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Deed in Lieu after Chapter 7 Reporting Questions


Deed in Lieu after Chapter 7 Reporting Questions

I will try to make this as short as possible.  We filled and was discharged from Bankruptcy in Sept of 09.  We moved out of State for a job transfer in March of 10.  Our lawyer told us to mail keys and we were done.  We rented for a year and in 2011 started to look into mortgages.  Knowing that we wanted to really buy in 12.  But wanted to see if there was a chance in he**.  We could in 11.  Well thank God we checked.  A very good mortgage guy on here did some extra help for us and found that the deed had never been transferred out of our name.   This just opened a can of worms for us.  I called the bank.  And they did not know what happend.  It was scheduled for a sherriff sale in November of 09 and didnt know why it got cancelled.  The file was stuck out in space on their system.  (Who knows how long we could have lived there for free)   I have spent so much time this past year figuring out what we could do to fix things.  I wrote Congress people, the banks presidents office, consumer protection agencys, talked with lawyers everything.  I would have wrote to Obama himself but could not find a place to send it to.  I had the ball dropped twice by people handling our account.  Our final paperwork delivered by Fed ex.  To find out weeks later that Fedex did deliver it it was signed for but by no name I could ever reconize.  For the past 12 months we had conflicting letters because there are so many diffrent departments and at least 4 diffrent compnays handling things.   Even when I gave up after about 7 months we got a letter to start things all over again!  Two days before we were to sign our paperwork.  We got a call from a relator that they had a client who wanted to offer us a short sale.  Just my luck.  Im not done with the controllers office yet I have until March to submit papers, and I will even though our deed in leiu is over.  There is something not right about the banks never having to take a deed back ever!  And the process I had to go thru to take the deed back.  Because of the banks mess up, our clock for actual deed transfer was two years later.  That is just not right.


But thank God, even though being scared to death and still am a little bit.  We got our final documents Deed in leiu with 3,000 moving expense.  We had not lived in the house like I said since 2010.  And the bank knew that. 


I have worked on our credit score over the past year.  It is today 686 and when my score comes back next week could be over 700.  I will let you know. 


My question for the board now is.....  because I have seen conflicting information all over the web....


How will the Deed in Leiu affect our report?  I have seen where it cannot be reported again because the house was in the 7 and shows a 0 balance.  Im assuming the Deed transfer will show up on the report some where?  Will that affect our report.  I did try to get the bank to report it diffrently in negotiations but was unsuccessful.  But from what I have read they cannot report it twice anyway.  When will the deed transfer show up?


We received our 3,000 check yesterday.  And I know they were waiting on the deed transfer before they would release it.  So Im guessing the deed is transferred. 


Since my husbands score will be so high I want to try to apply for a mortgage and see what happens but am looking for the right window before it is too late or too early. 


My husband had to transfer out of state for his job because his plant did close down in the state we lived in.  He was never out of work.  And actually got a huge promotion in the transfer.   Thank God.  We are in a much better financial situation now.  We had his divorce debt that we had paid over 35,000 on in 07 when I got a settlement.  But still had to do the bankruptcy because we only had the house for 4 years and were underwater.  Luckily we dont expect a extravigant lifestyle as his ex did.  And we live well within our means now.  But I have a soon to be 5 year old ready to start school in August.  And if there is any way possible I would like to have him in a house he could grow up in. 


We were never raised to file for bankruptcy and would have never done it.  We have too much pride.   But our tax guy talked us into it.  Saying there are three things that stop people from doing it when they should.  That is fear, pride and hope.  He told us back in 2006 that it was going to be a long time til the market came around.  And in our situation we would be foolish not to.  We went against the grain of many of our family members and friends.  


If I had had a crystal ball when we got the settlement I would have never spent that money paying the cards off.  We didnt know.  We were trying to do the right thing.  My husband at the time did have us set down with a financial advisor.  I asked it it would be better to use the 32,000 to pay off credit cards or to put it in some sort of investment.  And he said in front of my husband we would be better off to apply it to the cards because of the amount of intrest we were paying we could never make that in an investment.  My husband felt wrong for taking the money from me to pay his debt from his divorce.  He had 85,000 in debt and walked away with a bed, tv, and three totes.  He just wanted out.  Looking back had I have known that we were going to file bankruptcy I would have invested it where it would have been safe.  I could have just walked outside and took a match to that money. 


My point is I dont think we are bad people.  It wasnt even my debt.  I dont think this should hurt us from getting a mortgage in the future.  On the banks end I would here well there is nothing from stopping you from getting a mortgage sooner.  There are no laws that say you cannot.  But on the mortgage end Im told that there is a 3 year from Deed transfer before you can be considered for a mortgage.  Its one of the unwritten rules. 


How is the housing market ever suppose to come back if this is the case?  We will turn into a rental society. 


Given the option... if we could have traded the house we had for a forclosure in the area that we are in for a comparable house I would have done that and kept my payment.  We had also put 30,000 out of my husbands retirement fund down for PMI that we lost.  And we are still paying on until 2016.


Next time we will do things much diffrently.  But it does feel good to be able to breathe again!  And its nice to be able to live within our means.


Message 1 of 3
Senior Contributor

Re: Deed in Lieu after Chapter 7 Reporting Questions

Wow.  That is quite a story.  I hope you guys can continue to rebuild your lives together.  I know 2 years sounds like forever, but time really does fly.  Good Luck.

STARTING: 11/24/10 EQ-584 EXP-648 TU04-595
CLOSED FIRST HOME 8/19/11 EQ-630 EXP-691 TU04-653
CURRENT: EQ-701 EXP-??? TU08-720
Message 2 of 3
Community Leader
Legendary Contributor

Re: Deed in Lieu after Chapter 7 Reporting Questions

How foreclosure impacts your credit score

By Les Christie, staff writerApril 22, 2010: 4:44 PM ETOf course, it just gets worse when you face foreclosure.


Mortgage borrowers can lose their homes three basic ways: a foreclosure; a short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference; or a deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.

Sweet said credit bureaus generally slash scores equally for those three resolutions to someone losing their home. The important factor, she said, is that "it's reported that you paid less on a settled account."

Some borrowers may think that because they never missed a payment, they can "walk away" from their homes with relatively little impact on scores. Not true. "When a deed-in-lieu or short sale is reported as a partial payment, it's treated as a serious delinquency,"Wattssaid, "just like a foreclosure."

Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.

Mortgage debt, combined with other financial problems, can send borrowers into bankruptcy, the worst thing that can happen to your credit score.

The effects are long-lasting, according to Sweet. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.

It's gonna cost you

Absorbing a big credit-score hit can make many transactions more costly. It's not just paying more for credit card debt and auto loans, insurance can cost more as well.

The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of the Insurance Information Institute.

A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters.

Despite the problems a poor credit score can cause, Experian's Sweet recommends that people who are in financial dead ends, like totally unaffordable mortgages, it's better to recognize that and cut your losses quickly; don't prolong the problem.

"You need to do what you need to do to get your finances back in order," she said. "Don't worry about your credit score."

Message 3 of 3