Reaffirm or Not to Reaffirm a Mortgage after Bankruptcy

by Deborah from Missouri

Ask Kate about reaffirming a mortgage in bankruptcy: You may remember Deborah who wrote me about the agony of homeownership after her bank had the audacity to raise the house payment during her mortgage modification process. Now Deb writes... 'Sooooooo, brilliant Kate, should I reaffirm my mortgage and risk trying to work with Nationstar -- or should I keep it in the bankruptcy 7 and be rid of it, once and for all?


Deborah asks Kate about Reaffirming a Mortgage vs Letting Go of the House in Bankruptcy

Kate, I am truly appreciative of you and all the practical information and advice you give out.

Since last I wrote you, a number of things have transpired regarding my mortgage.

First of all, I DID file a Chapter 7 in May -- intending to get rid of my home of 17 plus years and the unaffordable mortgage payment Bank of America stuck me with after its supposed 'modification' of my loan.

ALL of my debt was included in the Chapter 7 filing, including any fees left over after foreclosure.

Secondly, I found somewhere else to live (with my sister and I LOVE it!!) just in case BOA showed up in the middle of the night to put me out (you wouldn't believe the stories I've heard of what BOA does to delinquent borrowers. And with MY experience, I don't trust them ONE BIT...)

In early June, however, I received a letter from BOA stating that my mortgage had been sold to Nationstar. As my new loan servicer, Nationstar also sent a letter confirming this and stating the terms of my loan with BOA would remain the same. I thought this meant that my payment would be kept at the $1,190 per month that BOA required.

Recently though it occurred to me to call Nationstar to find out what my monthly payments would be. Surprisingly, my payments would be $835 -- which was my original payment amount. I called Nationstar on July 11, explained that my home was included in the Chapter 7 and asked if there was some way to get my home back. The young man was very nice and stated that Nationstar would work with me to obtain an affordable mortgage -- but I needed to fill out forms to 'reaffirm' my home.

He stated he would send the reaffirmation form for my attorney, along with my monthly mortgage statement, modification application and payment coupons.

To date, I have not received ANY of this. Even though I've called numerous times and left messages for my 'Assigned Foreclosure Prevention Specialist' to contact me, I have heard NOT... A... WORD...

(I am having flashbacks to my HORRIBLE experience with BOA and am feeling distressed again).

I've PRAYED about what I should do. I've asked relatives and friends what I should do. It's funny 'cause the guys say, 'Let... it... GO, Deb!', but the girls say, 'Deb, I love your house. There's nothing like having your OWN home. You should keep it.'

Even though I KNOW the house will be/has been difficult to maintain with my current health challenges, it's been my HOME for a very long time. I also want to keep it so that my disabled daughter and grandson can have somewhere to go, just in case.

Sooooooo, brilliant Kate, should I reaffirm my mortgage and risk trying to work with Nationstar -- or should I keep it in the BK 7 and be rid of it, once and for all?! Thank you for any help you can give.

Kate Answers: To Reaffirm or Not to Reaffirm a Mortgage after Bankruptcy

Ask Kate at Get-Your-Best-Mortgage-Rate.com

Dear Deborah,

I'm so happy to hear from you and appreciate knowing of your progress. It means a lot to me.

Now, not to be a wet blanket on such good news of a substantially lower house payment, but I'm somewhat suspicious of the accuracy of your Assigned Foreclosure Prevention Specialist's statement.

(It's a bit difficult to keep a straight face over that title, isn't it?)
Read Deborah's first letter to Ask Kate at Short Sale vs Foreclosure - Deborah's Agony of Homeownership and don't miss her follow-up comment near the end of the page.

Affordable Mortgage Payments Are a Necessity

Before you get too frustrated trying to wring out a confirmation of the lower payment from the mortgage company, have another heart-to-heart talk with yourself.

For a moment, put aside my suspicions and assume the monthly mortgage payment is truly going to be under $900. Ask yourself how realistic it will be for you to make that payment and still be able to afford your medical care... and take care of your daughter and grandson.

In my opinion, the most important thing we've learned from the financial debacle is that only a homeowner can determine whether or not a mortgage payment is affordable. In other words, qualifying for a mortgage payment does not mean a homeowner can afford it.

You can read why this is so important and why I say, never depend on your lender to decide how much mortgage you can afford!

