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    Real Estate Loans Generally Should Never Be Reaffirmed

    Doan Law Firm generally never reaffirms real estate loans since the laws do not require such in order to keep your home.  The only exception might be if the Lender offers a reaffirmation agreement which favorably modifies the original loan agreement with reduced payments, interest, and principal balances.

    Unfortunately, Lenders often claim they are necessary and this is a recurring problem. The first thing to understand is that there is a difference between the “In Rem” liability that the Deed of Trust creates against the house (i.e., if the mortgage isn’t paid the house will be sold at foreclosure) and the “In Personam” personal liability (i.e., that you would owe any deficiency.)

    A Chapter 7 bankruptcy discharge eliminates your “In Personam” liability; but it does not change the “In Rem” liability. You can keep your home so long as you continue to pay the mortgage. In some cases, mortgage companies mistakenly claim that you can or should “reaffirm” your mortgage in your bankruptcy case; yet it is nearly impossible to reaffirm mortgages in California since by law there is no personal recourse to reaffirm.  By law, almost all first mortgages on residences can not go after a debtor personally, even outside of bankruptcy!

    The reason that a mortgage company might not report on-going payments is both out of spite on their part, and also out of an over-abundance of caution. If, instead of making all of their post-discharge payments on time, a person after bankruptcy had been delinquent, there is case law holding that reporting such delinquency to a credit bureau is a violation of a debtor’s discharge, since the debtor wasn’t personally delinquent.   Since they can get burned for reporting bad information, mortgage companies often take the safe route and choose to not report any information.

    One of the key facts of the credit reporting laws is that creditors can only report accurate information. They are not, however, required to report accurate information. They can instead chose to remain silent.

    So if you are in  the process of a refinance or purchase and being requested proof or a reaffirmation agreement, it is possible to still get your payment history included in your credit report as follows:

    1. Request a payment history from the mortgage company.  (The mortgage company is required by law to provide one every year free of charge.) 2. You should then file a dispute with the three credit bureaus, attaching a copy of the payment history.

    3. The credit bureau is required to verify the accuracy of the debt with the mortgage company within 30 days.

    4. At that point, the mortgage company can either

    a. Remain silent and then the credit bureau must accept the information provided by the client; or

    b. Accurately report information. The mortgage company would be hard pressed to explain how a payment history it prepared was inaccurate.

    5. You will need to repeat this process on a regular basis, to update the information.

    6. Additionally, you should keep the payment history, since that can be provided to anyone you’re applying to for new credit.

    This process, while a headache, at least gives you a route to accomplish your goals


    Written by Michael G. Doan- Owner of the Carlsbad Bankruptcy Attorney office, Michael not only manages his business, but is also a highly skilled San Diego Bankruptcy Attorney with over 17 years of experience. He specializes in many fields, such as: insolvency, bankruptcy, consumer rights, debt negotiation, creditor collection abuse, estate planning, contracts, real estate, and tax. Michael is currently concentrating his practice solely in Bankruptcy Law and is a Board Certified Specialist in Consumer Bankruptcy Law by the American Board of Certification, one of only fourteen such attorneys in all of California.

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