Expert: Terry Leeders - 5/6/2009

Question
In March 2007, I was granted a Ch. 7 Bankruptcy discharge in Michigan.  I signed a re-affirmation agreement on both my primary and secondary mortgage (80/20).  However, the owner of my primary mortgage DID NOT accept the reaffirmation agreement and closed the account.  The owner of my secondary mortgage DID accept the reaffirmation.  I have continued paying my mortgage, but will need to vacate the premises soon.  I have two questions:
Who owns the house?
Can I walk away and continue to pay the secondary loan in installments and surrender my deed to the primary mortgage holder?


Answer
If the reaffirmation wasn't filed, then it technically isn't valid.
You still own the home, but they (both) still have a lien on the home, which they can foreclose on at any time if you are in default.  While not technically allowed, the lenders often let you keep the home if you continue to make the regular payments on the mortgage without a reaffirmation agreement.  The downside is that you do not get credit for the payments on your credit report.  If you want to keep it, I suggest looking to refinance, which then becomes a brand new loan. If you want to walk away, and it forecloses, you could be on the hook for the 2nd mortgage if it doesn't get paid off in the foreclosure sale because you signed the reaffirmation.