I was discharged from chapter 7 BK in 2012, the house was included in the discharge. We tried to apply for a VA loan but came up on the CAIVRS list. We just found out the house is now just going to auction on Feb.13. Is there anyway we could still get the VA loan? Chase said we have no financial responsibility towards the house, and our bankruptcy lawyer is writing a letter stating this. We live in N.C and the house is in N.Y. thank you for any help in this matter. Also, the house was a FHA loan.
August 2014 UPDATE: Fannie Mae has made a significant change is how it views mortgage debt included in Bankruptcy.
Now, if you had a foreclosure, short sale or deed in lieu of foreclosure after the Bankruptcy, the waiting period to buy again begins from the Bankruptcy discharge date, not the subsequent removal of your name from title! – Read More Here >> Fannie Mae Waives Waiting Period After Bankruptcy
All of the conversations I have had around this subject are very similar in that:
- I discharged my mortgage through bankruptcy
- The home is upside down but I didn’t want to lose it
- Now I want to buy a new home with a more affordable payment
What it boils down to is that when mortgage debt is discharged through BK, it does not mean that you own the home free and clear, and it doesn’t mean that you’re off the hook for the mortgage.
When mortgage debt is discharged, you are protected against any personal liability should the home foreclose through or after the BK – this essentially means the lender cannot come after you for their losses.
Many times the mortgage debt will show up on the credit report as “included in bankruptcy” with is slightly deceiving because it implies that the debt is no longer owed…which is not the case.
The challenge is that if you decide you do not want to be shackled by your upside down mortgage at any time in the future, you are still facing either foreclosure or short sale to rid yourself of the home.
To buy again after bankruptcy you have to wait for 24 months before you can use a FHA loan for the purchase of a new owner occupied home.
Once the bankruptcy is complete, homeowners are still faced with the fact that refinancing into today’s lower rates is not possible due to the fact that the home is upside down.
Renting the home out to buy again after the 24 month bankruptcy wait is also a challenge, as I have detailed in this article: Can I Rent Out My Upside Down Home and Buy Again?
I am keeping a close eye on this, I think that many home owners are in this situation now after filing for bankruptcy a couple of years ago.
I think this is an important conversation to have as there are many families trying to get back on their feet after tough times.his topic?
Do you have any experience or questions around this topic? Please leave comments and questions below if you have a specific situation you would like to discuss.
Branch Manager at Broadview Mortgage Long Beach, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (562) 999-1355 or ScottS@broadviewmortgage.com
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I was discharged from ch 13 BK in 2013. I had three houses. I reaffirmed my primary residence. I included the other two houses in the BK. One of the houses forclosed. I have since paid cash for another rental property. Is it possible to obtain a mortgage to purchase another rental.
Scott I have a question.. I live in Pa. and we just received our chapter 13 discharge last July we never surrendered our home and stopped paying two years ago because it was 80,000 upside down with two mortgages. The bank now wants to foreclose are we liable for anything besides trying to clear titles? Im so confused my lawyer claims we are not but the bank says yes. Please help. thanks again Steve
My 1st and 2nd mortgages were discharged in bankruptcy in 2010. I live in Minnesota and am in the process of getting divorced and am trying to weigh my options relating to keeping the house. The estimated tax assessment of the house for 2015 is 185K the mortgages total 196K. I am uncertain about the exact value of the house, but I believe 185K is likely on the high-end. Both lenders appear to be willing to refinance the loan without me reaffirming the liability and extending the period back to 30yrs. They have stated that they cannot state for certain whether they will or will not unless the other party (stbx) signs a quit claim deed or her name is removed from the title through divorce. The divorce should be final within the next couple months, but I am uncertain if the sheriffs sale will be set before that.
Can anyone share if one of us signing the quit claim would shield either party from any foreclosure costs/fees/taxes etc. as well as if the quit claim prevents the foreclosure from being reported on credit reports?
In addition, I am trying to understand how my rights/claims on the house differ between not reaffirming the mortgages and reaffirming them. The material I have found relating to this subject is confusing and vague.
