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
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?)
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,
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