Deb

You should provide an example, for your readers, on a case and how you would calculated the figures for DTI, given in your example, to potentially be viable for a Fannie Mae Modification. Of course the readers would have to understand that the example is assuming the loan was a fannie Mae loan originally as the institutionalo investor.

Thanks,
Stan

The interaction between loan modification and bankruptcy can be very tricky. Whenever there is a bankruptcy involved it always complicates things. Lenders do not want to be viewed as having violated the debtor’s automatic stay. Lenders also don’t want to be seen as violating the debtors discharge once one is received. These are just two of the additional concerns imposed by a bankruptcy. That does not mean that a loan modification is not possible if there’s a bankruptcy, it just means there’s more steps to take and more “I”s to dot and “T”s to cross. For that reason alone, many lenders are reluctant to even address the topic, Bank of America would be no different. Times are changing though, and more lenders are beginning to explore loan modification’s inside a bankruptcy.

You’re correct that the current FDIC program does impose a bankruptcy restriction. A homeowner does not qualify for the FDIC program if they are in an active bankruptcy or have received a discharge from a Ch. 7 bankruptcy since the origination of the loan for which the loan modification is being sought. There are other restrictions such as the house must be owner occupied and the primary residence, the loan must be 60 days or more delinquent, the foreclosure sale can’t have taken place or be scheduled in the next 60 days (most states), the loan must be the first loan, and there can’t have been a loan modification within the last 6 months.

You have to remember that lenders have rules (guidelines) to follow when they are considering a loan modification. If the loan modification doesn’t save the lender more money than the cost of foreclosure, they’re not typically interested in modifying the loan. Part of the lenders decision making takes into account whom the Investor is on the loan. When there is a mortgage backed security pool holding the note or a trust, it can be more difficult and costly to modify the loan. The lender/servicer can approach the Trustee or the Portfolio Manager about the idea of modifying the loan, but again if it’s more expensive to modify than to foreclose, the answer is often times foreclose.

I can’t advise you on whether it makes sense for you to reaffirm the loan. You really need to speak to the attorney who filed your BK petition. If you filed pro per, meaning you filed for yourself without a lawyer, you need to seek out the advice of one now. The decision to reaffirm or not is often very petitioner specific. I have heard of cases where debtors have agreed to reaffirm on the condition that the creditor/lender modify the terms of the loan. The situation you described seems to make you a good candidate for some workout (home retention) solution. It might not be a loan modification, but as you suggested it might be a trial period, or a more extended repayment period. Since the offer to allow you to repay the delinquency is already on the table, maybe you start there. I know you said that 3 months would make the payment too steep and only cause you to fail, but what about 6 months or 1 year? Remember that there are new rules that govern this process, you may need the Ch. 7 Trustee to sign off on your negotiations and you may need court approval to make the lender comfortable that they’re not violating any of the bankruptcy rules. My advice would be that you approach the issue with your attorney first. Maybe a contact from him or her would be better received by the creditor’s attorney than a call from you.

I’d be very interested in hearing how this all turns out and what obstacles you’ll have to overcome to achieve your goal of keeping your home. This is a very fast changing area, it may be that something you do within the process can help others save their homes too. Please keep me updated with your progress.

I hope this helps,

Ralph R. Roberts

We filed Chapter 7 to buy time and try and save the house while we continued to work. We have been trying to keep the cars, health insurance and the house. We are now 60 days late on our pay option arm. The home is upside down by 35% on a Jumbo Option Arm. We have money coming in just not enough fast enough to get ahead. Our track record is outstanding and our credit was 700+ before this happened.

Question: I read based on FDIC and Bank Of America Modification program is not possible if someone filed Chapter 7.

Could we offer to reaffirm?

Maybe a trail period of on time payments at the modified amount?

Any Wisdom?

They did offer taking the missed payments and divinging them up by three months but we would surley fail on that since we have missed the payment we have.

I am confident we will pull out of this.

There’s a couple options you might consider. It might not be called an actual Loan Modification, but it will accomplish the same goal… keeping you in your house with a payment you can afford. The first solution I’d investigate is asking your lender to take the escrow shortage and spread it out over a longer period of time. Consider this:

Let’s say your escrow shortage is $3,000 and your lender has you paying it back over 12 months; that’s $250 extra each month on top of your regular payment… ouch. But if you can spread that same $3,000 out over 24 month the extra amount is only $125/month. Get the lender to agree to 36 months and you’ll only have to come up with an extra $83.33 each month. Now that might be more reasonable.

The next option is if you can afford your monthly payments just because of the escrow shortage, you might qualify for an HSA (HomeSavers Advance). This is a one-time loan being offered by Fannie Mae that can be used to cure delinquencies or arrearages of principal, interest, taxes, and insurance (PITI). A HomeSaver advance loan can be up to $15,000 and will mean you have to sign a promissory note, but it’s not going to accrue interest or require payments for the first 6 months, it’s payable over 15 years, and bears a fixed interest rate of 5%.

Hope this helps,

Ralph R. Roberts

Not true. I work for a tax attorney who offers a money-back guarantee and he has been in business for 20 years!!!

They CAN guarantee that they will be able to do something, although they cannot guarantee a specific result (ie. deliver the asset protection guaranteed by the agreement, but cannot guarantee that you will get back “$1000 or more in tax refunds.) In terms of loan modification, I believe they can guarantee that you will get a modification, but not that you will save “X” on your mortgage every month.