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Mortgage Discharged in Bankruptcy is NOT Free and Clear?

Mortgage Discharged in BKAugust 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


 

Much of this conversation has taken place in the comments sections of two articles from a few months back – Buy Again After Bankruptcy, Foreclosure and Buy Again One Day Out of Short Sale.

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.

562-999-1355

Scott Schang

As a 17 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (949) 558-3338 or Scott@FindMyWayHome.com

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626 comments
Mark9999
Mark9999

I''m not a lawyer or CPA but do know the following: If you include rental property in a BK, the IRS will 'recapture' your depreciation and, possibly, other rental deductions. The idea is a BK shouldn't provide a means to avoid paying taxes on the profit earned when selling rental property (either though a short sale or a bank foreclosure sale). What happens is the IRS will add back these recaptured monies to the sale price of the property. In many cases including mine, this didn't matter because the final bank sales price including the recaptured amount was still less than the mortgage amount owed. FYI, I owned the property for a number of years so the recaptured amount wasn't small.

Mark9999
Mark9999

I'm not a tax lawyer or CPA but do know that if you declare rental properties in a BK, the IRS will recapture all of your depreciation and, possibly, other deductions on the properties by adding these amounts back to the value of the properties. The idea is that any actual profit you make on sale of the rental property  (either through a short sale or a bank foreclosure sale) should be taxed. In my case, even adding the recaptured monies to the sale price didn't come close to the amount owed on the mortgages - I was still underwater. Therefore, no tax was due.


I'm not sure if this applies to you but thought my experience may be of some help.

rentalproperetydistress
rentalproperetydistress

Debating whether to Short Sale all 7 properties or file chapter 7 ???  It appears the biggest hurdle will be getting out from under the 1099-C's that would come from the lender and therefor increase my income and taxes due by a large portion.  The 2nd big ? is DEPRECIATION..... my CPA has been depreciating these properties for the last 10 years so even if I short sale them I will have these taxes to pay.  So confused.  Do you have any idea which may be the least painful and least expense. 

My two personal properties, the first one is in the process of a Short Sale, scheduled to close by Oct. 1 that will leave me with the huge 1099-C.  The 2nd, I have about a 10,000 equity but it would take that to pay a realtor and then there is still the issue of the Depreciation thats been taken over the last 10 years.  


I considered BK chp 7 but 5 of the properties are in an LLC with my Mother and I dont want this to affect her in anyway.  3 of the 5 properties have mortgages in my deceased fathers name.  Actually each one is worth just about what we owe but that leaves no room to pay realtor commissions and the taxes that will result from the depreciated value.  1 property is in my Mom's name, it is only worth about 10,000 and we owe 40,000.  the last one is in my name only worth about 20,000 but owe 58,000.


If I  Short Sale all the properties or maybe deed in lieu with lenders do you have any idea if there is any way to reduce the Tax Gains caused by depreciating the rental properties or can I pay it back to the IRS over an extended period of time.  I have never been late on any of mortgages or any debts but I seem to be digging my self a bigger hole with the depreciation that I never knew existed until a month ago when I callled my  to discuss the Short Sale of what use to be my personal home (now have been renting for 7 years).  


HELP???

 

ScottSchang
ScottSchang moderator

@rentalproperetydistress While I appreciate that you trust that I can contribute a meaningful opinion on your situation, I am not an attorney or a CPA, so there is little I can offer in terms of actual advice, or guidance.

I am happy to offer my educated perspective having dealt with some of these situations myself, and through the process of helping many buyers purchase homes after financial hardship.

I have 17 years experience in the mortgage and real estate industry, and my expertise lies mostly on the lending side, most recently on the issue of being eligible to buy after a financial hardship.

I am not sure the question or either short sale or bankruptcy is limited to one or the other.  Short selling all of those properties would cause taxable events, which you already know, by treating the loss as income, and being taxed on it.

Including these properties in a Chapter 7 bankruptcy would relieve you of that tax liability through the discharge of the mortgage debt, however, you will still retain ownership of all of the homes.  BK will not remove the liens on any of the homes.

Based on your extensive investment portfolio, I would imagine you would be interested in the cleanest method of dealing with these underwater assets so that you can be in a position to purchase again in the near future?

While I cannot comment on the tax liability, or legal impact of BK, or short sale on your LLC, I can tell you that you would be eligible to purchase using traditional, Conventional financing in as little as 4 years from the discharge of the bankruptcy, as long the the liens are removed from your name, or the mortgages are current on the discharged mortgages.  You can use FHA financing to purchase a primary residence in as little as 3 years from the date your name is removed from the title on the last property in default.