I would appreciate any advice on the situation. I do not love the house, but love having a house. I also do NOT want to wait 3yrs before being able to own another.
Does the Fannie Mae "Waiting Period for Mortgage Debt Discharged through Bankruptcy" also let you refinance or is it just for a new purchase?
My husband and I filed bankruptcy in 2010, and it has been discharged for over three years. We included our home in the bankruptcy and it shows discharged with a 0 mortgage balance on credit report. The mortgage company has not foreclosed on the property, and when we called the county auditor we were told that the company may have let the house go, they did not want to foreclose. We cannot even locate the mortgage company that had the mortgage, we get passed from one company to another, and no one knows about the property. We dont have a title or anything.
I know we are responsible for taxes, but we want to purchase a home in a few months. We were going to try the Fannie Mae Conventional loan or FHA first time home buyers program. How does this affect us? Are we still considered owning the home since it was discharged in bankruptcy?
If I want to buy a property that was listed in a BK that has been discharged for over 5 years but title has not changed, how do I go about that? Do I just need to get a Authorization to Release information from the owner and take it to the bank asking about a short sale? Keys were turned over, property is vacant with abatement liens piling up.
Original mortgage was with BofA, discharged due to bankruptcy and servicing of loan transferred to Ocwen in 2012. Now in 2015, interested person wants to purchase home. Ocwen will NOT deal with them unless extensive paperwork is filled out including updated financials. With bankruptcy there should not be any need for in depth info since there is no longer any financial responsibility. (According to BofA, is this correct?) Is there a way to force Ocwen (or at least convince them) to go ahead and make a deal? Ocwen claims is the payoff price is 1.2 million, yet that is including all fees and interests accrued since last payment was made in 2009. Appraisal is approximately half of that. Advise?
I have run into a snag on a refi that I don't understand the rationale for. I went through a bankruptcy and the first mortgage was discharged, but I continue to pay it. The first is willing to refi me to a better interest rate, but the second (HELOC) holder refused to subordinate thanks to a low-ball appraisal, which I am fighting (property is IMO close to not being underwater, but the appraiser who doesn't understand the value of a good horse barn gave a low value). What I don't understand is the second holder would refuse to subordinate - they are in second position now and would be again. (I should also say I did reaffirm the second, not the first). Can you give me any clue as to the rationale for refusing to subordinate?
Hi. I have been reading all of these entries. Very interesting. I am in Minnesota and had to file bankruptcy that was discharged in Oct of 2013. My wells fargo mortgage was included in this bankruptcy. Since I filed I have gotten married and the mortgage that was included in this bankruptcy also has my husbands name on it as we bought together before we were married. We continued to pay but I never re affirmed the mortgage. We are soon to be going into foreclosure. Will I be eligible under FHA to buy again in Oct of 2015? Or is this whole foreclosure thing going to screw up my waiting the 2 years and will I have to start over from the foreclosure date? Not one mortgage person has been able to answer this question seeing as how we stayed after my bankruptcy and now can no longer make the payments. Does the bankruptcy overrule the foreclosure that will eventually happen?
Thank you for whatever you can tell me.
No not with this house that I did a bankruptcy in 2011 and later did a deed in lieu of foreclosure.Edit (in 7 minutes)
You said Lender cannot come after you for their losses. What happens when the bankruptcy is discharged and after 3 years I submit a new application with the same Lender and Lender insist that I must provide a copy of all the bankruptcy papers in order to approve a loan but ends up telling me loan request is decline because in order for you to get a loan you have to pay off a VA certificate you used to which a bankruptcy chapter 7 included the debt of the mortgage although my credit scores are above 640 and a deed in lieu in which we had agreed in court to do as so and there is special circumstances in regards. SunTrust asked for a complete copy of my Chapter 7 bankruptcy in which all debt was discharged as of 5/ 2011. I suspect retaliation what are your thought? Can a mortgage lender demand a full copy of Chapter 7 Bankruptcy documents in order to approve a mortgage loan 3 years later after the bankruptcy closed and all debt was discharged?. Should they have asked for a full copy to come from my bankruptcy attorneys if allowed instead of me? I may not have other amendments that my attorneys could have made in my possession.
