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Refinance after Chapter 7 mortgage was not reaffirmed

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Refinance after Chapter 7 mortgage was not reaffirmed

I filed bk 7 2 years ago. Got divorced 9 months ago. We did not reaffirm the mortgage. I kept the house. I struggled the first few months and decided I would sell the house. So during that time I fell behind on my payments. I made some renovations to get it ready to sell. I also borrowed money from a family member to complete renovations, and they put a lien on the home for that loan. After looking at what I could afford in our market I decided not to sell. However I still need to pay back that loan/lien. I thought it was no big deal that I had fallen behind on my payments because it doesn't show on my credit. I thought the new lender would just need a payoff for the mortgage, but someone told me they will require something from my current mortgage holder that says I haven't been late. Well I have been late. I am caught up now, but had gotten 60 days behind and stayed there for a few months. If I try to refinance will they require me to get records from my current mortgage company showing my payment history since the bk or is there a way around that? Obviously I feel like a complete idiot now, and am scared I'm going to have to sell anyways. Thanks for your help/input!

7 REPLIES 7
Moderator Emerita

Re: Refinance after Chapter 7 mortgage was not reaffirmed


@Nicille wrote:

I filed bk 7 2 years ago. Got divorced 9 months ago. We did not reaffirm the mortgage. I kept the house. I struggled the first few months and decided I would sell the house. So during that time I fell behind on my payments. I made some renovations to get it ready to sell. I also borrowed money from a family member to complete renovations, and they put a lien on the home for that loan. After looking at what I could afford in our market I decided not to sell. However I still need to pay back that loan/lien. I thought it was no big deal that I had fallen behind on my payments because it doesn't show on my credit. I thought the new lender would just need a payoff for the mortgage, but someone told me they will require something from my current mortgage holder that says I haven't been late. Well I have been late. I am caught up now, but had gotten 60 days behind and stayed there for a few months. If I try to refinance will they require me to get records from my current mortgage company showing my payment history since the bk or is there a way around that? Obviously I feel like a complete idiot now, and am scared I'm going to have to sell anyways. Thanks for your help/input!


The new lender will definitely check your payment history with your current lender.  Having payments made 60 days after the due date of your mortgage after a Bk is a credit killer. 

 

However, if you sell your home and rent for a year (so you have 3 years from your discharge). You should be able to get a new mortgage.  Why? Because the lender will only want the HUD/ALTA statement and 12 months of rent checks Smiley Happy   They won't inquire into the payment history of your current lender because you will have effectively replaced it with the rental history.

 

If you don't want to do that, you may have to wait quite a while to refi.  What would be the LTV if you were able to get a refi on your current residence?  LTV makes a difference. 

 

 

Message 2 of 8
New Member

Re: Refinance after Chapter 7 mortgage was not reaffirmed

Loan would be 80% of value if I refi now. The mortgage doesn't show on my credit at all. It hasn't affected my score. Since the bk I have perfect credit history with a car payment and 3 credit cards that have low balances. My credit score has recovered well. I didn't even think that they would need a payment history or I would never have juggled things the way I did. I'm an idiot and I'm pretty pissed at myself to say the least. If I sell it, couldn't I buy something else and say I've been living with family since it isn't on my credit? I would have a good 35k down

Message 3 of 8
New Member

Re: Refinance after Chapter 7 mortgage was not reaffirmed

When I say it doesn't show on my credit I mean it's as if I never bought a house at all. It's weird. It's just gone. And the 35k down would be after paying off my car so essentially I'd have no bills

Message 4 of 8
Moderator Emerita

Re: Refinance after Chapter 7 mortgage was not reaffirmed


@Nicille wrote:

When I say it doesn't show on my credit I mean it's as if I never bought a house at all. It's weird. It's just gone. And the 35k down would be after paying off my car so essentially I'd have no bills


It doesn't matter if it shows on your CR or not.  Mortgage lenders check into your current payment history.  When you have a Bk, they don't excuse any late payments after your Bk filing/discharge.  BTW, you have to provide paperwork to the lender:  the complete petition + discharge + divorce decree + PSA (property settlement agreement) in addition to all the normal mortgage items needed.

 

Google 1003 mortgage app. Read it and you will see that you are obligated to tell the mortgage lender about your mortgage even if it isn't on your CR. If you fail to mention it - it is fraud. I know you don't want to go down that road.

 

I mentioned 3 years because that is when you can get an FHA mortgage.  Conventional mortgages after a bk are 4 to 7 years after your discharge.

 

What is probably available to you now is a subprime loan - which is a very low LTV and very high interest rate. Not a good choice usually.  If you didn't have the rolling 60's you might have been able to get a FHA loan but not after the late payments. 

 

pm shanethemortgageman on the mortgage subforum to see if he has anything that can help you - but don't get your hopes up.  When I said credit killer I wasn't referring to your scores, I was referring to the mortgage loan process. 

Message 5 of 8
New Member

Re: Refinance after Chapter 7 mortgage was not reaffirmed

Well thanks for the info looks like I'm gonna rent for a year!

Message 6 of 8
Moderator Emerita

Re: Refinance after Chapter 7 mortgage was not reaffirmed


@Nicille wrote:

Well thanks for the info looks like I'm gonna rent for a year!


^^That works - but make sure you sell your home first and keep all the paperwork from the sale - and no more lates.  Then rent.   Also, talk with Shanethemortgageman, he may have a niche type product of which I am unaware.  

Message 7 of 8
New Member

Re: Refinance after Chapter 7 mortgage was not reaffirmed

right that's kinda obvious at this point. I just checked my payment history and it looks like I was 2 payments behind when we filed bk. So it took me a year to get that caught up, but I did. Then I was current for 6 months. I didn't make July or August payment until September then stayed 30 days behind until last month where I paid 2 payments to get caught up. So there's no hope even though I made on time payments since the bk and even got it caught up from payments that were behind before the bk? I'm super pissed obviously I would never have done this if I used my head I just thought I was going to put the money into the remodel, sell and then rent because my two years weren't up anyways. Looks like I may still be doing that lol

Message 8 of 8
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