Chapter 7 already discharged - mortgage not reaffirmed - foreclosure/credit score question

[erootvik]

intereting observation.

upon discharge of bk you owe nothing but you do in fact still own your home. the bank does not actualy have perefected lien until the court givesthem a judgment.

sincethey need to forclose forthis purpos they are alsoforclosing against all owner and ocupents. given you debt was discharged they arelegaly prevented from collecting against you. a forcloser actuion would be exactly that.

there is also a statut of limitations for taking action on a contract. in WA its 6 years. if they do not act before then they wave right to collect.

also moneys paidfollowing discharge could be recovered becuse you actualy have no conection to that loan any more. they took funds from an uninvolved party.

[SYinLV]

Hi- I'm new here and this is kind of long but I wanted to provide all the details.  Mine is a similar story as several I've read however it has a different twist.  I want to keep my house AND build my credit.  Any help is greatly appreciated.  THANK YOU

• I am 5 years past Chapter 7 discharge in Nevada.
• I have a 1st Mortgage and a HELOC.
• Both were included in the BK discharge with NO REAFFIRMATION
• My 1st Mortgage is with CitiMortgage- my payments have always been made with their auto pay program
•              During the time of BK, for some reason my payments were stopped for 1 month then started again the following month (I did not make any changes)
•              I didn’t realize this and for the last 5 years- I’ve been 1 month behind on payments
•              This is the only time before or after BK that I had ever been late and continue to pay on time
•              My credit report shows chapter 7 for the mortgage and no activity on it since the discharge even though I’ve been making my payments
• The HELOC was also included in the BK.  My lawyer advised I could stop paying on this and its likely it would “go away.”
•            I have only received one letter from the HELOC holder and that was advising the loan had been sold to another company. I have never heard from them.
•            I recently received a letter from a collections agency stating there was a lien on my house from the HELOC company but I could have this removed if I           paid 10% of the outstanding debt.
•            I looked up public records and there is not a lien on my property
• My house was homesteaded prior to BK. 
• I want to keep my house
• I’m good with the terms and payments of my current 1st mortgage. I did not want this included in my BK but my lawyer said everything had to be.

Questions:

1. Should I make the “late” payment to get the 1st caught up or do I have more leverage trying to get them to fix my credit (I’m late b/c they didn’t deduct the payment) if I continue to lag a month behind?
2. Do I need to reaffirm my mortgage to continue to build credit? Can I reaffirm post BK? If not, what are the other options?
3. When I go to sell my house, is the equity mine or does it go to the trustee?
4. On the HELOC- should I pay the 10% or since there is no lien can I continue to ignore? I don’t know if this debt is truly discharged or if I am obligated for it as I continue to live in my house?

[SYinLV]

It would be helpful even if you can only answer part of the questions. Thanks so much

[StartingOver10]

1) Yes, make the late payment because right now you have what is known as "rolling 30's".  Means you have been continuously behind 30 days since your BK was discharged.

2) No, you can not reaffirm your mortgage post discharge. You can continue to pay and stay.

3) The equity is yours if you decide to sell anytime in the future.

4) Yes, the HELOC was discharged in your BK, but only the personal liability for repayment.  The lien the CA is talking about is actually the "mortgage lien" that was filed at the time you took out the original HELOC. It is still there unless your BK attorney went back through and had the lien removed during your BK. Doubtful, because it would have cost you extra and you would remember. You can check your BK documents in PACER.gov to see if the lien was taken care of in the BK. Or call your BK attorney to verify since he would have your entire file.

If you decide to sell in the future, then that second (HELOC loan) will need to be paid, in full before a release can be issued and the house can close. Believe me, if you wait until then there will be no more 10% of the note deal, they will want the full amount of principal plus interest plus fees etc because they know you can't close on the sale without their release.

If it were me, I would take that deal for 10% as long as the CA can give a Satisfaction(Release) for the HELOC.  If they can't, then don't do it. Have an attorney review everything before you attempt this. Far better to get rid of the HELOC now long before you attempt to sell the property then there are no complications during the sale.

[SYinLV]

Thanks so very much. One last question- should I refi my mortgage so I can build credit? I can't believe I've been making payments for 5 years that don't "count" (credit wise)

[StartingOver10]

I think it would be extremely difficult, if not impossible, for you to refi with a rolling 30 for the last 60 months after a BK. Any derog after a BK kills your chances for a new mortgage.

You would have to prove up each of your payments and show the missing payment was during your BK and even then, I know that any derogs after a BK essentially tank your changes of getting a new loan.

Right now, with the BK discharged and you current on your payments (or going to get current); you have the best of both worlds. You can walk away if things get too difficult and the lender can't come after you for payment or two, make payments and stay.  When you decide to sell the equity is yours.

Once you get straighened out with your payments and the HELOC paid off (settled for the 10% and HELOC lien removed). Then just continue to stay and don't worry about refinancing. JMHO.

You can build your credit through other means - check soulmasters thread on getting to 700 in 2 years.

[cin67]

Good news. I filed Ch 7,  and exactly 2 years post-discharge applied for a VHA loan and was approved. I sold my home, which had a first mortgage and a HELOC. I had NOT REAFFIRMED EITHER in the BK action, though they both were listed. I had no "credit" for these payments, or so I thought. More on this after some responses to your questions:

1. I am not a legal advisor, nor an advisor in any way. But, it always seems to be financially responsible to be on time with all payments. As soon as I discovered a late payment, I'd pay it, get current, and make a note what happened when and why, and what date I was notified that it was tardy. 