How can you definitively determine if a mortgage was or was not discharged in a chapter 13? My attorney says it was and the mortgage company (OCWEN) says it wasn't. I am seven months discharged from a chapter 13 that has subsequently aged off my credit. The mortgage company refuses to remove the house from my credit saying it was not included. I would have perfect credit if it were not for this.
Hello Scott, I'm currently in divorce court in IL. Me and my soon to be ex filed chapter 7 BK in 2007 which included the 1st and 2nd mortgage, The BK was discharged in 2011. The mortgage is current, BOA transferred the 1st MTG. to another Co. and kept the 2nd. neither were reaffirmed, My question is how can I refi to keep the house and remove the ex? I suggested a quit claim deed but shes crying that her name will still be on MTG. Do I have any options?
Our chapter 7 BK was finalized summer of 2013, including our home. (Repeated attempts to modify with BofA were fruitless, and we had no alternative but to file BK and let the home go.) We were going to just walk away, but saw an article by an attorney who said renting our home out until the bank forecloses & sells it at auction would give us income & keep it from being vandalized, etc.. We left the home Nov 2013, and began renting it out then, for cheap, with the tenants well aware of situation & on a month-to-month agreement. We've kept Landlord insurance on it, are paying the water bill, and for a few months, we paid the HOA dues, then quit. Foreclosure has still not begun 1 1/2 years after BK discharge. BofA has transferred/sold loan to some other entity who keeps making noises about foreclosure, but hasn't acted.
My question is whether or not we've made the right decision in renting the home out? I want to make sure we've not somehow inadvertently made ourselves responsible for the entire mortgage again, or the property taxes, etc..
Also, can we deduct the insurance, water bill, HOA dues, etc., on our taxes since we have to declare the income? If we take rental deductions, will that make us legally liable for anything concerning the home, we'd not be otherwise?
@matyvin Unfortunately, even though you do not have any financial responsibility towards the house in terms of tax liability, or the creditor having the ability to come after you, you do still own the home. You would need to have your name off title for 2 years before being eligible to apply for VA financing. The BK, and the Foreclosure are two completely separate events, and have two separate timelines.
@reklawty Fannie Mae would require that you wait 7 years from the foreclosure date, and 2 years from discharge date of the Chapter 13. Both timelines are in affect, and the longest of the two waiting periods would be enforced.
Hope this helps?
@hunter11 Steve, I am not an attorney, I am a lender that specializes in helping folks buy after financial hardship like BK, or foreclosure. In my experience, mortgage debt discharged through bankruptcy falls under bankruptcy protection laws which state that a creditor cannot "double ding" you for the subsequent loss of your home if you've already been deemed insolvent by a federal bankruptcy court.
I am not as familiar with Chapter 13 rules as I am with Chapter 7, so this is where my input may fall short. I would think that the answer would lie in the how the CH 13 was structured, and how the mortgage debt was dealt with. If the mortgage debt was fully discharged, then I don't think you are speaking to the right person at the bank. If your intention with the CH 13 was to retain the home and restructure the loan so that you can continue to make payments, then your lender might be right.
I am inclined to follow the advice of a bankruptcy attorney. If you are not confident in your attorney's opinion, I would seek the opinion of a different BK attorney - have them review your paperwork.
From the perspective of a lender, if you are on title to the home, you are the owner of the home and responsible for all taxes, costs and liens against the property. If you have stopped making payments on the home, the lender has the right to foreclose on the home in an attempt to recuperate their losses.
In order for you to be in a position to buy a home in the future, you will definitely need to be off title.
Hope this helps?
@retger1 lots of good questions here, let me see if I can answer as many as I can. First, if your mortgages were discharged in your bankruptcy then any subsequent loss of the home would not show up on your credit. Bankruptcy law prevents a creditor from "double dinging" you on debt covered under bankruptcy protection laws.