Consult an Attorney before Mortgage Reaffirmation

Next, call your attorney and see how much it would cost for him to work directly with Nationstar before you sign any papers to reaffirm your mortgage. Alternately, if hiring your attorney to handle the reaffirmation is too expensive, ask if he would give you questions to ask Nationstar and pitfalls to avoid.

But most importantly, ask his recommendations on the mortgage reaffirmation itself because there are definite pros (for the bank) and cons (for you) it seems, which is why you need an attorney's advice. In fact I've already outlined some of these advantages and disadvantages for Stan who asked me if mortgage reaffirmation after bankruptcy is necessary for a HARP refinance.

Above all else, my original advice stands. Take care of yourself. And in that light, I'm happy to know of your back-up plan to live with your sister!

Good luck, best wishes, and please keep in touch,

Ask Kate


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I choose PEACE...
by: Deborah

Hi, Kate and thanks for your timely response!

Today, I can better appreciate the lyrics of "The Gambler", the popular song sang by Kenny Rogers: You gotta know when to hold 'em, know when to fold 'em, know when to walk away. That's what I'm goin' to do regarding my home of nearly 18 years -- walk away...

I think that the hardest part for me was to finally come to the realization that I can no longer afford to stay in my house -- not financially, not mentally, and especially, not physically. I can't do it. Even if Nationstar was to modify my loan to make it financially affordable, the time has come in my life where the physical, mental and emotional challenge weighs more heavily than the financial strain.

I could write a book on what to do and what NOT to do as it relates to acquiring help with your mortgage. Please advise your readers to do everything they possibly can, if they want to remain in their home. Reach out to those who are at the top of the food chain. I wrote President Obama, who turned me on to the Secretary of Housing & Urban Development (Shaun Donovan) and whoever the CEO of the company is that has your mortgage. DO NOT waste time with mere employees; you'll be bounced from rep to rep.

Yes, I could write a book on my experiences, the perks and pitfalls of owning a mortgage. But thankfully, Kate, you've already written that book, and I've been tellin' friends and family about your one-stop-mortgage-shop!

Thank you, Kate, for helping me to realize that nothing is more important than health and living as stress-free as possible at this stage in my life. Thanks so much for all your help and for keeping me on the side of sane. You have really been a godsend...

Hi Deborah, Kate here.

I am saddened while at the same time happy for you. I know how much agony goes into such a decision. I am very proud of you for being able to take action.

Your words are deeply touching. I thank you for taking time to offer such a heartfelt response. It means more to me than I can express.

Please keep in touch.

Sincerely, Kate

FHA - Bankruptcy
by: Anonymous

Kate, In late 2009 we refinanced our home with the FHA home loan - following that year our business was hit during the market crash and we had to shut it down, leaving us selling mostly everything we had and filing personal bankruptcy. We wanted to keep our home and had never been late on our mortgage. We kept paying our $2500 per month on our mortgage, for almost two years. We wanted to refinance or reaffirm our loan but our lender would not help us.

Since then our income has dropped significantly and our lender again said unless you are 2 to 3 months behind we cannot discuss any modification with you. So we stopped paying two months ago. Our home is included in our chapter 7 bankruptcy, no foreclosure yet. Our home is also almost $100,000 less than what we owe on it. The mortgage company came back with the first response saying we don't qualify for any programs because our home is worth $360,000 what we owe on it. Plus that's only one of the reasons but what about our income? This they did not address told us we could re apply.

We want to stay in our home. It seems we do not qualify for any program out there because of the cut off date? Now that we are stuck in their game. I fear now we will be losing our home in a market where there are very limited rental homes for a family of 6.

Any suggestions? Can we qualify after our 2 year bankruptcy before the home goes into foreclosure? We have been told if we go into foreclosure we will have to wait another 3 years.

Hi, Kate here.

Please read the letter above and follow the links to related pages for thoughts on reaffirming your mortgage.

I can't comment on individual qualifications and since so many details go into a loan decision, you will have to refer to a lending professional for that answer. But I can tell you in general, the required waiting period before a lender approves a mortgage starts over again when foreclosures following bankruptcy.

I'd recommend calling the free housing experts associated with Making Home Affordable. Ask them for help dealing with your lender's requirement that you have to be late on your payment before getting a modification. They are available around the clock every day of the year. Contact them at 888-995-HOPE (4673).

Before you call, read more about them at Free Making Home Affordable Housing Counselors and learn how to get the most out of your time.

Best wishes, Kate

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