2. My understanding is one cannot reaffirm post-bankruptcy, but every state is different. Check with your attorney who did the bankruptcy.

3. I don't know if you can keep your equity - thats another question for a bankruptcy attorney in your state.

4. On the HELOC, I read online that one should NEVER pay the 10% offered until you GET A RELEASE SIGNED FROM THEM. Google this issue- it seems to be a collection agency tactic.  OF NOTE: there may not be a lien on record, but check town records where deeds are filed - I suspect there is a record in the town/city hall of a security on the property itself.

As for refi - I read many many posts and I asked around, and the answer is No to re-finance after a bankruptcy. I dont recall how many years a refi is unavailable. I believe there are other threads in this forum that specifically address refinance post discharage, and the answer seemed to always be No.

AS for new loan - I got one even though it looked like I "had no credit".  I continued to pay my mtg and my HELOC pmt on time for the two years post-D. Like you, i didn't understand that I was doing so without getting credit for my payments. However, good news!  My lender asked me for copious proof of my payment history (bank statements, mortgage statements, cancelled checks, bills, etc) and accepted it as positive proof I have a good payment history. That is why you must NEVER BE LATE on ANY BIL after a BK. I also provided Letters of Explanation upon request (such as how I got into debt and BK). So.. even though the three credit reporting agencies had no record of my positive payment history, I was able to show proof to the lender and was approved.  I am nearly at 700 (678) and within days of closing on a new home with a new loan.

[cem13]

I had a HELOC opened in FEB2005, I live in Michigan.  I was current until I lost my job and filed BK7 in JAN2011 and discharged in JUN2011.  My Attorney told me NOT to reaffirm ANYTHING.  He told me if I wanted to stay in the house to keep paying the first mortgage, which I did.  I also kept up on the car payments and paid it off.

My HELOC was removed in the BK7.  I did not have to pay "extra".  My Attorney handled the paperwork and "POOF" it was gone upon discharge.  I waited a few months and then checked with the County in AUG2011.  An old high school friend worked there so I asked her to look it up on the "D/L"  She looked it up an showed me the screen, the only lien was my first mortgage.

In late Dec2013, I received a letter from the HELOC telling me that they are "releasing the lein" effective 01JAN2014.  So I called my friend again and asked her to check my record again.  She showed where there was an attempt to release the HELOC but since it was stripped in the BK7, they basically ignored the release..  She recommended that I keep the letter as proof but the lein is gone.

I called the HELOC company and asked the Agent why they sent a release of lein after it was removed in BK7?  She told me that many times the BK7 paper work gets "lost" and not tied in with the correct file.  She also said that during BK7, this company waits for 3 years.  If the lein is not paid, they will release the lein.

[cem13]

Has anyone been successful in settling a first mortgage for less than what is owed after a BK7 without reaffirming?

I am thinking about making an offer to my first mortgage holder to release the lein and then refinancing with Navy Federal.  I have ZERO baddies after BK7 and all 3 socres are above 700.

[sk2014]

Okay here is our situation...

1. Chapter 7 discharged 2/2010
2. First and second mortgages included, not reaffirmed, still living in this house.
3. First Mortgage is with Third Federal (Local to cleveland) and our second is with CitiFinancial
4. As of 4/23/2014, first mortgage is at 66668.7 3.25% (lucked out with a 5 year arm in 2008) and our 2nd is 64656.84 total 131,325, last "zillow" estimate was 115,000, so we are obviously upside down.
5. We tried to pay both mortgages until June 2010 but had to stop paying the 2nd because it was more then our 1st Mortgage. 
6. Paying the 1st Mortgage religiously since bankruptcy.
7. I have not been working steadily since 2010, I went back to school, graduated with two associate degrees, had some contracting gigs, but still haven't been able to save any money and having a hard time finding a permanent gig again. My husband has a great job, great pay, tried the mod, nope made too much money.
8. Our current house needs work, (ie additional bathroom, kitchen updated/repaired, an additional bedroom as my daughters is really small)
9. Current scores are not so hot, after getting them mostly up to 670's, we got behind on a couple of bills so of course I have several past due and our scores are between 610 - 640 (I signed up for the lexington law credit repair program ..seemed like a good idea)
10. I would like to either fix/add on to our current house or purchase a new house.
11. Talked with a lender, due to our 2nd mortgage not being paid as agreed we aren't going to be able to qualify for anything with that lingering.
12. Second mortgage is no longer on either of our credit reports, no foreclosure (even on the Office of the Auditor Property Info), I tried to look for liens, I am either not doing something right or something is wrong...somewhere.
13. I would like to settle with the second mortgage company, but I am afraid to "poke the bear"...but at this point I don't know how to get what I want without taking care of the second mortgage.

Questions

• Is it safe to assume, once we settle with the 2nd mortgage, the equity is something we can tape into to fix or have as a down payment towards a new house???
  (I was thinking of borrowing the money to settle from family and then turning around with the equity to pay them back?)
• How do I get started with settling the 2nd mortgage.. as I've read that citifinancial is hard to deal with??
• What option is more likely in our situation, fixing/adding on or buying new?

That's it for now...

Kelly