Reaffirming Mortgages After Bankruptcy - IRS Tax Liens

by Kristi in North Bonneville, Washington and by KMA in Missouri

Ask Kate about reaffirming a mortgage loan after bankruptcy: Kristi and her husband can't find a lender to refinance their mortgage which was never reaffirmed after bankruptcy. But a job lay-off and medical disability is putting a strain on their budget. They ask how to get an affordable mortgage payment.


Ask Kate if tax liens prevent mortgage approval: Secondly, KMA asks if an IRS tax lien will prevent refinancing a current FHA loan as well a new mortgage for home buying.

Ask Kate: Can I refinance if my mortgage wasn't reaffirmed after bankruptcy?

By Kristi in North Bonneville, WA
Can I refinance if my mortgage wasn't reaffirmed after bankruptcy?

Dear Kate,

I have been reading good information on your site. I'm just so stressed out on what to do about our mortgage.

We found out the hard way that our mortgage was put into our Chapter 7 bankruptcy even though we told our attorney we did not want to include our house. That was 2012.

We didn't understand this process and are very sad about it, wished we never went this route.

Then in 2013 when my husband got laid off and unemployment ran out, we called Bank of America and also A HUD counselor to help us get a loan modification. But they would deny each program we tried! I am still wondering why?

Well we managed and I heard that you were suppose to not be able to make house payment so I didn't pay it and they sent us a foreclosure notice. So I paid it plus the late fee.

I just could not get help, been struggling a long time now only to learn since bankruptcy, all our payments aren't being reported which also takes away our equity.

We are struggling but have no where to go. I'm trying to save our tax refund, but things come up and it dwindles.

Hubby got a lower paying job after the layoff and we just barely make all the bills. Rate hikes on electric and water is going to hurt too. I have to go to the food bank once a month, I'm on disability, and stress makes it worse. We can't even pay my medical co-pays and barely medicine.

But to sell the house, we need to do upgrades and paint, things that aren't in our budget. So what should we do?

Should we see if we can refinance from 6.2% to lower? Or sell the house, take the money and put down on a smaller place until we get better credit? And then find our retirement home? Thanks so much!

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Kate's Answer: Can I refinance if my mortgage wasn't reaffirmed after bankruptcy?

Hi Kristi,

When finances are tight and homeownership is threatened, it's hard to see clearly enough to form a game plan. But a game plan is what most homeowners need when facing foreclosure.

Affordable Mortgage: Start with a Budget

Block out some quiet time to create a budget. Write down how much money you make and how much you need for expenses.

If your expenses exceed your income and you have no way to increase your paycheck, look for an expenditure in your budget that should be more affordable. It makes sense to consider the mortgage payment because it is often monopolizes the budget.
After a divorce, Leonor is the sole support of her three children, pays college tuition, and is saddled with debt from her failed marriage. My answer: In Need of Affordable Mortgage Payments After Divorce.

Affordable Mortgage: Refinancing Your Loan

If you can find a lender who will refinance your mortgage in spite of it not being reaffirmed after bankruptcy, analyze the mortgage offer. Proceed cautiously and make sure you are not paying too much in the interest rate or closing costs.
Audra asks about reducing closing costs, how to know if they are as cheap as possible, and if not, how to negotiate lower fees. My answer: How to Reduce Mortgage Refinancing Costs.

Affordable Mortgage: Modifying Your Loan Terms

Or go back to your current loan servicer to ask why they won't modify your existing mortgage terms. It's important to know why. Ask specifically if the non-reaffirmed mortgage is standing in the way.

But keep in mind that reaffirming a mortgage after bankruptcy can sometimes pose risks. So if a lender requires your mortgage to be reaffirmed before refinancing, I urge you to discuss this matter thoroughly with an attorney.
John hasn't missed a house payment in 9 years since his bankruptcy but his lender is balking because the mortgage has never been reaffirmed. My answer: Mortgage Reaffirmation after Bankruptcy.

Affordable Mortgage: Selling Your Home

Another idea is to call a real estate agent to discuss selling your home. Don't assume your home will require work. Ask the agent about selling it in its as-is condition. If indeed you are faced with required repairs, real estate agents sometimes know of contractors who will wait until the transaction closes to be paid out of the loan proceeds.
Is is possible for distressed homeowners to sell a house yet remain legally obligated on the mortgage? My answer: Sell Your House Safely - Title vs Mortgage.
Of course, I do not know your full situation and even so, only you can decide what actions to take. But again, as a first step, I suggest creating a budget.

I wish you the best,

Ask Kate

Ask Kate: IRS Tax Installment Agreement and FHA Loan

By KMA in Missouri
IRS Tax Installment Agreement and New FHA Loan

Hi Kate,

I currently have an IRS installment agreement in place and made timely payments for almost two year.

I also have a FHA loan in another state, but I am interested in buying a home in my residing state.

Other than the IRS Tax Lien, my other credit accounts are good and I earn a very decent income.

Will the tax lien hinder the process of me buying a second home, and refinancing my FHA mortgage on my out-of-state home?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Kate's Answer: IRS Tax Installment Agreement and FHA Loan

Hi KMA,

You'll be happy to know that in many cases, it is possible to get approved for FHA financing even with an IRS tax lien. Here is Lynn's question and my answer on this subject...

Getting Approved for FHA Home Loan with IRS Tax Lien

Lynn found out her FHA mortgage transaction couldn't close due to a tax lien still in negotiations because the underwriter was requiring three months paid into an IRS payment plan.

Learn her options for getting financed at IRS Tax Lien and Mortgage Approval for FHA Financing.

Conventional Home Loans and IRS Tax Liens

But conventional financing (Fannie Mae and Freddie Mac) generally will not offer loan approval to borrowers with unpaid IRS tax liens, even if they are in payment plans.

However, the IRS has agreed at times to remove a lien connected to a seasoned payment plan if the taxpayer enters into a Direct Debit Installment Agreement (DDIA). As this is not always the case, please consult the IRS and your lender for more information.

Best wishes,

Ask Kate

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