Hope this is a little helpful?

Lucy1012
Lucy1012

I filed chapter 7 bankruptcy and was granted a discharge in 2009. I have continued to pay my first mortgage, and live in the house, but not a 2nd mortgage home equity loan. I now have a buyer, and was able to get the lien released  on the 2nd mortgage by the lien holder, but there was verbiage in the release to the effect that the lien is released, but not the obligation to pay the debt.  Am I still liable for this debt even though it was discharged? After releasing the lien, do they have any legal recourse to collect?

ScottSchang
ScottSchang moderator

@Lucy1012 Hi Lucy, this is a better question for your bankruptcy attorney.  If you included the 2nd mortgage in your BK, then you should have no legal liability whether the lien was released or not.

LindseyLamb
LindseyLamb

Hi Scott,

We are in Washington state and filed BK in 2009, our mortgage was discharged in that the same year and we did not reaffirm the debt. The debt was sold to BOA and we quit making payments in 2011 and have gone rounds with them and now SLS to get a loan modification to keep the house but now we are so far upside down I would rather walk away. However they still have NOT tried to foreclose on us and it's been 4 years without a payment!! So we have our credit cleaned up and a down payment stashed, can we buy another house now, do we need our current home, although discharged, out of our name to do so? And if so how long after a short sale or deed in leui of foreclosure do we have to wait if we want to get an FHA loan versus conventional? Thanks! 

ScottSchang
ScottSchang moderator

@LindseyLamb thank you for your question - this is an easy one!  First, your name either has to be off title, or the mortgage needs to be current before you could buy using either program.

If the bank is not foreclosing, I would attempt a deed in lieu of foreclosure first, or a short sale first, which might lead to a DIL if there are no buyers.

Your quickest path to homeownership will be using conventional financing.  You would be eligible to buy using conventional financing as soon as your name is removed from title of the current home.  The conventional guideline allows you to use the 4 year waiting period after BK, and ignore any subsequent foreclosure, short sale or DIL.

FHA would require a 3 year wait from the date your name is removed from title, regardless of the method.

Hope this helps?

megamom6
megamom6

Claimed bankruptcy and was discharged in June, 2010. I own a duplex bought in 2004, it was discharged through bankruptcy unknown to me til a year or so later, yes I was stupid. I have made payments every month and am always on time. I want to buy a new house. How can I go about doing so with this house loan showing up on my credit report as being included in bankruptcy?


Thank you for your help in advance. 

ScottSchang
ScottSchang moderator

@megamom6 Bankruptcy will relieve you of the mortgage liability, but you are still the owner of the home, and the lien from the mortgage is still against your home.  As long as you are still the owner of the home, you are responsible for either making those payments, or not making the payments, which will cause the Lender to foreclose on the home.

How you would buy a new home has everything to do with what your options are.

If you are trying keep your current home, and rent it out, you may do so using conventional financing, 4 years from the discharge of the bankruptcy.

If you are trying to buy your new home using FHA financing, you have qualify for both payments on both homes, if you have less than 30% equity in the home.

Hope this helps?

P.S. What State are you trying to buy in?

megamom6
megamom6

@ScottSchang @megamom6 State is WI.......I just want out of my duplex and into a single family home but am unsure how the home discharged in bankruptcy affects me trying to get another home loan.....


If I let this current home go into foreclosure does that hurt me trying to get a new home loan at all? I understand I am still liable for the home and as previously stated I make payments every month and pay the taxes every year. I currently live in the lower half. I was just thinking of renting it out but want to know what would happen if I changed my mind. 


I am sure I have less than 30% equity in my home since the housing market tanked and my house is not nearly close to what it was worth when I bought it 11 years ago. 

ScottSchang
ScottSchang moderator

@megamom6 @ScottSchang You can certainly buy another home, the question is just when.  Using conventional financing, you can buy 4 years from the discharge of the BK, which sounds like you're eligible now.  

Only problem is going to be, what do you do with the duplex.  If you let it go into default, you have to wait until your name is off title. If you can rent it out, you have to be able to qualify for the new home, and anything that's left over that rents on the duplex doesn't cover.

Does that make sense?

HappyEx
HappyEx

My ex-wife and I have been divorced for 4 years.  I signed off the deed our home to her 5 years ago (before we even divorced).  We both filed chapter 7 this past year and both were discharged.  She is now trying to do a deed in lieu to get rid of the property and is asking me to file disclosure to help her move things along.  Since I am not on the deed, why would I need to file the disclosure?  Could this be a bad move?  I understand the BK law protects me; I am just leery of providing any personal information.  

