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

  • Can the lender force foreclosure on my home when my ex-spouse got a 2nd mortgage in his name showing him as the borrower while we were married on this home And now I own this property from the divorce?
  • I am leasing a house threw a management company and found out that the house is in foreclosure and an auction date has already been set. The way I found out is the attorney for the lender posted the notice on our door not by the management company. I had to let them know. Am I still suppose to pay them the lease payment?
  • Are the terms of a loan modification completely at the discretion of the lender or are there state or federal guidelines they must follow? Homeowners must become 90 days behind to get my mortgage company to consider modification. By this time, isn't my credit nearly as damaged as it would be with foreclosure?
  • My home was forclosed on 2yrs ago after my real estate agent tried for 2 long years to short sale it.  Mortgager #1 denied all offers for the first 1.5yrs, while 2nd mortgager was agreeable.  Final offer was finally accepted by Mortgager #1 but 2nd mortgager completely blocked the sale by rejecting offer.  Now 2nd mortgager still sends me mortgage bills and calls me daily to try to collect this debt!  They also report my payment as LATE EVERY MONTH! Is there any way to get them to leave me be?  Do they have the legal right to harass me even though they are the reason I went through this foreclosure?
  • I recieved a Notice of Substition of Trustee. The recorded date that shows on this notice when my mortgage lender appointed the as a successor trustee shows a recording date of September 15, 2008. Which today is September 2 , 2008, so how can something have been recorded on a date that has not even happened yet? The sale is scheduled for September 5, 2008. What are my legal rights as to getting this sale postponed?
  • what if i cant make the full payment amount of the reinstatement on time what will happen
  • We had a house go to foreclosure and the lender ended up selling it. Now the bank of the second mortgage is trying to sue us for the deficiancy. the lot is less than 2.5 acres & house is single family. Can they do this or does this violate ARS title 33?
  • We had an 80/20 mortgage on our home. In Feb it was foreclosed on. The first lender shows as a foreclosure but the 2nd lender(chase) shows as a charge off. I was told that there is something in the state of AZ that requires both lenders to report it as a foreclosure. Is there a provision code that I can contact Chase with to have the reporting changed to Foreclosure? Thank you..
  • I own a property, not my main residence, that was part of a 2010 C7 bankruptcy. We reaffirmed and kept the property. We have made all of the payments since, but in the past year our finances have declined. We have tried to rent the property without much success and we have paid over $6000 above the properties income to maintain it. It is empty again and we simply cannot continue to pay the mortgage and HOA any more. It is worth about what I owe. Can I allow the property to go to foreclosure or short sale after being part of a bankruptcy?
  • I am living in a house that is in foreclosure. The trustee date is in December, how lolng do I have until I get evicted from the property? How does the whole foreclosure work in AZ?

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