310.376.9865
For the past year or so, most of the big banks have been turning down application for loan modifications, or new loans to people who have previously filed bankruptcy in the past several years.
I get one or two calls a month from past bankruptcy clients asking what to do, as the banks being honest and upright entities indicate I am the worst bankruptcy attorney in the universe because I did not have my bankruptcy client sign a reaffirmation agreement while doing through the bankruptcy.
Well, in the Central District of California, I am unaware of any judge that will approve a reaffirmation agreement. Furthermore, if the loan is under the HAMP program, a reaffirmation is not required. (Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages Version 4.1_, p.75). Although most loans are non-HAMP.
However, to illustrate my point, I am posting a ruling by a Bankruptcy Judge in Woodland Hills, CA:
“Tuesday, June 04, 2013 10:00 AM
#49.00 Motion by Debtor to Reopen Chapter 7 Case
This chapter 7 no asset case was filed on 1/28/11. Discharge was entered on 4/29/11 and the case was closed on 5/29/11. No reaffirmation agreements were filed prior to that time. The schedules show that at the time of filing the petition the Debtors owned a single family residence at 13618 Gain St., Pacoima that was worth $267,000 and that the liens as to that property were as follows:
- 1st TD to Wells Fargo with $161,000 owing
- 2d TD to Bank of America with $117,000 owing
- 3d TD to Bank of America with $10,000 owing
On May 13, 2013 Debtors filed this motion to reopen “for the purposes of permitting Debtors to refinance with Wells Fargo Bank, N.A. (“Creditor”) and thereafter to file a reaffirmation agreement with the court.” [doc. 16, 1:25-27] The motion goes on to state that the “Debtors have been informed by the Creditor that the Creditor will not refinance Debtors’ first deed of trust due to the fact that Debtors’ bankruptcy case is now closed and the original deed of trust was no reaffirmed. Debtors must reaffirm their original deed of trust through the bankruptcy court before Creditor would consider refinancing Debtors’ first deed of trust.” [doc. 16, 3:19-23] Debtors also note that “[w]ithout the case being reopened, Debtors will have no ability to refinance their Real Property, primary residence. This will have an adverse effect on their ability to re-establish their creditor and finances post bankruptcy discharge.” [doc. 16, 4:24-27, emphasis in the original] proposed ruling.
The initial issue concerns why Wells Fargo is apparently insisting that the Debtor reaffirm the first trust deed before it will refinance. Is this merely so that it is comfortable that the refinance [or possibly the loan modification] will not be seen as a violation of the discharge injunction? If so, the Court is willing to enter an order to that effect.
Or is it so that Wells Fargo will have additional rights under the refinanced loan than it would otherwise have due to the effect of the discharge on the original/current loan?
I have no declaration or other evidence from Wells Fargo as to its purpose. If the Debtor can provide such a declaration, I will consider it. Otherwise, the Debtor is to provide me with the name, email address, and phone number of the person at Wells Fargo who can be contacted at the time of the hearing. I strongly suggest that Wells Fargo be asked to arrange that this person be in higher management with the knowledge and authority to deal with this or that s/he be an attorney for Wells Fargo who is fully cognizant of the details of this loan and the purpose for which the reaffirmation agreement is being requested.”
In short if you have applied for a new loan and you get this ridiculous response from the bank that you did not reaffirm your loan, ask for the person giving you this response, to please give you a letter stating the same with his name and address, because the bankruptcy judge has some questions for him.
I have sincere doubts as to whether you will ever receive such a letter.
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Los Angeles/Orange County Chapter 7 Bankruptcy Attorney- A Debt Relief Agency.
- Law Offices MJ Mann Bankruptcy Attorney
- 2706 Artesia Blvd, Suite BK
- Redondo Beach, CA 90278
- 310.376.9865
