Is it legal for them to charge us with mortgage insurance? 13 Answers as of February 05, 2015

I filed chapter 7 in 2010 and did not reaffirm the mortgage. We are still paying our mortgage payment to the bank, but we are also paying mortgage insurance of $131.00 per month. Is this legal for them to charge this, if they say we are free and clear of any mortgage and they will not work with us to reaffirm?

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David R. Fondren, Attorney at Law
David R. Fondren, Attorney at Law | David R. Fondren
I am not 100% sure. However, If they obtained mortgage insurance to protect themselves if you choose to stop voluntarily sending payments, and, if they provide proof of the policy, then I think they can. There is no longer a contract between the parties. They have a valid lien on your home.
Answer Applies to: Missouri
Replied: 2/5/2015
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
Just because you did not reaffirm does not mean you are free and clear. You are not personally liable for the promissory note because of the chapter 7 bankruptcy but the bank still has the mortgage as collateral and if you do not pay as per the terms of that mortgage then you are in default and they can foreclose.
Answer Applies to: New York
Replied: 2/2/2015
Ronald K. Nims LLC | Ronald K. Nims
Since you have an unreaffirmed debt, you're not personally liable but the bank still has a lien on the house. They can make any charges that are permitted in the mortgage. So if they're allowed to charge PMI by the terms of the mortgage, it's not prohibited. It's illegal to reaffirm after your bankruptcy case has closed. It's illegal for change the terms of the mortgage, even if you agree, after your bankruptcy case is closed. The bank is also prohibited from taking any action to collect from you, some banks refuse to even communicate with you to avoid any possible allegation that it was a veiled collection action. Generally, I advise clients in your position to refinance with a different lender (a refi might be interpreted as an illegal reaffirmation so the same lender can't do it).
Answer Applies to: Ohio
Replied: 1/29/2015
You can just continue to make the monthly payments even though you did not make a reaffirmation agreement. The original mortgage probably required that you have insurance on the home.? Though you no longer legally owe the debt you must abide by the terms of the mortgage otherwise they could foreclose.
Answer Applies to: Minnesota
Replied: 1/28/2015
Tokarska Law Center
Tokarska Law Center | Kathryn U. Tokarska
While the debt has been discharged and your payments are voluntary, the lender retains a deed of trust on the property. If you do not make payments they can foreclose.
Answer Applies to: California
Replied: 1/28/2015
    The Orantes Law Firm
    The Orantes Law Firm | Giovanni Orantes
    Most loan documents require that the property be insured. So, the lender is within its rights to seek reimbursement for the insurance payment. Thus, the only way not to continue to pay the insurance is to let the property go and move out because it is true that you are no longer liable personal for it. The only thing that is liable for the un-reaffirmed debt is the property itself and if you stop paying what the loan documents require, the lender can foreclose on the property. Now, if you intend to keep the property, I would suggest that you pay the property insurance yourself through your own broker and inform the bank of that (which should cause them to stop billing you for such insurance) because the policies banks usually protect only the bank, not the borrower.
    Answer Applies to: California
    Replied: 1/28/2015
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Yes, you have to pay the mortgage insurance if you want to stay in the house. You can refinance with a different lender. You are not stuck with the one you have.
    Answer Applies to: California
    Replied: 1/28/2015
    GARCIA & GONZALES, P.C. | Richard N. Gonzales
    Yes. If you want to keep the home, you have to pay according to the original terms of the promissory note and deed of trust (mortgage). If you decide to "walk away" from the home in the future for whatever reason, you will not have any personal liability.
    Answer Applies to: Colorado
    Replied: 1/28/2015
    R. Steven Chambers PLLC | R. Steven Chambers PLLC
    Yes. If you want to stay in the house you have to abide by the terms of the mortgage loan documents, which includes providing insurance as required. Because you have a discharge and did not reaffirm the debt you can walk away at any time but as long as you want to remain in the house you have to pay.
    Answer Applies to: Utah
    Replied: 1/28/2015
    Richard B. Jacobson & Associates, LLC | Richard B. Jacobson
    It certainly does not seem right. If they won't agree to a reaffirmation, then as soon as the Court grants a discharge you are released from the mortgage note. The lender, of course, retains the mortgage. If you want to keep the house without reaffirming, you can continue to make the payments although you will not get points on your credit score for doing so. Discuss this with your lawyer very soon. He or she might be able to convince the lender to drop this charge. Also review your copies of your mortgage and notes to see if something in them gives the lender this right. Good Luck.
    Answer Applies to: Wisconsin
    Replied: 1/28/2015
    Hoang & Tran PLLC | Adam Tran
    I am not clear. It is my understanding that you did NOT reaffirm your mortgage. If you did NOT reaffirm your mortgage you do not need to make any further payments of any kind to the lender (i.e. principal, interest, mortgage insurance, etc)- BUT, you will probably be required to surrender your property to the lender. However, if you are reaffirming the mortgage, which INCLUDES the mortgage insurance, then you need to pay the principal, interest and mortgage insurance. I do not believe that you can piecemeal or parse out the mortgage. You probably need to sit down with an attorney to clarify your concern.
    Answer Applies to: Texas
    Replied: 1/28/2015
    John W. Lee, PC
    John W. Lee, PC | Kim A. Lewis
    It's not quite clear from your question if you were paying mortgage insurance before you filed bankruptcy or if they added it after you filed. If your original loan required mortgage insurance then they can continue to charge you. If they added it after you were discharged that might be a violation of your discharge.
    Answer Applies to: Virginia
    Replied: 1/28/2015
    Scott Goldstein | Scott Goldstein
    Unfortunately, it is. The mortgage obligation and security is separate from the note, which was discharged. The lender is entitled to charge PMI and to collect escrows if you are still paying the mortgage. And no, before anyone asks, they have absolutely NO obligation to modify the mortgage and it is too late to reaffirm.
    Answer Applies to: New Jersey
    Replied: 1/28/2015
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