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

[DaveInAZ]

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@cem13 wrote:

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@lalittman wrote:

File a complaint with CFPB and all 3 credit reporting agencies.  Keep filing complaints till they get tired of dealing with this.  We have been dealing with Chase for 2 years on a mortgage discharged while making payments, and some clown in exec mortgage says we are harrasing Chase with all the complaints.  It made my day.

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I had to burst out laughing at this one.  If companies were more accurate with their reporting, then they would not get hit with complaints.

Keep up the good work.  Eventually they will tire of the complaints and either fix the problem or make it go away for you.

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Well, in fairness, it's actually impossible for any lender to report payments on a mortgage not reaffirmed in Ch7 BK. The debt was discharged and is gone forever, the same as any credit card/unsecured debt. The difference is that while the mortgage debt was discharged the lien and/or Deed of Trust on your property were not, and your on time payments are not reducing any debt, they just prevent the lender from enforcing the forclosure clause in the lien/Deed of Trust. When my house sells the escrow company will be paying my mortgage lender the payoff amount, but the payoff amount is not paying in full my discharged mortgage debt, it's the amount the bank requires to release the lien so I can give the buyer a clear title. The amount "just happens" to be the same as what the mortgage balance would be if it had not been discharged.

[0REDSOX7]

DaveInAZ - probably the most clear and concise statement on this topic.

[lalittman]

I am the process of taking Chase to small claims court so they can tell the judge why this never came up in the Discharge BK pertition. I am claiming higher interest on my credit cards because of my depressed FICO score bercause they are not reporting an open and current mortgage

[Anonymous]

Hello everyone, I am new here and was reading all previous posts but couldn't find an exact simillar situation, here is mine,

I purchased my house in Virginia with %5 down, 80/15 loans from Bank of America, back in 2007. 

I had my first loan %80 modified in late 2009.

End of 2009 I lost my job and stopped paying my 2 mortgages and my credit cards.

In October 2011 I received a letter for a Trustee sale for my house.

End of 2011 I filed a Chapter 7 and was dischaged on Feb-2012. in my Bankruptcy documents in the statment of Intention section, I selected the property will be Retained, and I  intend to OTHER, retain, keep current.... 

however when I asked my attorny after the case was discharged that I want to start paying the first mortgage, she said I cant, and even if I send the bank a check they will return it as the house is in a Forceclosure status.. we never proceeded with any further agreement with the bank, so I never paid the bank since 2010.

until now I have never heared from the bank about any forceclosure or to make any payments. I still have the house, the title in the tax records is still under my name, however I dont pay any property tax, and never received any late notice from the taxes (I assume the bank is making those payments).

in my credit report the 2 morgages are showing as discharged, and no balance owed on any of them.

I am trying to purchase another house but the loan officer told me my application was declined because the underwriter asked for a payment history of the house.

I tried to explain the situation to him but it didnt work.

my questions:

1- is that a normal situation for the bank not to report any late payments after I intended to keep the house in my chapter 7 paperwork, and still not to proceed with forceclosure for that long??

2- for my new house, I have a score of 670 with 4 credit cards and a car loan. I never missed a payment since the discharge. any advise on how to get the new loan approved or how to convince the underwritter that It is the bank who is late and never proceeded with a forceclosure?

Thak you for the help.....

[DaveInAZ]

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@Anonymous wrote:

my questions:

1- is that a normal situation for the bank not to report any late payments after I intended to keep the house in my chapter 7 paperwork, and still not to proceed with forceclosure for that long??

2- for my new house, I have a score of 670 with 4 credit cards and a car loan. I never missed a payment since the discharge. any advise on how to get the new loan approved or how to convince the underwritter that It is the bank who is late and never proceeded with a forceclosure?

Thak you for the help.....

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1- No, that's highly unusual for the bank to not foreclose after that long, and even more unusual to not report any late payments. They can't report any lates after discharge, but they sure had plenty of time before you filed BK to report late payments. I'd say consider yourself very lucky.

2- What kind of mortgage did you apply for? Conventional, FHA, VA? For a conventional mortgage Fannie Mae (the quasi govt. agency that is the largest purchaser of conventional mortgages) changed their rules last year to that when a mortgage is discharged in BK any wait period for a new mortgage after BK it is the date of BK discharge, not any foreclosure. But, the wait period is 4 years, so you won't be eligible for a conventional mortgage until Feb 2016. The waiting period for a FHA mortgage is 2 years after discharge. Don't know about VA, not a vet. And lenders can have their own "over rides", such as requiring longer wait periods, and requiring satisfactory payment history on your current home.

I think you have a couple options:

1- If you could work something out with your current lender would you consider keeping your current house? I'm not sure your attorney gave the best advice that you "can't send any payments", most lenders prefer to avoid foreclosure if at all possible - they usually lose money in a foreclosure. If you would consider keeping & staying in your current home it could be worthwhile to contact to see if they would consider another loan modification that would work for you.

