Fee of $2,000 and increase your dues each month by another $25 and this was over 10 yrs ago. Been there..done that.

Luci

The 41k wouldn't bother me so much if it wasn't 25% or more of the total value. The guy on the phone told me that the house appraises at 180k right now. I have a real hard time believing that since the guy that got 141k for his had a Wells Fargo appraisal that came back at 160k. And to me an appraisal means nothing if no one will offer you that amount.

The other thing is our condo has none of the things you list. There is no club house or any other extras. The HOA fee covers water, insurance, yard maint. and misc. fees. They are only 115 now but I know we are not collecting enough for reserves etc...

Thank you for your input.

[eddiep]

Filing Bk should not affect the mod if it is "complete" before you file. I have been completely open and honest with my mortgage company about my intention of filing. Just make sure it is complete before you file, the automatic stay prevents them from rewriting your mortgage documents and the mod will be canceled if you jump the gun.

I agree with the others that recommend doing a ride through. You and your wife need to stay united for this fight.

[Rick9972]

Filing Bk should not affect the mod if it is "complete" before you file. I have been completely open and honest with my mortgage company about my intention of filing. Just make sure it is complete before you file, the automatic stay prevents them from rewriting your mortgage documents and the mod will be canceled if you jump the gun.

I agree with the others that recommend doing a ride through. You and your wife need to stay united for this fight.

We refinanced our house and signed the documents. Walked from the closing site to our lawyer's office and signed our BK papers. Lawyer did not file for two days waiting on the new mortgage to be filed with the county office. When it was filed he filed our BK the same day.

He laughed and said it is really the best way to save your home, if you want to keep it.

[HakunaMatata]

My wife is afraid we will never be able to buy again. I tell her that is not true, especially since we are not the only ones this is happening too. She says that we will be throwing away money on rent. I used to agree. Now we would be throwing away mortgage payments until it is worth more than we owe again.

Perhaps you should gently remind your wife the majority of us are "renting" right now. Post housing bubble-burst, many homeowners maintain mortgages on underwater properties creating the proverbial renter. From a business perspective, we're "throwing away money" when equity isn't attainable. Of course, we all need a place to live. For many, property ownership isn't exclusively correlated to equity.

Your wife's opinion appears to stem from a financial framework. Have you explored non-ownership renting options in your area? How do these numbers compare to your current/modified mortgage and current/potentially increasing HOA fees? It's feasible to obtain a mortgage two years following bk. Do you think you can regain equity on your current property within this timeframe? Surrendering your property and renting for a couple of years may actually prove to be a most cost-effective business decision.

[downsized]

I agree with the others. Get the modification done, get current, then file and do a ride thru on the house if you want to stay there. If renting somewhere else is cheaper than the mortgage and HOA fees, then I'd probably give some thought to letting the condo go back.

[2Bshinyandnew]

You really have nothing to lose by accepting the modification, and $126/mth to gain. I can't imagine how you could get "in trouble" for accepting a modification while knowing you are planning a future bankruptcy. The counselor I worked with at ACORN Housing said that my future BK plans looked GOOD to my lender/ servicer because it meant I would be wiping out my unsecured debt.

You are not all that upside down and unlike many here who are $100K+++ underwater you have a chance of regaining enough equity to break even eventually. In the meantime you have to live somewhere, unless you can rent for less than the offered modified mortgage payment, I think it makes sense to accept the mod, get current on our mortgage by having the bank add the arrears to the principal and stay put. This may look a whole lot better credit wise than 4 months late and eventual foreclosure.

In this situation I would:
1. Accept and complete the offered mod
2. File for BK once the mod is complete
3. Either ride-through or reaffirm the modified mortgage after you file BK, your choice!

ETA: I would ride-through, personally

[Kpower]

In your case I would probably accept the mod and keep your house for now without reaffirming. My wife and I decided to give up our house though. We were 25k underwater but the mortgage payment was killing us. We already had a 30yr fixed at 6.5%. We refinanced a year ago and basically got the same interest rate but used our equity to help pay down cards and pay off my car.

We recently moved into a townhome with 1800 sq ft compared to our house that was 1500 with only 1200 living space. In our county the deck counts as sq ft. We have had to give up certain amenities that we had grown acustomed to but overall we are getting used to it and getting settled in. Like an attached two car garage. It sucks carrying two babies and groceries in the rain. Our complex has a pool and weight room and playground though. The dishwasher is very small and noisy and the fridge door keeps opening up randomly but we are working on that. Luckily I managed to get my monster fridge in the laundry room so we still have an icemaker and extra storage when needed. There are bonuses and trade offs but we are saving 400 a month which very soon will be going into a savings account. Some for my boys college and some for us.

We know that this is not forever but it is a necessary step in our financial recovery. In a few years we will be in a much better position to buy a home again and we will not make the same mistakes that we did this time. Just my half a cent.

[kenshirley]

There are so many houses out there for sale and so many builders and mortgage companies that need your business that you will be able to buy another home.
Yes you will have to write a letter and tell them how it all happened and such but with some money down they will give you a loan.

[nc73]

i'd let the house go and buy another once it's all over

[PdxDavid]

[I]Your wife's opinion appears to stem from a financial framework. Have you explored non-ownership renting options in your area? How do these numbers compare to your current/modified mortgage and current/potentially increasing HOA fees? It's feasible to obtain a mortgage two years following bk. Do you think you can regain equity on your current property within this timeframe? Surrendering your property and renting for a couple of years may actually prove to be a most cost-effective business decision.

I am trying to think of this as a business decision. We are not attached to this house as it was only a step to the house we want/need. Then the market tanked and here we are. There is no way this place is going to regain 40k+ in value over the next 2 years. I don't think these will regain this value in 5 years. They have built too many and are poorly built to begin with. You add the empty units that will be here soon and we are looking even worse. Plus as units empty the HOA dues will have to increase. One thing goes wrong and we are all screwed.

We have looked at renting. We can get a 5br 2800sq in a much better neighborhood for 1675. There are others that are less but this is ideal for us as a family of 7. We are in a 3br 1400 sq now.

I appreciate your feedback.