ScottSchang
ScottSchang moderator

@HappyEx Just read over the paperwork carefully.  You have no ownership interest in the home, but you are still on the loan, even though it's been discharged.  I cannot think of any liability you would incur from helping out here, but you might want to run it by an attorney to determine if it opens you up to any liability.  Hope this helps?

hunter11
hunter11

Stoney I can tell u from experience that you don't have disclose Financials. We went thru a bankruptcy and didn't surrender our home but decided to stop paying 3 years ago. Fast forward I just got both mortgages to approve a shortsale without financial disclosure and no deficiency owed. Going to settlement on August 20th and even walked away with a 12,000 check because that's what I told the first lien holder Iwanted to keep the house clean and they agreed. Just send them a letter per ur bankruptcy counsel ur not disclosing anything. Hope that helps. Good luck!

Stoney59
Stoney59

@hunter11

Hunter thanks so much for your help.

Information I just received tells me the mortgage company is requiring the information for a short sale being set up by the court trustee in charge of my BK. Yes I can with hold the disclosures, but it wouldn't bode well on the BK, since it is discharged, but not closed as yet. Rare cases, the trustee can revoke my BK. Not so much the disclosure that bothered me as much to who was requiring it, Greentree Servicing and since the mortgage was in the BK, the info shouldn't have any bearing on the sale.


Stoney59
Stoney59

filed chapter 7 included mortgage, discharged Dec.2014. Court trustee included home as part of my estate in the bankruptcy and appointed a realtor to sell,(I'm not living in the house, basically walked). Greentree servicing has  requested financial statements and current pay stubs as part of a short sale deal, again. why, what do they need this for if the house is now in the hands of the court trustee?

ScottSchang
ScottSchang moderator

@Stoney59 That's a good question.  If the mortgage was discharged through BK, then they do not have the right to pursue you to collect the debt.  They do however have the right to approve a short sale, unless they have a court order to remove the lien, or accept fair market value as the value of the home.  Unfortunately, you are at the mercy of the servicer whether or not they want to approve a short sale, begin foreclosure proceedings, or negotiate a deed in lieu of foreclosure.  I apologize that this is not a question I can accurately answer.  I don't know who would be able to other than Greentree.

mikell1980
mikell1980

Hello, ok I filed for chapter 7  discharge date 6-2012 I owed 109,000 when I filed BOA sold the house for 130,413.70 in 12-2012 hud paid BOA 109,000 on 8-2013 and BOA has put a cavirs on me I don't under stand how and why if they sold the home for more than I owed

ScottSchang
ScottSchang moderator

@mikell1980  I agree with you that this seems quite unusual.  I would recommend that you contact the FHA Resource Center at 1-800-225-5342.  Once the CAIVRS claim was paid, it should have been removed.  Hope this helps!

mikell1980
mikell1980

@ScottSchang @mikell1980  we have contacted that number and they told us to contact BOA, we did that and they say they don't understand what we are talking about that there should be nothing after 12/2012 and that loan is foreclosed, closed and paid in full and no longer on us after 2012


ScottSchang
ScottSchang moderator

@mikell1980 @ScottSchang Correct, it shouldn't be there - if you apply for a new loan, your lender will be able to clear it up.  What State are you trying to buy in?

mikell1980
mikell1980

@ScottSchang @mikell1980  we are in Alabama hud is telling me to send them proof of Social Security number but wont tell me what kind of proof they neeed

ScottSchang
ScottSchang moderator

@mikell1980 @ScottSchang that is normal Mike, they need a copy of your social security card.  Sounds like you're moving in the right direction!

angelos1986
angelos1986

Hello, So this is my situation. I had a house with someone since 2006. After the housing market crashed the house become underwater. The house is in foreclosure but has not foreclosed. It's been 6 years! The deed is a joint deed. I filed for Ch 7 BK in 2014 and it was discharged. However, my name is still on the deed along with the other person. My goal is to be able to buy a house in a few years, but I know that since I am still on the deed that this is not possible. My question is if I Quitclaim my interest in the property to the other person who is on the deed then I will no longer have any interest in the home. Therefore, would the combination of the BK and the Quitclaim deed allow me to be eligible for a future mortgage? Also want to point out that attempts at short sale and DIL have been unsuccessful. Thank you, Angelo

ScottSchang
ScottSchang moderator

@angelos1986 Hi Angelo, yes, you can quit claim off title to the home as long as the other party agrees.  You would be able to buy relatively quickly after your name has been removed as long your credit, and income are all in good shape.