I also find it very difficult to believe that refinancing your mortgage will not "reaffirm" the debt. I don't care what anyone tells you, if you take out a new lien against a defaulted property, I don't believe that is covered under your bankruptcy protection - you need to consult a bankruptcy attorney before you even consider this option.
Now, fast forward to a date in the future when your name is removed from title of the home (through foreclosure, short sale, deed in lieu or quit claim) - Fannie Mae guidelines will allow you to be eligible for financing 4 years from the discharge of a BK, which you already are.
Of course, you would still have to meet all other credit qualifying guidelines, but the timeline would not be an issue. If you are trying to buy again using FHA, that's when you will encounter a 3 year waiting period from the date your name is removed from title IF there is a foreclosure, short sale, or deed in lieu of foreclosure.
The last thing I would like to add here is something we run into a lot. "Who" is responsible for the home as defined and detailed in the divorce decree, will determine what responsibility you have for the disposition of the property after the divorce.
If the home is sold as part of the divorce, then you have a clean slate and you are eligible for conventional financing right away. As long as the home remains in your name, you are responsible.
Hope this helps?
@cindi1958 this is a really good question, and it kind of comes down to what Fannie Mae's role is in the lending industry. Fannie Mae is NOT a lender, they only created a set of "guidelines" for assessing risk. If you follow Fannie Mae's guidelines, they will purchase the loan from the lender on the secondary market, allowing the lender to then go out and offer that money to another borrower to purchase, or refinance their home.
Many of Fannie Mae's guidelines are open to interpretation, and the responsibility falls on the lender to decide whether or not they are willing to accept a certain level of risk, using Fannie Mae's guidelines as a reference.
The next challenge is, if a lender chooses to accept a certain level of risk, is there an investor that will purchase that loan on the secondary market - and herein lies the challenge. If there are few investors that are willing to take the risk, then "street level" lenders do not have the ability to lend if that specific risk is present.
In the case of buying after a hardship, it is considered by many investors to be too high of a risk, or they simply have not yet had enough demand to consider purchasing a loan after a major financial hardship.
In my experience, there are still many investors that do not understand, or choose to not understand some of Fannie Mae's more recent guideline changes regarding bankruptcy, short sale or foreclosure in the borrower's past.
I'm sorry that this is kind of long winded, the simple answer to your question is that lenders have the ability to decide what risks they want to take, and how they want to interpret Fannie Mae's guidelines.
The long answer, is much more complicated than that.
Hope this helps?
@MagicAB This is such a good question, and the second time i've run into a similar question in the past few days. It sounds like you're on the right track. You can certainly try to contact the bank yourself, and depending on who holds the lien, they should be able to point you in the right direction.
The owner of the home will definitely need to be involved. In the other scenario, similar to this, the bank was requiring the owner to jump through all of the short sale approval hurdles, including completing a thorough financial inquiry and establishing a hardship, before the bank would even consider it.
If the owner of the home you're looking at is willing to cooperate, you certainly have nothing to lose by trying.
I'm not sure if this is helpful at all, but I would love to hear back from you with an update?
@ShariGrassoGresham I've heard some horrible stories about how Ocwen is holding people hostage with defaulted loans, but this is horrible on a whole new level. I'm almost thinking you need to get a real estate attorney involved. What State is the home located in?
@crollerqueen thank you for your question, I can absolutely answer your question. Based on current underwriting guidelines, FHA treats the bankruptcy and the foreclosure as two separate events, each carrying their own waiting period - 2 years for the bk, 3 years from the foreclosure date. These waiting periods run concurrently, so the bk waiting period will have passed while the foreclosure period is still going.
If you are using conventional financing, it's the foreclosure is treated differently. There is a waiting period of 4 years from the discharge date of the bk, and as long as the mortgage debt was discharged, there is no separate waiting period for the foreclosure.
