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Bankruptcy Mortgage advice

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Bankruptcy Mortgage advice

We are 3 yrs out from Chapter 7 discharge. Our mortgage was included in BK. We have been voluntarily making the mortgage payments. It is reported on our credit reports as closed/included in BK. We recently tried to refinance the mortgage and was unsuccessful due to value of property. It has lost a lot of value and continues to drop. We had it appraised and it is not even worth the money we paid for it 17 years ago. I need advice on what I should do with the property? And I have other questions about returning it to the mortgage company as well. I appreciate any responses.
Message 1 of 11
10 REPLIES 10
Senior Contributor

Re: Bankruptcy Mortgage advice

Welcome! If you received a discharge in your bankruptcy and your mortgage was discharged. That means that you can walk away from the house and stop paying the mortgage and the mortgage company cannot pursue for the mortgage amount. Their only remedy is to foreclose on the house. If you stop paying and walk away from the home, the foreclosure will not show up on your credit report. If it does, you have the legal right to dispute that charge and get it removed. But your still responsible for property taxes, HOA fees, ect.





My posts are JMHO. I DO NOT claim to be a FICO expert. Just sharing my experiences from rebuild to recovery after BK DC. My siggy is not to brag at all. Just to show fellow members what can be accomplished when you do it right and play the FICO Credit Game.
Message 2 of 11
Member

Re: Bankruptcy Mortgage advice

Ok. Thanks for the response. If I went this route, when would I be able to buy another home? And also, I’ve read on the internet about a “cash for keys” program. My question is, can anyone advise on how to deal with our lender on this situation and offer any advice on What the best decision would be to make. There is also the moral issue of giving the house back. I just wanna make the best decision for me. Thanks again.
Message 3 of 11
Senior Contributor

Re: Bankruptcy Mortgage advice

The extra things you are asking is beyond my knowledge. I dont and wont lead anyone in the wrong direction for such a huge decision. I'm sure someone that has been in your shoes can answer that. Sorry I couldnt help you any further. But I wish you the best of luck either way!





My posts are JMHO. I DO NOT claim to be a FICO expert. Just sharing my experiences from rebuild to recovery after BK DC. My siggy is not to brag at all. Just to show fellow members what can be accomplished when you do it right and play the FICO Credit Game.
Message 4 of 11
Contributor

Re: Bankruptcy Mortgage advice

I'm in a similar situation like you but my house has drastically appreciated in value (100k) and I'm planning on doing a cash out refinance and keeping my house for good. I'd rent it out if i ever moved.
In your case, since your house has depreciated in value, you may need to determine and compare your current cost of PITI vs. Renting a new home vs. Buying a new home in 2yrs (FHA) or 4yrs (Conventional). You should go with whichever of the three options your comfortable with financially. I hope this helps and good luck to you.


In the garden until 12/10/2019
Goal is 720+
11/15/17 EQ 591 TU 469 EX 545 FICO 8
12/25/18 EQ 676 TU 669 EX 659 FICO 8
EQ 33 INQ l TU 29 INQ l EX 48 INQ l
Message 5 of 11
Senior Contributor

Re: Bankruptcy Mortgage advice

Well, that's really unusual for a property to be worth less that it was 17 years ago. What's going on? Is it in good repair, any particular problems?

 

But the most important question for you is: Where do you want to live? Are you happy in your current home and does it meet your needs? If so then what it is worth is secondary, if you've been making the payments for 3 years since BK then apparently they are affordable for you. Or would you prefer a new home? If so then FireMedic's advice is excellent, you can simply walk away - all the lender can is repossess the property, they can't charge you anything, they can't report anything to your credit report. And I don't see any moral issues, the lender made a bet they could earn a profit from you, and with 17 years of interest payments they've made a nice profit from you. And I don't see it as anyone's responsibility to make any business a profit.


Fico 08: 720/721/719 TU/EX/EQ
Message 6 of 11
Member

Re: Bankruptcy Mortgage advice

Thanks for your response. I think part of the problem is there have been a few homes that have sold around us for quite a low price. Dumped off basically. I know that’s one of the issues. As far as our house, it could use a little work. But I have done a lot of updates and that money as well is lost. The worst thing the house needs is a roof. Ours is old and could use replacing. But I am hesitant to put that kind of money into knowing I’m not getting it back. This is how I got in this BK situation in the first place. Bad financial decisions. For 3 years, I have been trying to make better ones. And to your other question, that’s a no. I am not very happy with the people we live next to. I would move tomorrow if I could. But yes, The house is affordable and it is a decent neighborhood. I’m not saying that I defiantly want to give the house back. I am just weighing options. So, I’ve read on the internet that if we walk away, you must wait another 3 years before getting approved for another home. Does any one know if this true. Thanks again.
Message 7 of 11
Senior Contributor

Re: Bankruptcy Mortgage advice

Nolo.com is a good source of info for bankruptcy/foreclosure, and they say for an FHA mortgage:"To qualify for an FHA mortgage loan, you must wait at least three years after the foreclosure. The three-year clock starts ticking from the time that the foreclosure case has ended, usually from the date that your prior home was sold in the foreclosure proceeding. If the foreclosure also involved an FHA loan, the three-year waiting period starts from the date that FHA paid the prior lender on its claim."

 

For a Freddie Mac or Fannie Mae mortgage it's at least 7 years,  a Conventional or Private mortgage it can 2-8 years. If you're a veteran a VA loan is the most lenient, two years.

 

And while since your mortgage was discharged in BK the lender can't report the foreclosure on you credit report a foreclosure is still a public record, recorded and made public by your county Recorder. And when you apply for a mortgage the lender wants to know your current situation - are you renting or paying a mortgage, so it would have to come out.

 

So if you walked away you're almost certainly looking at having to rent for several years before you could buy another house and get a mortgage. And since you got your mortgage 17 years ago I imagine your mortgage payment is less than rent for a comparable place to live. Normally you think of something like a new roof adding value to your home, but in your case you need to consider the cost of a new roof to the hassle & expense of moving & renting for several years. But one thing I should also point out is that once you stop making mortgage payments it is normally several months before the lender forecloses, some have posted here that it took a year and even longer before they were foreclosed on. And you are living rent free for that time between when you stop making payments and they foreclose and you have to move out. Not a situation I would want to live under wondering when the knock on the door comes, but only fair to point that out.

 


Fico 08: 720/721/719 TU/EX/EQ
Message 8 of 11
Member

Re: Bankruptcy Mortgage advice

Ok. Thanks for all the reply’s! One more question. What if I wanted to do a short sale. How would I go about that and being that the debt was discharged, how would a short sale effect my ability to buy another home? Thanks

Tim
Message 9 of 11
Member

Re: Bankruptcy Mortgage advice

2 questions. Can I qualify to buy another home with my current situation, obtain another mortgage then work on selling my current home? Thanks

Tim
Message 10 of 11
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