Hope this helps?

Pami3
Pami3

After my husband lost his job in 2008, we ended up filing bankruptcy (chapter 7) in 2010. Our 1st and 2nd mortgages were discharged (we have the 2nd because we added onto the home in 2006) We wanted to stay in the home which was fine as long as we paid the mortgage. Luckily we were able to modify to lower interest rates (first loan 3.5%, second loan 1% for 40 years) and have managed to make all the payments on time ever since. Even so, my credit rating is still bad since the mortgage payments are not reported to credit bureaus,  plus I missed a couple of smaller credit card payments on occasion. We live paycheck to paycheck. My husband is out of work again. I don't make enough to cover the mortgages on my own. We'd consider selling if we could qualify for a smaller home loan (doubtful), but our home is still upside down by at least 80k. I have one daughter planning to go to college in the fall and another one that needs braces. I don't know what to do. If I stopped making the 2nd mortgage payment, could they foreclose even if the first mortgage is up to date? The first mortgage is 265k, Second is 165k Home is currently worth about 350k (zillow) In 2006 it was worth about 700k! We lost so much equity after the collapse. Could they personally sue me to repay the second mortgage? I hate not to pay my bills, but I also think it's unfair they refused to lower the principle at all. It's not our fault the market crashed. We just invested in our home and never imagined home values would plummet the way they did.

Also, do they have the right to charge me late fees if the payments are paid after the due date but still paid in the month they're due? Any advise would be appreciated. I really would just like to stay in my home of 20 years. Any advice would be appreciated.

Thanks, Pam

jimmymacs
jimmymacs

Hi, I have a few questions.


I walked away from a house 2009 and filed Chapter 7 in 2011 and included the house in the bankruptcy.


I have been renting since, and would like to buy a home. I was told that I was on the Caivrs list, and that I would not be able to get a USDA loan until 3 years after the forclosure. The only problem, is that the forclosure still hasn't gone through, despite multiple attempts through BOA.


1)Is there any way to speed up the foreclosure?


2)Can I get off the Caivrs list faster due to including the Chapter 7?


3)If I did a In lieu of Deed, would that affect the Caivrs situation?


Thanks for the help

JenniferVaughnKerr
JenniferVaughnKerr

Hi! My husband and I had our Ch 7 bankruptcy discharge June 26, 2012. The house was deeded over to an investor on June 19, 2012, removing all our interest in the home. We moved and thought nothing of it. Our FHA loan with BOA was dropped from our credit report - it says included in bk. Now we're applying for new FHA mortgage and the CAIVRS comes up Agency Name: FHA Single Family; Case No.: 093-683208; Case Type: Foreclosure.  BOA has only just started the foreclosure process. What does this mean for us? We're trying to find our eligibility for getting a new FHA loan but no one will talk to us. I would hate to assume it will be 6/26/15 - 3 years after discharge date. If BOA is only now foreclosing, does that mean no claim was paid? And if that is true, what basis will our eligibility date be made on? Geez this stuff is crazy! Thanks so much for your help!

ScottSchang
ScottSchang moderator

@JenniferVaughnKerr Hi Jennifer, when buying using FHA financing, the foreclosure date, and the BK discharge date create separate timelines.  When you say the house was "deeded over to an investor", does that mean that it was foreclosed?  If you simply signed the deed over to an investor, but you were still on the lien, I understand the issue.  It might be easier to call me to discuss - 714-336-8286

beanwald
beanwald

Hi I have a very complicated situation. Our home we purchased in 2006 for 62000 the servicer Nation Star says we owe 140000 now. We filed suit on BOA and Desutche Bank for wrongful foreclosure. In the middle of the law suit BOA sold to Nation Star. Desutche bank is still the note holder. Our case was dismissed without prejudice. Due to neither BOA or Desutche proving they had right to foreclose. The decision was made in September 2013. As of today at the court house in the recorders records shows boa balance zero. In the clerk of courts office they cannot find a lien. I talked to an attorney he says walk away file chap 7. I just want an opinion what should we do. By the way we're in Ohio. Thanks so much in advance.

delphione
delphione

@beanwald 

Your situation is not surprising. Your atty gave you good advice. You may also wish to contact Meridias as they may be able to help you further. (877) 649-9718, as they can facilitate a Deed In Lieu, and clear your name from the title.