2- If you would rather just move on and buy a new home, try working with a local mortgage broker that works with multiple lenders. Be completely upfront about your situation and ask them if they feel certain they have a lender who can approve you, you should qualify for an FHA mortgage with your credit score, length of time since discharge, and that you haven't been foreclosed is actually a plus. Or, you may want to push your luck and stay in your current home payment/rent free until March 2016 when you can qualify for a conventional mortgage, which has a lot less fees than FHA.

[cem13]

I agree with Dave on this point.  If I were you I would not say a thing to anyone.  Live there rent (payment) free, put the payment into an escrow account every month just like you were making the payment to the bank.  Then if they finally wake up, you can negotiate with them.  The escrow account will serve as behavior evidence but you get to use the money as a down payment.

I did something similar.  In 2008, I fell behind on my mortgage.  They put me into a trial peroid where I made 3 payments.  I did not hear from them for a year.  They called me one day in 2009 and asked me if I would be willing to do a home modification?  I said yes.  They had me make 3 monthly payments again.  They forgot about me for another year.  In JAN2011, they approved my modification.  Shortly after I filed BK7 (JAN2011).  I did not reaffirm the new modification but I paid the monthly payments all along.

In Jan2015, I wrote them a letter saying accept $80K or I walk (I was bluffing but they did not know that).  They accepted in a few weeks.  I was approved for a FHA loan since my BK7 d/c date was JUN2011 and I did not qualify for a conventional mortgage.  The appraisal came back at $120K.  So I cut $40K off my mortgage, cut my payment by $300 per month and cut my payoff by 5 years.  Freddie Mac does not want to foreclose if they can help it.

Like Dave suggested, go to a Mortgage Broker and explain everything.  They will pull your credit and go through the pre-approval process.  They will be able to tell you what you need to know.  FHA is very reasonable but you have to pay the PMI.  If you get a 15 year Mortgage the PMI is .45% which is not too bad considering the FOMC will be raising rates soon (some say June, others say September).

A Mortgage Broker works for you and only gets paid if they find you a mortgage so it is in their best interest to find you a Mortgage.  Now YMMV of course but if you have a decent CR and some money in the bank for a downpayment, and you have shown good behavior in the past few years; you should be good to go.

Good luck and keep us informed of your progress.

[Anonymous]

Thank you Dave and Cem for the response. I think I was not clear enough on my story.

The bank reported the late payments prior to the bankruptcy. but after the bankruptcy, what shows in my credit report is a zero balance and no late payments, both mortgages are discharged.

Now I am confused, when I selected that I intend to retain and keep current, does that mean I reaffirmed the house or not? that is my first question

based on that now it has been 3 years after the discharge, and I never paid the bank (however they didn't report any late or even proceeded for foreclosure) can they report the 3 years of not paying later on and will that harm my credit??

also is there a way I can settle the second mortgage originally was $125,000 (don't know how much now after those years without a payment) and release the lien? any suggestions?

if I am able to settle the second mortgage, can I legally sell the house, or refinance it since I will only have left with one lien for the first mortgage (originally $672,000) I see comparable houses sold late 2014 for $780,000. or Can i do a loan modification with Bank of America?

for the new loan, I already put an offer for a house and talked to a broker I know and applied for a FHA loan, but the underwriter declined it because he needed a payment history after the discharge. I tried to explain that even I selected that I will retain the house and keep current but my attorney advised not to pay because the bank will return the payment, and also that she never submitted any further agreement with the bank, and all those years I never received a call from the bank and the bank just didn't ask for foreclosure (that is not my fault) but the underwriter didn't accept it.

does any one know of a similar case, or of any bank who is more flexible on that and will get me a loan? my score and income are not of an issues at all. it is just the old house and the way it is reported.

my last question is for the old house, if I am able to sell it, the title has my name and my X-wife's name on it until now. we were married in a foreign country and divorced out of the USA. is there a way to remove her name off the title, or can I sell without her present? (her name was not on the loan, and she never worked and never paid anything  for the down payment or the 18 month payments I was making before my hardship).

Again, I really appreciate the help from everyone. 

[DaveInAZ]

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@Anonymous wrote:

Thank you Dave and Cem for the response. I think I was not clear enough on my story.

The bank reported the late payments prior to the bankruptcy. but after the bankruptcy, what shows in my credit report is a zero balance and no late payments, both mortgages are discharged.

Now I am confused, when I selected that I intend to retain and keep current, does that mean I reaffirmed the house or not? that is my first question

based on that now it has been 3 years after the discharge, and I never paid the bank (however they didn't report any late or even proceeded for foreclosure) can they report the 3 years of not paying later on and will that harm my credit??

