What are my options for leaving a home where the mortgage wa

Welcome Don,

I suppose you should have asked the mortgage company whether they allow for reaffirmation and then carried on with the payments even after chapter 7 bankruptcy. At least there should have been a written agreement obtained regarding the reaffirmation. However, I'd like to know whether you have made any late payment because you said that the company will be taking action against the property?

Thank you adonis. I have made no late payments since I left bankruptcy in 2006 having proof by way of the monthly statements. The bank is not threating action on the property at this time, only if I were to become late. I guess my question really is, how do I walk away from the home that I no longer want, that was lost in the bankruptcy, reaffirmation was not agreed to and without being late on payments. I have been approved for an FHA mortgage only if my name is removed from the deed of this house and I continue not to have late payments. I am assuming that any negative action taken on the property by the bank will not affect my credit rating as the mortgage was discharged in bankruptcy, however and provided I was given correct informaiton, I believe I want to avoid the legal proceeding of a foreclosure as this would hurt my ability to close on the FHA mortgage. Any thoughts on how to swing this with minimal pain?

Thank you, Don

Hi don,

Welcome back.

Deed in lieu is one of the way by which you can remove your name from the deed. But it may affect your credit. So talk to the mortgage company who have approve you for the FHA loan that if you go for deed in lieu will they approve for the FHA mortgage.

Have you consulted with an attorney yet? See you have not reaffirmed the mortgage right. So it is not on your credit report. So if you simply walk away it may not affect your credit but I am not sure. I am not a legal expert. So please do not do it without consulting with a BK attorney.

Feel free to ask if you have any further questions.

Best of luck,
Larry

First and foremost, I feel you should have had a written agreement regarding the reaffirmation. However, if you have been making payments even after bankruptcy, it implies you want to keep the home. But if the bank doesn't reaffirm loans, they shouldn't have accepted your payments – plain and simple!

The information that they'll foreclose if you're 30 day late, is correct. But I think you're not willing to pay anymore and would like to focus on the new home. Since the property isn't selling, try renting it out and use your rent payments towards the mortgage payment, though you shouldn't owe the debt because the bank does not accept reaffirmation. Otherwise any debt which you reaffirm even after filing chapter 7, should be owed by you as per the laws.

I know keeping 2 homes isn't easy but right now if you go for a deed-in-lieu, I think you might lose your approval for the FHA loan. By the way, how much do you still have to pay for the mortgage?

Regards,

Jessica.

don, how can you say you "lost the house in bankruptcy" when you were still living there and making payments? frankly, that makes no sense.

how can you walk away? i agree...how can you walk away? unfortunately for each of us, the inflection used in the question differs. i can't believe you would simply walk away.

your bankruptcy filing included the mortgage on your home as a debt to be discharged? what kind of counsel did you have when you filed your bankruptcy? i am, frankly, quite puzzled about how you got to this point.

I have consulted an Attorney since starting this topic and found the following.

1. A Deed-in-Lue of foreclosure may or may not affect the purchase of a new home and I am waiting for an answer from the mortgage company that holds the confirmation for the new loan.
2. To do a Deed-in-Lue of may require me to be late on the payment and cause the foreclosure to begin. To do this would surely kill the new deal.
3. Since the mortgage was discharged in bankruptcy the bank can only take action against the property and are not allowed to negatively affecting my current credit. They may try and I may have to dispute any errors on the credit report
4. The attorney is looking at the possibility of re-opening the Bankruptcy, as long as my discharge date does not change, to re-file my intentions to abandon the house, since they would not agree to reaffirmation in writing. This will allow me to stop making the payments and allow me to live in the house for up to a year while the bank processes their paperwork. This will kill the new deal.

Bottom line, not many good options to buy a new home and will have to wait a year to get back into the market. Who knows, maybe the house sales during that time. The bank said they would entertain a short sale, again not affecting my credit and I would not be liable for the taxes on a short sale since the mortgage was discharged in bankruptcy, this according to the attorney.

