Loan Modification and Reaffirming Debts After Bankruptcy

Reaffirmation
Loan Modification

Reaffirmation

Reaffirmation is when after filing bankruptcy, you sign a document putting yourself back on the hook for the debt. Though sometimes clients have to do it in order to keep a car, I generally discourage reaffirming debt for the following reason.

If you reaffirm, you give up your bargaining position AND your right to walk away from the house or car. If you reaffirm and a year from now cant afford the mortgages or car payments and lose the house or car, YOU WILL BE ON THE HOOK for the balance of the mortgages. Remember, you can not file bankruptcy again for 8 years. By reaffirming, you put yourself at risk of having creditor calls and all other forms of collection (law suits, bank freezes, garnishments) from your mortgage company in the event that you cant make the mortgage payments.

It is true that reaffirming can help your credit a little. Also, sometimes you just have to reaffirm or lose what you have. Speak with your bankruptcy attorney to see if reaffirmation is the best thing for you.

Loan Modification

Waltzer Law Group can handle your loan modification. However, what is most important is that we will not take your money or waste your time by telling you we can get you results if we cant. This doesn’t mean that all of our loan modifications get approved, but we will only take Loan Modification clients we think have a chance at success.

This information is taken from the HUD site. You can see the page directly by clicking on this link. http://www.nls.gov/offices/hsg/sfh/nsc/faqlm.cfm

A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.

Question 1: In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?

Answer: Mortgagee Letter 2008-21 states in part: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.

Question 2: May a mortgagee perform an interior inspection of the property if they have concerns about property condition?

Answer: Yes, per Mortgagee Letter 2000-05, page 20, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor’s continued ability to support the modified mortgage payment.

Question 3: Can a mortgagee include late charges in the Loan Modification?

Answer: Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan Modification.

Question 4: When utilizing a Loan Modification option, can a mortgagee capitalize an escrow advance for Homeowner’s Association fees?

Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Obligations states: Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.

Question 5: Is there a new basis interest rate which mortgagees may assess when completing a Loan Modification?

Answer: Yes, Mortgagee Letter 2008-21 states that the new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years.

Question 6: Will HUD subordinate a Partial Claim, should a mortgagor subsequently default and qualify for a Loan Modification?

Answer: If a mortgagor subsequently defaults and qualifies for a Loan Modification, HUD will subordinate the Partial Claim.

Question 7: Are mortgagees required to perform an escrow analysis when completing a Loan Modification?

Answer: Yes, mortgagees are to perform a retroactive escrow analysis at the time the Loan Modification to ensure that the delinquent payments being capitalized reflect the actual escrow requirements required for those months capitalized.

Question 8: Is the mortgagor eligible for the upfront premium refund at payoff of a modified loan?

Answer: It depends upon when the closing date occurred. For assets closed:

After July 1, 1991 but before January 1, 2001, the 7-year unearned premium refund schedule shown in Mortgagee Letter 1994-1 remains in effect,

On or after January 1, 2001 that are subsequently refinanced, the 5-year refund schedule shown in the attachment of Mortgagee Letter 2000-46 applies, or

On or after December 8, 2004, refunds of upfront MIP are eliminated except, when the mortgagor refinances to another FHA insured mortgage. The refund schedule attached to Mortgagee Letter 2005-03 has been modified to a 3-year period.

Question 9: Can a mortgagee qualify an asset for the Loan Modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

Answer: Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.