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- No, filing w/intent to retain is just that, a declaration of intent and is not legally binding. To actually reaffirm you would have to had signed a Reaffirmation Agreement, also signed by your attorney, the lender, and approved by the court. It doesn't sound like that's what happened.

also is there a way I can settle the second mortgage originally was $125,000 (don't know how much now after those years without a payment) and release the lien? any suggestions?

- Well sure, and if the lender is smart & reasonable they will settle for a fraction of what the they think is the current balance, because they are the ones way out on a limb here - if the lender of the 1st mortgage forecloses they will lose everything because foreclosure on a 1st mortgage removes the lien of any other loans on the property. And since it was discharged in your BK7 they can't come after you for anything. BUT you should not make any attempt to settle until you have resolved any & all issues on the 1st mortgage.

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if I am able to settle the second mortgage, can I legally sell the house, or refinance it since I will only have left with one lien for the first mortgage (originally $672,000) I see comparable houses sold late 2014 for $780,000. or Can i do a loan modification with Bank of America?

- Since you are not in foreclosure you can legally list the property for sale now, but prior to doing so you should negotiate with BoA what they will accept for a payoff balance if/when it sells. Ditto for the 2nd mortgage. Also you would want in writing that BoA will not initiate foreclosure for XXX amount of time, giving you the time you need to sell the property, you would also want those payoff balances in writing.I'll address refinancing below.

for the new loan, I already put an offer for a house and talked to a broker I know and applied for a FHA loan, but the underwriter declined it because he needed a payment history after the discharge. I tried to explain that even I selected that I will retain the house and keep current but my attorney advised not to pay because the bank will return the payment, and also that she never submitted any further agreement with the bank, and all those years I never received a call from the bank and the bank just didn't ask for foreclosure (that is not my fault) but the underwriter didn't accept it.

does any one know of a similar case, or of any bank who is more flexible on that and will get me a loan? my score and income are not of an issues at all. it is just the old house and the way it is reported.

- I've been posting in the Mortgages section of MyFico in which a lady & her husband are in a similar situation - they were discharged BK7 5 years ago and moved out of their house and the lender still hasn't foreclosed. They applied for a new mortgage on a new property & were declined because of no payment history after discharge on their old, non foreclosed property. DallasLoanGuy, a trusted & valued forum member, posted that every lender he works with will treat it as a foreclosure because of no payments for 120+ days and will not approve a new mortgage. So I don't think you can get a new loan for a new property in your current situation, and no one will refi your current property except BoA in a loan modification or complete refi.

my last question is for the old house, if I am able to sell it, the title has my name and my X-wife's name on it until now. we were married in a foreign country and divorced out of the USA. is there a way to remove her name off the title, or can I sell without her present? (her name was not on the loan, and she never worked and never paid anything  for the down payment or the 18 month payments I was making before my hardship).

Again, I really appreciate the help from everyone. 

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- Are you still in touch and on good terms? The easist solution is for her to sign a Quit Claim, removing her name from the title. Otherwise she will have to sign the legal papers in a sale.

In summary, you need to contact BoA and work out the best solution for you, either a loan modification or agreement to allow you to sell. If you can accomplish that, then contact the lender on the 2nd mortgage and see what you can work out with them. And with a property of this value you should also retain a qualified attorney. While we here on MyFico try to give our best advice, for something of this value and importance you should have professional legal advice.

[Anonymous]

Consulted attorney in 12/14. Said stop paying everything. Saved enough to finally file on 3/31/15. Received our discharge in mail today.

Wells Fargo filed for relief from stay. Also today received papers saying relief granted.

After reading about all the people who continue to pay and stay in the home I called WF today and inquired. They said I would have to pay $2000 to get current to their bankruptcy dept and then I could continue normal routine. She said they don't show they have received answer to their motion for relief.

One question is if I pay the $2000 (which is everything we have at this point), will they still foreclose when the relief papers get to them? If we can stay here for current mortgage payment that would be best because it is low and we could save. If we go rent somewhere we are looking at paying an additional $500 a month. If they foreclose and we have given them our everything, we won't have had time to save much.

Best case would be we stay and save for a few years till our credit is built back up. We are way under water. We are in old doublewide in Florida that after last hurricane no one will insure. If I understand what I've been reading we should be able pay to stay, then walk away after credit is built back up and get new mortgage. Can we get new mortgage even if they haven't foreclosed and this is still in our name? 

Sorry my thoughts are such a jumble on this page. I am so excited to follow SoulMasters BK7-700 outline! But I am such a nervous wreck!!! Appreciate all of the contributors on these boards!!!

[Anonymous]

My situation is similar and I am finding that the credit score is notvthe issue as I bounced up to almost 700 real quick. The problem is that underwriters ding you twice. First ding is chapter 7 and that requires a 3 year seasoning period/waiting period. Then if bank foreclosed days later you have a second ding and a new seasoining period/ waiting period restarted after foreclosure date regardless if you did notvreaffirm loan or surrondetedvhome in BK7. Makes no sense yo me but that is what I am running into despite my credit score being almost 700.