Gmakerley,

I am a layman and I may not get the verbiage out as correctly as I should, however, the house and mortgage meant the same to me, not to the bank though. I agree that my original counsel, and this was also discussed with the new attorney, did not do a good job counseling me on what a reaffirmation was and that just making the payments was not a reaffirmation. A reaffirmation must be in writing and agreed upon by both parties and the bank refused to reaffirm. I became aware of this when viewing my credit report. I took my credit report findings showing that I was not getting credit for the payments made on the mortgage as discharge in bankruptcy to the bank and asked why this happen, asked for the reaffirmation and when denied I even asked for a new loan only to be denied. After all I wanted credit for making on time payments and start repairing my credit. I claimed the intent to reaffirm during bankruptcy and they refused to do it as is their purgative. I can walk away without affecting my current credit and let them take action against the property and foreclose (to make matters worse, this is a negative amortization loan). I will not be able to get a mortgage while the legal proceeding of foreclosure is in progress. I agree with Jessica that if their intent was not to reaffirm they should have refuse my payment and foreclosure during bankruptcy and kick me out (I would have moved out without being kick out.)

Thank you everyone for you input and opinions. I will keep you posted as I wonder through the legal proceedings or not. I would appreciate feedback.

Don

Welcome back don.

I feel you should wait a year till your credit report improves. If you go for the new home now then the interest rates may be higher and you may find yourself in the similar situation So first improve your credit and save money for the down payment and closing cost. Then you can think about buying a new home.

Hope this helps.

Please Keep us posted.

Hi Don,

Frankly speaking even I was a bit puzzled when I read your first post but the second one is indeed explanatory. I can very well understand your situation but I don't think you can avoid getting a hit on your credit if you go for a short sale or deed-in-lieu.

"To do a Deed-in-Lue of may require me to be late on the payment and cause the foreclosure to begin. To do this would surely kill the new deal. "
May be what your attorney means here is, you need to be late so that the lender declares foreclosure and once he does so, only then you can seek deed-in-lieu within the time period after which the foreclosure sale occurs. And before you ask for short sale or deed in lieu, you need to send a hardship letter to the lender explaining why yoiu weon't be able to pay for the loan any more.

I really don't think you can walk away without affecting your credit. That doesn't happen. I know I am sound harsh but that's what happens in the industry. But hey don, are you intending to re-open bankruptcy so that you can abandon the house? well, I'm not in favor of re-opening but i do feel you can go for deed-in-lieu and since there's time left for you to buy, you may get a few months to repair your credit to some extent.

Do keep us posted with the details so that we can give any possible suggestions.

God bless you.

Samantha

thanks for the aside to me, don; honestly, this is weirder a situation than i have heard of before. the norm, in my experience, is that a bankruptcy filing does not interfere with a mortgage unless the bankrupt filer (you) decide to stop paying. it is most odd that the lender in your case would not agree to a reaffirmation of the loan. i have a hard time trying to figure out the motivation behind that action.

one thing you mentioned sticks out, and is most unfortunate. you noted that your previous counsel failed to point out all the ramifications of your bankruptcy, etc. i don't necessarily question the scruples of legal counsel, but i will offer that there are a lot of lawyers out there who specialize in an area, but dabble in others. dabbling won't do for clients who come seeking expertise. this is an unfortunate result of some people trying to make as much money as they can by branching out into areas in which they have little or no expertise - it's the "how hard can this be?" attitude.

and, please, attorneys...don't attack me for that previous paragraph. there are plenty of loan officers, realtors (i'm only addressing our industry now), etc. who run off at the mouth while lacking proper knowledge.

if only we (all) would educate ourselves before we make pronouncements to the public as if we had attained a position of expertise that we can only dream of.

okay...'nuff said.

there is no leaving a debt off a chapter 7 bankruptcy, at least in my experience, so it will affect the mortgage itself. also if cousel let the mortgage company know that they wanted to reaffirm the mortgage and the bank would not comply, where is this the counsels fault? the mortage company may have it's own policy to avoid paying their own attorney.
only option would be, would to not file the bankruptcy and then what? a reaffirmation agreement is just that, an agreement of all parties not just the mortage payees decision.

peachy, a year has elapsed since we first worked through the original post. i doubt that circumstances remain the same.

please try to review the date of the posts to ensure that what you're about to leave will be useful. thanks...keep coming back.