mortgage reaffirmation

[weezy615]

Hello, i have a question regarding getting mortgage reaffirmed:

I filed for chapter 7 and Im currently trying to get my mortage reaffirmed, However I have currenly in the 3rd month of a forbearance. My lawyer said New American Funding denied the reaffirmation agreement because I was under a forbearance plan..  I called New American Funding said I want to put the 3 months I missed on the back end of the loan so I can get my mortage reaffirmed.  I gave them my income and expenses and they told me I would hear back from them no later than july 1st for the loan modification.  

My issue is my 341 meeting is scheduled for june 25th!  My question is will I still be able to have them send the reaffirmation agreement after my 341 meeting? I need to wait to get approved for my loan modification then have the  send the reaffirmation agreement. 

Please any helpful advice would be much appreciated. thanks!

[Anonymous]

I believe you can do it after the 341 meeting. At least, I hope so. Because I intend to reaffirm my mortgage and my 341 meeting already took place but the reaffirmation hasn't happened yet.

[weezy615]

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@Anonymous wrote:

I believe you can do it after the 341 meeting. At least, I hope so. Because I intend to reaffirm my mortgage and my 341 meeting already took place but the reaffirmation hasn't happened yet.

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ok well thats good news.. I hope to get my loan modification approved next week some time.. maybe I can get a smaller payment !  

Also can you refinance if you didnt reaffirm? I would I be able to sell it and get my equity back in the future if I didn't reaffirm?

Thanks in advance!

[Azuieldrago]

I didn't have a mortgage to reaffirm but did reaffirm a secured loan. I could reaffirm up to my discharge. If you don't reaffirm, you legally no longer own the house. The bank does. You are merely a renter then. So you can't sell. As for getting another loan, You won't be able to get another home loan for 2 yrs. So you have two courses of action, reaffirm and keep the house. Second is surrender and see about pay and keep or see if they will evict you so they can sell the house.

[weezy615]

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@Azuieldrago wrote:

I didn't have a mortgage to reaffirm but did reaffirm a secured loan. I could reaffirm up to my discharge. If you don't reaffirm, you legally no longer own the house. The bank does. You are merely a renter then. So you can't sell. As for getting another loan, You won't be able to get another home loan for 2 yrs. So you have two courses of action, reaffirm and keep the house. Second is surrender and see about pay and keep or see if they will evict you so they can sell the house.

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So you're telling me I can't sell my home if I don't reaffirm my house??! I have about 60k in equity in it and I plan on selling it within the next 5-7 years.. 

[despritfreya]

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@Azuieldrago wrote:

If you don't reaffirm, you legally no longer own the house. The bank does. You are merely a renter then. So you can't sell.

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The above statement is FALSE.  You DO NOT, lose "ownership" of the home if you fail to reaffirm.  In fact, in the vast majority of situations, reaffirming a mortgage is just plain DUMB.

You are still the titled owner.  You can still sell the home.  You can still keep the home assuming you pay the mortgage.

As far as I know, only the 11th Circuit suggests that reaffirming a mortgage might be required and that is probably not a steadfast "rule".  If it is a "rule", failure to abide by the "rule" would only mean that the lender could foreclose if it decided to do so, which would be highly unlikely if payments are current and remain current.  And. . . even if the lender decided to foreclose, it would have to abide by state law regarding the foreclosure process and, I would imagine that the homeowner would simply sell the home (if there was equity) before it would be lost to a foreclosure.

Des.

[Azuieldrago]

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@despritfreya wrote:

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@Azuieldrago wrote:

If you don't reaffirm, you legally no longer own the house. The bank does. You are merely a renter then. So you can't sell.

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The above statement is FALSE.  You DO NOT, lose "ownership" of the home if you fail to reaffirm.  In fact, in the vast majority of situations, reaffirming a mortgage is just plain DUMB.

You are still the titled owner.  You can still sell the home.  You can still keep the home assuming you pay the mortgage.

As far as I know, only the 11th Circuit suggests that reaffirming a mortgage might be required and that is probably not a steadfast "rule".  If it is a "rule", failure to abide by the "rule" would only mean that the lender could foreclose if it decided to do so, which would be highly unlikely if payments are current and remain current.  And. . . even if the lender decided to foreclose, it would have to abide by state law regarding the foreclosure process and, I would imagine that the homeowner would simply sell the home (if there was equity) before it would be lost to a foreclosure.

Des.