soccergirl2013
soccergirl2013

My husband and I filed chapter 7 and was discharged in 12/2011.  We have remained in the home and have paid the mortgage.  In November of last year, my husband was diagnosed with Stage 3 colon cancer and will be out of work for 12-16 months as he does chemo and regains his strength after chemo before he can go back to work.  We have since fallen two months behind on our house note.  I see the mortgage company offers hardships for long term circumstances such as putting the past due at the end and reducing the notes for that time.  My question is with any hardship we take, if any is offered, and we sign off on anything, does that mean we will be reassuming the loan and will go back on our credit report and then we are liable for the debt again since it was discharged in bankruptcy?  Just trying to figure this out because as of now we are not responsible for the difference if the mortgage company sells the home and there is a loss.  My husbands doctors say his recovery is 75% after chemo and he will be able to go back to work so we truly want to keep our home.  Any thoughts? 

perplexedbystander
perplexedbystander

How can a homeowner on the road to foreclosure sell his deed for 10-50k for example and walk away without any mortgage debt/obligation ? And then how can the new deed holder turnaround and quickly sell it at a substantially reduced market rate (for a profit) without saddling the new homeowner with the old debt? 

The three parties involved benefit but the bank(big time), the RE market and industry suffer.


Mystified

ScottSchang
ScottSchang moderator

@perplexedbystander I'm not sure I completely understand the question here.  A homeowner does not have the ability to sell his deed.  If the owner of the home is in default on the mortgage (road to foreclosure), and the bank has a lien against the property, the owner's option are limited to short sale (with bank approval), foreclosure action, or negotiate a deed in lieu of foreclosure with the 1st position lien holder.  

It almost sounds like you are referring to the note market, which occurs when investors buy bulk portfolios of non-performing notes.  These note can be sold to the investor, which can in turn, renegotiate the terms, to make the note perform (receiving on-time payments) and sell that note at a discount, or foreclose on the home and sell it on the open market.

Does this shed light on your question?

bluecypup
bluecypup

I have a bit of a dilemma. Twenty months ago, a joint owner on my house filed for bankruptcy. The mortgage company apparently has stopped reporting the on time payments for this mortgage (Ocwen Mortgage). The bankruptcy wasn't mine, I am not removed from the financial responsibility of this home and can be sued if I walk away from the home. I have no bankruptcy protection and yet I also have no benefit of continuing my mortgage payments in a timely fashion. I am wondering if I have any recourse to force them to report my on time payment to the credit agencies. It is frustrating that they can keep me on the hook for the mortgage amount but not show my compliance with the terms of the loan. I am in Michigan if that matters

ScottSchang
ScottSchang moderator

@bluecypup This is a tough one.  I think you just need to contact the servicing company and request that they continue to report it on your credit.  They cannot list it as discharged through bankruptcy.


CathiW
CathiW

Hi there-  I'm so confused. I'm in California. My husband and I had our bankruptcy discharged in October 2010.  We had a home we were renting out and the home we were living in that show up as discharged through the bankruptcy.  The rental ended up being foreclosed the following year.  We would like to move closer to my mom and I'm so confused as to what to do with the house we are in.  I'm not sure we will get what we owe.  Do we have to pay the difference?  Should we rent it out and what do we need to do with applying for a new mortgage loan if we decide to do that?  The home we are in is only in my name as it was mine prior to us getting married.  The home that foreclosed on was only in his name because it was his prior to us getting married.  He is a veteran, and qualifies for VA....is that the best route?  His credit is good, mine is getting better.  We have great jobs, make good money, pay everything on time.

ScottSchang
ScottSchang moderator

@CathiW  You definitely have options, but I need a little more information before being able to provide you with accurate answers.  As long as your current home is paid on time, and you are not in default on the loan, you can rent it out, or sell it.  It will really depend on how much (if any equity) you have.  There are more options here than I can address in a comment, please feel free to email me your contact information to scotts@broadviewmortgage.com, or call me on my cell phone at 714-336-8286

Wendy Moore
Wendy Moore

I co-own a home that's been in foreclosure since 2010, mortgage was not reaffirmed after Chapter 7 bankruptcy. Everything discharged in 2009. My name remains on deed. Foreclosure being dragged out through NYC court system. Co-owner still lives there, I moved out, now facing prospect of lien being placed on property due to unpaid water bill. Don't want my fledgling credit rating too be affected. What do I do?

