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We owe about $470,000 on a house currently worth $375,000. Filed a chapter 7 that was discharged in May 2010, in which both mortgages were discharged. First is about $390,000 that was modified and we are paying it because we need somewhere to live, I know it isn't reported or anything, so we are basically "renting".
The second is one of those shady interest only balloon things through BOA, which we have not paid since March 2009. It is worth $80,000. They sent us paperwork to see if we qualify for a second loan modification.
I am confused. They can't foreclose since we are current with IndyMac (first mortgage) and we owe IndyMac more than the house is worth.
Do we need to now file a chapter 13 to get rid of the second completely? So confused, and I will be contacting the BR attorney too; I just want to have an idea of options before speaking to her so I can figure things out.
If we can get rid of the second do we re-affirm with indymac so that all of the on time payments get reported on our credit report? They are currently not reporting our payments.
I hope this isn't confusing, but I would just like to know the purpose of modifying a mortgage that is worthless.
It is my understanding that any secured credit (i.e. homes and cars) are NOT discharged in a Chapter 7. If the home is in arrears, the mortgage co can proceed with foreclosure. The mortgages have nothing to do with the bankruptcy at all once the discharge occurs. Did you "reaffirm" the debt (meaning signed an agreement to keep paying the mortgages)? But please call a BK attorney to make sure.
Also - how could BOA foreclose - there is no money in it for them, if the house were to sell today, wouldn't IndyMac - the first mortgage holder get the proceeds?
They are second in line. I do not know how that works.
Bankruptcy discharges the debt, but it does not discharge the mortgage lien. That is, unless your bankruptcy attorney got a Lien Avoidance signed by the Judge. So they can't sue you for the money that is owed on your promissory note, but they can foreclose on their mortgage on the house unless you took additional action in the bankruptcy.
At least, that's the way it used to work. I've been out of that area for about 5 years.
I understand that they can foreclose, however, my question is, can BOA (second mortgage holder) foreclose on a property that isn't worth what it was 5 years ago, when the first mortgage held by Indy Mac is current. There is no equity at ALL in this house; BOA would get nothing. I am thinking it's a scare tactic.
BOA sent papers to us to modify the second, and wouldn't that somehow reaffirm the debt? We are trying to decide what to do with this house as the modified first payment is killing us now (we are making close to 1500 less per month than when the mortgage was originally modified).
BofA doesn't know it's a** from its other end. They can simultaneously send you refinancing paperwork and a foreclosure notice. One person/dept. has no clue what the others are doing there.
I dont understand why you don't just let them foreclose - your credit is already in the toilet from the BK, you're clearly not going to make any money on the place in the next 5-10 years, and you're killing yourself to make a $390,000 mortgage payment when nobody needs to live in a place that expensive. You say you're paying it because you need somewhere to live, but is there really nothing cheaper to rent where you live?
Actually no, not where I live in NJ there isn't. If there was, I would be all over it. Average rent is between $1700 - $2500 for a house, slightly less for a 2 BR apt. And believe me when I tell you we are not in a mc-mansion or a luxury house by any stretch of the imagination. It's an average cape cod (1200 sq feet) that could use a good amount of work.
We are trying to decide if we want to relocate out of state or not, and that is a tough call because the husband has a great state job with amazing benefits and would have a hard time getting something like that elsewhere. Plus, I am still looking for something FT too, I am currently PT and making peanuts. It will most likely go to foreclosure but I want to have a plan first.
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