If you allow the home to go into foreclosure, and want to use conventional financing, you will be required to have a minimum 10% down payment on the purchase of a new home. If you are able to do a short sale, or deed in lieu of foreclosure (both better options than foreclosure), you can buy with the minimum down payment of as little as 3%.
Here are a couple more options - If you are eligible for VA financing, the wait is only 2 years from the foreclosure. If you buy using USDA financing, it is similar to conventional in the sense that there is a waiting period for the bk, but not for the foreclosure if it is included in the bk.
I know, it's a lot of information. Here's the quick and easy version.
If you are trying to buy using:
- FHA financing - You must wait 3 years from the foreclosure date
- VA financing - You must wait 2 years from the foreclosure date
- Conventional - You must wait 4 years from the bk discharge date
- USDA financing - You must wait 3 years from the bk discharge date
At this point, conventional financing is probably your shortest waiting period, putting in a position to buy after October, 2017.
Hope this helps?
@bpjok2 It sounds to me like you are trying to qualify for a VA loan after you discharged a VA loan in a Bankruptcy? I'm wondering if this is a VA Guarantee issue, and not a BK issue? It's also completely possible that the lender is not willing to work with you because you discharged the last mortgage you had with them, and that may be a policy that they have.
What happened to the home that you included in the Bankruptcy? Do you still own the home or did you foreclose, short sale or do a deed in lieu of foreclosure.
It sounds to me like the bank is simply not explaining things to you clearly. I do not think there is purposeful retaliation going on here. I think there's more to it.
What State are you trying to buy in?
@Terryr001 you should be able to find that information in your bankruptcy discharge paperwork from the court? I would start there. Hope this helps?
@Fino269 If both mortgages are current, you should be able to refinance the home 2 years from the discharge of the bankruptcy using an FHA mortgage, or 4 years from the discharge with a conventional mortgage.
Any division of property would have to be something the two of you figure out through the courts.
Hope this helps?
@msmagoo Hi Linda, you are certainly still responsible for the property taxes, you still own the home. In order for you to be in a position to buy another home, you have to get your name off title. Waiting around for the bank to foreclose is certainly an option, but that puts you at the mercy of their timeline, before you can start on the road to recovery.
I recommend attempting a short sale, or deed in lieu of foreclosure if you would like to expedite the process.
In regards to tax deductions, I am not a CPA or tax professional and could not offer advice to the deductibility of these items. Please consult a tax professional for that information.
Hope this helps?
Thank you Scott for the quick and informational response.
I may have used the incorrect term by stating "refinance". I believe the exact wording Fannie Mae (who purchased the 1st mortgage) used was "Modification with lower payment". At which point I was assured I would not be reaffirming the debt. This will be a topic with my lawyers, but I am just trying to get as much info as possible.
Can you describe in a little more detail what "responsible" would mean when you state the "as long as the home remains in your name"?
She is going to sign the quit claim but as the non-final divorce documents currently state, I will be awarded sole occupancy and the house as we allow it to go into foreclosure.
I understand these questions should be handled by my lawyer, but again, I am just trying to gather all information and opinions I can.
I really just want to be certain that if the house is foreclosed upon that I would be able to purchase another, as you stated should be possible given that I meet the criteria.
Thank you for your reply. So I am to understand that even though this mortgage was included in the bankruptcy I will still have to wait to go FHA until 3 years after the foreclosure is over which hasn't even started yet?. The bankruptcy does not override the foreclosure even though the bankruptcy was 1st? Again this mortgage was included in this bankruptcy. And foreclosure has not started and Wells Fargo doesn't even report to the credit bureau.
@ScottSchang Thanks for the info, every lender I call tells me they cant do anything without a quit claim deed or divorce decree. They wont even start the paperwork, is this normal practice?
@matyvin @ScottSchang I couldn't agree with you more. Your loan officer should have been able to identify this from day 1. That's a crime in my eyes equal to Chase not foreclosing. We're on the tail end of all this chaos, and I wouldn't be surprised if you are able to buy sooner than 2 years with the way guidelines are loosing up around homes included in BK.