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Ok, I was wrong. Did some further digging. Thank you @despritfreya for the correction. I was under the understanding that if you didn't reaffirm, you became a "renter" with basically a non-binding Contract for Deed situation. Point of debate, is there anything stopping them doing the foreclosure anyways even if still paying? OP mentions they have about $60K in equity, couldn't the trustee make it a Ch 7 with assets and take the house to sell and pay the creditors? Will reaffirming stop that or is that a trustee decision to make? 

OP, my apologies on being wrong. Des saves the day again. 

[despritfreya]

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@Azuieldrago wrote:

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Point of debate, is there anything stopping them doing the foreclosure. . . even if still paying? OP mentions they have about $60K in equity, couldn't the trustee make it a Ch 7 with assets and take the house to sell and pay the creditors? Will reaffirming stop that or is that a trustee decision to make?

In answer. . .

1.  99.9% of loan contracts assert that the filing of a bk is a default under the contract.  This type of provision is called an "ipso facto" clause.  Such clauses, as it relates to personal property, the statement of intention and the failure to act on the intention (signing a reaffirmation agreement) can be enforced, depending upon the established law in a particular bankruptcy jurisdiction.  Since the Bankruptcy Code does not require a reaffirmation agreement for real property, in 99% of the cases such clauses, as it relates to filing bk and real estate, are not enforceable.  The 11the Circuit (Florida, Georgia and Alabama) as far as I know is the only Circuit that has case law requiring a reaffirmation agreement as it relates to real estate.  However, that case law was from years and years ago.  I have not researched the issue in years so it may not be the current case law.  Further, even back in the day, it only became an issue if the lender insisted on a reaffirmation agreement.  Most did not.

2.  If the equity in the property is within the allowed homestead exemption, a Chapter 7 Trustee has no interest in the property.  If the equity is more than the exemption, the Chapter 7 can, and many times will, sell the property.

3.  Reaffirming does not change the homestead issue as it relates to the Trustee.  Reaffirming (if approved by the Court) serves one purpose and one purpose only - making the debtor fully responsible for the loan.  Now, if you are in a "non-recourse" State, maybe that's not a big deal (until the legislature changes the law) but if you live in a recourse state such as say, Illinois, why on this planet would you reaffirm a mortgage?  One only has to look at what happened in 2008 and even today to know that re-obligating yourself to a loan when such is not required is just dumb and can lead to financial ruin. 

Bottom line. . . When you reaffirm a secured (or even unsecured) loan you tell the creditor this:  "If I default on the loan you can take back your collateral and, despite the Discharge, sue the crap out of me for the balance".  Why would anyone take that risk. . .  just to have something reported to a CRA?  There are better and smarter ways to re-establish credit.

Des.

[Azuieldrago]

Thank you @despritfreya , Don't completely understood the wording but I think I have the intent. Basically, if you don't reaffirm the mortgage, you still own it and can sell it if you want. Lender can foreclose if they want but it would be unwanted headache if the debtor is still making payments and depending on equity and exemption laws on what the trustee can or will do. The reason I brought up the forclosure laws in my state foreclosure my state is 365 days where one of my neighbor states is 60-90 days usually longer. 

[weezy615]

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@Azuieldrago wrote:

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@despritfreya wrote:

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@Azuieldrago wrote:

If you don't reaffirm, you legally no longer own the house. The bank does. You are merely a renter then. So you can't sell.

---

The above statement is FALSE.  You DO NOT, lose "ownership" of the home if you fail to reaffirm.  In fact, in the vast majority of situations, reaffirming a mortgage is just plain DUMB.

You are still the titled owner.  You can still sell the home.  You can still keep the home assuming you pay the mortgage.

As far as I know, only the 11th Circuit suggests that reaffirming a mortgage might be required and that is probably not a steadfast "rule".  If it is a "rule", failure to abide by the "rule" would only mean that the lender could foreclose if it decided to do so, which would be highly unlikely if payments are current and remain current.  And. . . even if the lender decided to foreclose, it would have to abide by state law regarding the foreclosure process and, I would imagine that the homeowner would simply sell the home (if there was equity) before it would be lost to a foreclosure.

Des.

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Ok, I was wrong. Did some further digging. Thank you @despritfreya for the correction. I was under the understanding that if you didn't reaffirm, you became a "renter" with basically a non-binding Contract for Deed situation. Point of debate, is there anything stopping them doing the foreclosure anyways even if still paying? OP mentions they have about $60K in equity, couldn't the trustee make it a Ch 7 with assets and take the house to sell and pay the creditors? Will reaffirming stop that or is that a trustee decision to make? 

OP, my apologies on being wrong. Des saves the day again. 

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I do have 60k in equity but I live in Texas which gives me a dont **bleep** with my homestead pass. My lawyer got all my equity exepmt.