ScottSchang
ScottSchang moderator

@Wendy Moore is there any way you can quit claim off title to the home?  Because you included the mortgage in your bankruptcy, the bank cannot ding your credit at all, but the water bill sounds like it needs to be paid.  If the co-owner living in the home is not paying the water bill, you might have to.

paula0401
paula0401

I currently have a mortgage with Ocwen that was discharged during my Chapter 7 bankruptcy in December of 2013.  I wanted to reaffirm the loan and in April of 2014 paid 23,000 to reinstate the loan.  I'm now being told that the loan cannot be reaffirmed and that I will not be credited for any monies paid toward the debt.  What is my best course of action at this point?  Sell the home, keep paying?  It doesn't seem prudent to keep paying on a house that was discharged as part of a Chapter 7 yet I know they can foreclose because there is still a lien on the home.  I have an appointment to meet with a reals estate attorney to discuss best options as I need a place to live and obviously can't qualify for refinancing or a new loan.

ScottSchang
ScottSchang moderator

@paula0401 Hi Paula, there needs to be a clear understanding on exactly what Bankruptcy protection means.  It does not mean that the bank can foreclose on your home at any time - it simply means that IF YOU DEFAULT on the mortgage, they cannot hit your credit again (for late payments), and they cannot come after you for a deficiency judgement if you still owe them money.

You still own the home, and you will continue to own the home as long as you make your mortgage payments.  The fact that it does not report on your credit is not important, and does not affect you at all.  If it was on your credit, your score would only affected if you make your payments on time, or miss payments, it's the same as any other installment loan, like a student loan or car loan.  Not having a mortgage on your credit does not hurt, or help you at all.

Reaffirmation simply means that if you lose the home in the future, you can be sued by the bank.  Since it was included in the BK, you cannot.  

If you like your home, and want to live there - continue to make your payments and enjoy your home.  You may not know it yet, but you are probably pretty lucky that your mortgage was not reaffirmed.

Hope this helps?

If you want your mortgage to show up on your credit, you simply have to refinance it once you're eligible.

2796land
2796land

We've had some time to think since Wells Fargo released the lien on our vacation property back in November which we surrendered in Ch. 7 in 2011.  What we're wondering now is if Wells Fargo implied possession by hiring a maintenance company who changed the lock making the bank responsible for the taxes and HOA fees from 2011 until 2014.  

ScottSchang
ScottSchang moderator

@2796land I am not an attorney, and I would consult one for an accurate answer.  That being said, here's my opinion - As long as you are on title to the property, you are responsible.  The lien is evidence of ownership.  Hope this helps?

1angell18
1angell18

I am in this situation however the bank seems to have bought the house bank which i am uncertain of what it means. We saw that the bank has the house up for sale. How do we know if our names are off the title?

ScottSchang
ScottSchang moderator

@1angell18 title records are public records - you maybe be able to access it online, or worse case scenario is you can go down to the County recorder's office and get a copy for a small fee.  I would start by contacting a real estate agent in the area and asking them if they can find out.  Industry professionals typically have access to public records.  If you send me the address to the property, I can see if your County puts it's records online.  My email is Scotts@broadviewmortgage.com

Mark9999
Mark9999

This suggestion may be of some assistance to people who have a mortgage holder who will not foreclose on their property after a BK. As part of your bankruptcy, make sure you have your lawyer file a motion to Abandon the Property in question. This will relieve you of all financial responsibility for the property after BK. This action will NOT remove you from the title but will protect you from financial threats such as liability if someone is hurt on your former property, etc. In my case, this option wasn't available during my bankruptcy filing but the law has changed and you can now file this motion after the bankruptcy has been finalized. This is what I did. One side benefit of filing this motion is that the reticent mortgage holder finally started foreclosure proceedings. I believe this motion was the catalyst to force the start of the foreclosure process since I no longer had the legal responsibility to maintain the property.

cindi1958
cindi1958

Hi Scott,


Do you know of a lender in the Indianapolis area that will actually follow the new Fannie Mae Guidelines?  I am trying to refinance on my current home (purchased in May 2009) and I keep running into the same scenario.  All of the lenders state that it has to be 7 years from the BK Discharge, even though Fannie Mae states 4 years from the BK Discharge.  I had several rental properties and my own personal residence that were foreclosed on, however all properties were included in the BK (filed in December 2008) and the BK was discharged in June 2009.  It seems that all of the lenders have their own underwriting overlays.  Can you recommend anyone to me that will actually go by the 4 year BK discharge date?

ScottSchang
ScottSchang moderator

@cindi1958 I can find someone to help you - send me your contact information and I will make an introduction - scotts@broadviewmortgage.com