Foreclosure Article


Mortgage Reaffirmation Requirements Bogus

When a homeowner files for bankruptcy there is most likely a lender on the home involved. Once the discharge of the debts is entered by the Bankruptcy Court then borrower is no longer personally liable for the debt. But, if the borrower wants to keep their home they will need to pay the regular monthly payment because there is a lien or security interest in the real property. Some lenders will ask the borrower to sign a reaffirmation agreement after the bankruptcy is filed. This reaffirmation agreement will give the lender the right to sue the borrower if there is a later default.

Some states have laws that protect their homeowners called no-recourse or anti-deficiency statutes. For instance in Arizona a house homeowner cannot be sued after a trustee’s sale is completed so long as the property fits into a certain description: 2 1/2 acres or less, utilized and occupied as a one or two family residence. Therefore, even if an Arizona homeowner signs a reaffirmation agreement they will be not be liable on a first position deed of trust (probably not true for a junior deed of trust). Having said that the judges in Arizona will not sign reaffirmation agreements on residential property. They take this position in order to protect the naive homeowner who is being bullied by the lender into signing a reaffirmation agreement.

Reaffirmation agreement becomes effective upon filing with the Court if represented by an attorney and not presumed an undue hardship. Per the reaffirmation agreement language set out in the Code, “…No court approval is required if your reaffirmation agreement is for a consumer debt secured by a mortgage, deed of trust, security deed, or other lien on your real property, like your home.” § 524(k)(3)(J)(i)7.

Many lenders will state that they cannot refinance a mortgage loan because the loan was not reaffirmed in the bankruptcy. But, any lender has the right to refinance any loan, assuming no federal or state prohibitions. Instead the lender blames the borrower’s attorney. Stating that the attorney did something wrong. In Arizona this is a bold faced lie.

Many programs will refinance once a bankruptcy is completed. For instance -Borrowers who have received a Chapter 7 bankruptcy discharge in a case involving the first lien mortgage who did not reaffirm the mortgage debt under applicable law are eligible for certain programs, depending on the type of loan. According to one expert “The following language must be inserted in Section 1 of the Home Affordable Modification Agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the loan documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.” ” Accord, In re Bellano, 456 B.R. 220, 224 (Bankr. E.D. Pa. 2011); In re Owens, 10-72509, 2013 WL 4052874 (Bankr. W.D. Va. Aug. 9, 2013) (“…the lack of a reaffirmation agreement with the Bank and the issuance of the discharge to the Debtor do not appear to preclude the latter even now from filing an application under the HAMP program.”); In re Pope, 10-19688-RGM, 2011 WL 671972 (Bankr. E.D. Va. Feb. 17, 2011) (Finding that a lender’s requirement of reaffirmation as a condition precedent to consideration of a loan modification was improper).

My point – your lender is not your friend when it comes to reaffirmation agreements. Talk to your attorney, get good legal advice in order to determine the law and your rights. Talk to the folks at www.makinghomeaffordable.gov. Talk to other lenders. This is an area of law that is changing every day. Do not fall into the trap of assuming a “no” today will still be a “no” tomorrow.

Contributing Attorney: Diane L. Drain is an Arizona bankruptcy attorney at the Law Office of D L Drain.  



Comments:

QUESTIONS

  • My dad and brother owned a home which I lived for 17 years and took care of both my parents. My my died 13 years and my just passed away 5/18/16. My brother does not communicate with me so the house I still live in he foreclosure on. What are my rights I still live here.
  • How do I find out if there is a sale date for my home that is in foreclosure?
  • My home was sold at a foreclosure auction on 11/22/16. I have never been served a 3 day notice by the new owners just a Summons and Complaint. They want me out of the property and want to charge me an outstanding amount of money and I cannot afford to pay it. They are trying to get a default and judgment against me and I am living in the house with my 8 year old granddaughter. I work 4 days a week and need time to secure another place for us to live. These people are very unreasonable and want me out. I have lived there for 23 years and am having alot of anxiety over this. HELP
  • I was in a chapter 13 with my only debt being my mortgage. I found out Monday my house has been sold at auction. I never received any type of notifications that my chapter 13 had been dismissed,or any notifications that I was in foreclosure, as a matter of fact I had sent the mortgage co $4,000 the previous month. I believe the sale of my house was illegal since I was never notified..Is this true, if I am never given the opportunity to save my house which are required by law and can I do anything about it now that it's been sold?
  • My home has recently been foreclosed on. I have a HELOC attached to the dwelling. Am I responsible for repaying this debt?
  • What is the actual process for evicting a homeowner after the property has been foreclosed, including timeframes?
  • Currently my home is not in foreclosure. I am behind in payments and the bank will not allow me to make partials. They are willing to reinstate the loan but I am unable to raise the 6 payments required. I have received default and letters of intent to accelerate. The bank is recommending a short sale. I want to work this out and I have saved 3 payments and I wish to stay in the home. We received a modification in 2012 and a special forbearance in 2013 I am back to work after being laid off in September and emergency surgery in December. Do I claim bankruptcy in order to save my home?
  • I am behind $8000.00 dollars on my mortgage. I know they will send a foreclosure notice soon. I have been struggling due to having a medical issue both my wife and myself (Heart Attack). Is there away to keep my home from foreclosure with a a program available to me? I am still working and my wife cannot find employment in Kingman as it is a small town.I have had to file ch-13 and I am still making payments to the court trustee monthly.
  • my dad took out home loan in 2004 died 2007 never told mortage co i just kept paying the payment but fell behind on 2 payments mortage co wants 3000 or foreclose can they do that
  • Does the anti-deficiency statute cover for a an 80/20 loan where the 1st mortgage was refinanced (no cash out)under HARP 2.0? Refinanced only for lower interest rate/payment.

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