Expert: Norma Duenas - California Bankruptcy Attorney - 1/8/2010

Question
We filed Chapter 7 and was discharged a few months ago.  I noticed looking at my credit report that my current home was included in the BK.  I just bought this house 9 months ago, with a FHA 30 fixed rate loan.  Will the bank drop PMI after it reaches 80% LTV?  Or will I need to reaffirm the mortgage?  I plan on staying in the house for the 30 years, if I dont reaffirm is there negative consequences??

Answer
With regard to your first question, whether the bank will drop your PMI after it reaches 80% LTV has nothing to do with you signing a reaffirmation agreement, and it should not be impacted by it. You should not need to sign a reaffirmation agreement for this.

As to your second question on whether signing a reaffirmation agreement has negative consequences. From my point of view it generally should not have negative consequences. Reaffirming a mortgage means that you are bound by the terms, conditions and liability of your mortgage that would have otherwise been discharged in bankruptcy. If you did not reaffirm your mortgage, and for some reason circumstances change where you are not able to keep making payments on the home, then the mortgage company should not have a right to seek a deficiency against you for the remaining balance. Generally if you continue to make your payments on time on your mortgage you should not have an issues staying in your home. It is generally not common for mortgage companies to require you to reaffirm your mortgage in order to stay in the home. If you need further assistance contact me through http://www.socaladvocates.com