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FiveStarLaw
FiveStarLaw, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy Lawyer. Experienced.
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I applied for a loan modification 9 months ago - I have completed

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I applied for a loan modification 9 months ago - I have completed the paperwork in whole 4x and in part many more times. I have contacted the lender at least 2x/month and made all my trial payments on time. I had planned to file Chapter 7 as soon as my loan modification was approved.

When I called to make my payment this month, I was told I was no longer in the loan modification program because my information had "expired” AND they could NOT accept my payment.

Because I was 3 payments behind, my house is technically in foreclosure. I was told to reapply for loan modification and the representative said they would “accelerate” my file – this had happened to many customers this month.

Several months ago, I was told by the lender that if I filed bankruptcy, my case would have to start all over because it would go to the bankruptcy dept. rather than loss mitigation.

If I file Chapter 7 now, rather than start the loan modification over, what will happen to my home?

General info:
My 1st mortgage is app. $460,000 which is about the current market value of the home. I have 2 additional equity lines totaling app. $150,000 and have not made any payments on for almost 12 months.

I would like to keep my home.

For a variety of reasons, and because I thought my loan modification was almost finalized, I rented my home for $1000 more than my loan modification trial payment and rented a more affordable home with a friend.

Technically, the house is still my residence and I receive mail there.

Should I just reapply for the loan modification or go ahead and file Chapter 7 now?
If I file Chapter 7 what is most likely to happen to my home?

My original loan was a libor – interest only – assuming even with taxes and insurance, the payment would still be less than the rent I'm receiving, but not sure how the bankruptcy would view the overdue payments?

Would the court/trustee allow me to continue paying my first mortgage payments even though the house was rented? Would I have to make payments on the 2nd mortgages in order to keep the house, even though they are essentially unsecured at this time?
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  FiveStarLaw replied 4 years ago.
Hello,

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Customer: replied 4 years ago.
Yes
Expert:  FiveStarLaw replied 4 years ago.
Hello,

Unfortunately this is the scenario that is happening all too frequently. Lenders are putting homeowners on temporary payment plans and then opting not to modify leaving the homeowner further behind. Sorry to say this is legal.

You might want to consider a Chapter 13 bankruptcy instead of a Chapter 7 for 2 main reasons.

First, filing a chapter 7 bankruptcy may encourage the first mortgage holder to move ahead with the foreclosure since you are behind on the mortgage.

The Chapter 13 bankruptcy may also be used to strip away the 2nd mortgages since the first mortgage equals or exceeds the value of the property. In a chapter 7 you would be required to continue making payments on the mortgages in order to keep the house
Customer: replied 4 years ago.
I'm afraid I don't qualify for Chapter 13 - variety of reasons, but primarily I don't have "disposable" income and my total debt service in addition to my mortgage is nearly $300k.

Seems there should be some recourse against mortgage lenders who continue to take advantage of distressed homeowners. It's one thing to not "qualify" for a loan modification, but the lender has refused to tell me why I do or do not qualify for a loan modification. They have my mailing address, 2 phone numbers and an email address and they are unable to contact me to either ask for more information or to inform me that I am no longer in a loan modification program? The only way I find out is to try and make my monthly payment and they won't take my money??

I believe I need app $12k to bring my 1st mortgage current. If I can borrow that money from a friend and bring my 1st mortgage currrent, and can afford to continue to pay my 1st, but do not pay anything to the 2nds how will that be viewed in Chapter 7? I do not want to reaffirm either the 1st or 2nd, but believe the 1st mortgage holder will let me keep my home as long as I stay current? The 2nds don't have much choice? They can't forclose and Chapter 7 will discharge my personal liability?

Can the bankruptcy trustee force me to pay the 2nds to keep my home? Will renting the home have any bearing with the bankruptcy trustee?
Expert:  FiveStarLaw replied 4 years ago.
I'm afraid I don't qualify for Chapter 13 - variety of reasons, but primarily I don't have "disposable" income and my total debt service in addition to my mortgage is nearly $300k. -- You may want to have a local attorney calculate whether you qualify for chapter 13 -- your disposable income could include what you are presently paying on the junior liens

Seems there should be some recourse against mortgage lenders who continue to take advantage of distressed homeowners. It's one thing to not "qualify" for a loan modification, but the lender has refused to tell me why I do or do not qualify for a loan modification. They have my mailing address, 2 phone numbers and an email address and they are unable to contact me to either ask for more information or to inform me that I am no longer in a loan modification program? The only way I find out is to try and make my monthly payment and they won't take my money?? I agree with you however this is the law
I believe I need app $12k to bring my 1st mortgage current. If I can borrow that money from a friend and bring my 1st mortgage currrent, and can afford to continue to pay my 1st, but do not pay anything to the 2nds how will that be viewed in Chapter 7?the junior lienholder's will likely foreclose

I do not want to reaffirm either the 1st or 2nd, but believe the 1st mortgage holder will let me keep my home as long as I stay current? The 2nds don't have much choice? They can't forclose and Chapter 7 will discharge my personal liability?they can foreclose

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FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36570
Experience: Bankruptcy Lawyer. Experienced.
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