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Mortgage 4 months pass due"Help"


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We have been living in our home for 6 years. Our rate increase from 5.25 to 8%. Our payment went from 1581 to 1800 per month. We have applied for a modification about 4 or 5 times and was denied and credit is not good enough to refinance. We live in South Carolina a judical state of which the foreclosure process takes up to 6 months. We are already fully retained to file a Chapter 13 to keep the home but the chapter 13 payments the lawyers gave us would be affordable but our mortgages would still be unaffordable. If there are no other options my plans is to stay in the home for as long as I can to save for our next move. But i'm not sure how long we would have before we have to move. I'm holding off as long as we can but don't know the right time to file the chapter 13. We have only recieve the breach of contract and the final date was March 17, 2011. We really want to keep our home and will fight to the end but if we don't have any other options this is a way for us to save for our relocation. Any suggestions will be great.

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If the value of the home is less than the balance on the first mortgage then there is an option in Chapter 13 to "strip the lien" of any junior mortgages. In other words a 2nd or 3rd mortgage would be treated just like an unsecured credit card in the bankruptcy. You'd pay the plan payments against the 1st mortgage and the 2nd would get anything left over for a couple years; then the second is gone...forever...and they have no claim on the home.

Now understand that filing a motion to strip lien is serious work for the lawyer. The junior lienholders are not going to just roll over and loose their security interest without a fight. So you need a bankruptcy lawyer that is willing to go into court and actually litigate, not just file papers and show up for the meeting with the trustee. This may cost you extra in legal fees. But if you think about it spending five thousand in legal fees to drop forty thousand in debt and still keep the house may be worth it.

Now the above also assumes your available funds won't be eaten up by other secured assets. It's hard to get a lien strip on a mortgage if you also have a pair of $400 car payments competing for resources. But if your goal is to keep the house you may have to jettison other secured debt and their secured property to do so.

Edited by Methuss
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....We really want to keep our home and will fight to the end but if we don't have any other options this is a way for us to save for our relocation. Any suggestions will be great.

Due to forum guidelines here, I can not list my contact information.

Yes there might be another way - let me explain....

First a bankruptcy is used is a last ditch option. It should be used to save the home once there is a sale date. A bankruptcy will 100% trash your credit, and for five years plus your (other) bills can go up making life impossible. Asking a bankruptcy attorney about how many bankruptcy's they've done going through the court, I'm sure they can show you many cases. Ask them how many loan modifications they have done working with the banks to lower payments outside of court. This is most likely a lower number because their battles take place in the court room.

Strongly suggest you speak with a Mortgage Attorney - why, becuase their battles take place outside the court system, working directly with Lenders. Understand in your Lenders eyes - your loan is just a bunch of numbers, paying on time you are proving to them you are not in a hardship.

What you have said - being in an adjustable loan at 8%, anything above 7% can be deemed predatory if you are not behind. Being four moths down in default, this takes you to another level. Now you you can show you are in a hardship with a high interest rate and behind on your payments.

What happens next is to prove you can show affordability per the national guidelines of 31% of your gross income. If your mortgage payment is below 31% of your income and you are having trouble making your payments. Your Lender can argue the mortgage is not the cause of the hardship. If your payment is more than 31% of your income, this can be looked at why you are in a hardship. To comment further need to know your loan amount, with your taxes and HO insurance. Also the gross monthly income. I further question - what was the denial?

You mentioning the increase in your interest rate caused your loan payment to become unaffordable. This is telling me you could afford the payment before it adjusted. Knowing this - in my opinion, you could be approved for a loan modification. Again need to know more information to discuss further.



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