If you haven't already subscribed to my blog, do so in the upper right corner. If there's a guideline change around VA, I'm going to write about it.
Good luck, and thank you for your service to our Country.
@retger1 "responsible" refers to how a lender will look at qualifying you when you go to buy again. For example - if the "she" quit claims, so you are sole owner of the home, and a foreclosure occurred on the home while you were the only one on title, then you are the only one that would have to "count" the foreclosure when trying to buy again.
In this example, since the mortgage was discharged in the bankruptcy, all we are really talking about is that "she" could buy using FHA, and not be penalized by the waiting period, because she was not on title at the time the foreclosure occurred. As long as the divorce decree is clear about who has sole ownership and responsibility for the home.
Yes, given all of the information you've provided, it sounds like you are well within the guidelines to purchase using Conventional financing, with a 10% down payment, 4 years from the discharge date of the BK.
Here is an article I wrote about this specific guideline change that has been in affect since August 16th, 2014 - http://www.findmywayhome.com/home-mortgage-news/fannie-mae-waives-waiting-period-on-foreclosure-after-bankruptcy/
@ShariGrassoGresham @ScottSchang unfortunately I do not know anyone in Virginia. I found this attorney in California that seems to have experience dealing with Ocwen, maybe this is a good place to start? Hopefully they can at least help point you in the right direction.
I honestly do not know if Ocwen is allowed to trump up a bunch of charges, but it doesn't seem like they should be able to hold you hostage like that.
A Federal Bankruptcy judge granted you bankruptcy protection, and this seems to completely fly in the face of the intention of bankruptcy laws.
I hope this helps, and good luck!
@crollerqueen @ScottSchang Yes, you are correct in understanding that FHA considers bankruptcy and foreclosure as two separate events, with two separate waiting periods. Both conventional, and USDA have recently changed their guidelines to make the bankruptcy override the foreclosure, however FHA has not.
In any case, you need to get your name off title to that home as soon as absolutely possible so that you can clearly assess your options.
@bpjok2 I would try to use another lender. Was the deed in lieu a VA loan?
@Fino269 @ScottSchang It really just depends, is there a court ordered freeze on your assets during the divorce? If your ex was cooperative and quit claimed off the home, the lender should have no problem with that. If you're asking if you can do anything with the home without getting her involved? Absolutely not.
I am actually at the other end of this deal in that I am trying to purchase this property that Ocwen is holding hostage. I have spoken directly with the original owner, he has granted permission for Ocwen to deal with me, but will not fill out the mountain of paperwork they are asking for because his bankruptcy discharged him from the house. The property has been vacant since 2009 except for the squatter that resided there and taped into the water lines of the neighbors and rented rooms to others.
It is very sad as it is in a beautiful neighborhood and is rotting away and becoming an eyesore... among other problems.
Thank you again for your thoughts.
Ok !!! Thank you so much! So deed in lieu or maybe cash for keys!!! I really wanted you to tell me something different. I was hoping anyway! Haha. Thank you so much for making this sight available and answering everyones questions. It's very informative .I will keep looking for your updates!
@ScottSchang Thanks for the quick response, there is no freeze on the assets. Shes not being cooperative. although the MTG. was discharged she feels that she will still be associated with the home because her name is on the MTG. Also would I have to refi both 1st and 2nd MTG. since there with different companies? Or could I get a lender to refi just the first MTG?
If you are current on both loans, it is possible to refinance the 1st only, but it would require permission from the 2nd lien holder because they would have to resubordinate. That basically means they will allow you to pay off the 1st lien without paying them, and they agree to stay in 2nd position
@ScottSchang she is on title. Would a quit claim release her from any & all liability to home since BK wasn't reaffirmed?
@Fino269 @ScottSchang yes, it's a case by case situation. I would start by contacting BOA, someone in customer service might be able to point you in the right direction, and ask them what their policy is on resubordinating.
You should probably speak to a lender first, to see if you would even qualify if BOA cooperates.