Port Deposit, MD asked in Real Estate Law for Maryland

Q: Should you accept a loan modification with a partial claim on a mortgage that has already been discharged in bankruptcy

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1 Lawyer Answer
Mark Oakley
Mark Oakley
  • Rockville, MD
  • Licensed in Maryland

A: The only discharge granted was to your personal liability on the mortgage. The lien on the property remains. If you cannot afford the payments and stop paying, then the mortgage company can still foreclose and sell your house at acution to enforce its lien. What it cannot do is sue you and obtain a judgment for any amounts not repaid from the foreclosure sale. If the loan modification is being offered as a means to allow you to restructure the loan payments so that they are more affordable, and so you can stay in the house and avoid foreclosure, then you have a decision to make: is it worth becoming personally liable on the mortgage again in exchange for keeping ownership and residence in your home, as well as the new amount of debt and monthly payment represented by the new mortgage balance? A lawyer cannot advise you on that. That is a financial decision you should make with the assistance of a financial professional who can review your income, debts and budget and help you understand what you can and cannot afford, and what is or is not a good deal. Obviously, if you will not be able to sustain the new modified loan payments, or the house will not be worth more than the mortgage balance for years to come, then you may end up back in the same mess you were in when you went into bankruptcy and lose the house to foreclosure anyway, and with the worse outcome of a deficiency judgment against you personally. Even if you can afford the payments, it may just be a bad investment. If the mortgage balance exceeds the fair market value of the house, then you're overpaying for your house, and throwing money away you won't get back in a sale. Maybe overpaying for your house is worth it to you just to stay put, but that's a personal decision. You need to consult with a financial professional to do your budget, and evaluate the property value versus the mortgage amount and loan terms.

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