Posted on Oct 30, 2013

Many of my chapter 7 clients that want to keep their home after bankruptcy decide to sign a "Reaffirmation Agreement" with the mortgage servicer. A reaffirmation agreement is a "new promise to pay" the mortgage loan.

The debtor (the borrower) will be liable for the mortgage debt after the bankruptcy if they sign a reaffirmation agreement, whereas the debt itself would be discharged otherwise (the lien on the property is still valid). A reaffirmation agreement must be entered into before the discharge in bankruptcy, and must be filed with the court.

Mortgage servicers don't require debtors to sign a Reaffirmation Agreement on a mortgage. But without one, a mortgage loan may continue to be serviced or handled in the mortgage company's "bankruptcy department." They may be unwilling to send the borrower monthly statements; they may not be willing to give the borrower routine forebearances or other accommodations; and they may report the debt as discharged to the credit bureaus.

Anyway, we requested a reaffirmation agreement from Ocwen recently, and we just received their reply. First of all, they don't prepare them; they make us prepare them, even though we don't have the exact figures to complete the form, they do. We are instructed to call their customer service number and get the figures (in Mumbai?). We will try that, but I bet that it is nearly impossible to accomplish.

Also, they will only do a reaffirmation if the borrower is contractually current and has been for the last 6 months and have no outstanding fees or costs. And they will only do it within 45 days of the Meeting of Creditors. And they won't file the Reaffirmation; they will only sign it and send it back to us, so we have to sign it.

So, I don't know if any of my clients will qualify for an Ocwen Reaffirmation Agreement; I've yet to see an Ocwen monthly statement that didn't have some "junk" fees or costs on it. I don't know how this could be considered good servicing of mortgages; I would think it would be in the mortgage owner's interest for the loan to be reaffirmed. Apparently Ocwen doesn't think so.

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J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization