What do I do if my second mortgage is in charge off status,

a second mortgage holder cannot do anything but wait ( unless they are the same bank ) they are in the second position and therefore cannot initiate foreclosure untill the first mortgage calls the loan due or they are in first position ( first motrtgage been paid off ). however expect your second mortgage to charge off and your credit will be hurt significantly. you will likely never will be able to purchase another home and will continue incurring late fees and interest on your second mortgage. in addition if you ever attempt to sell or refinance the home they will come and collect the ballance you owe them before you get your money.

Hi Gaskill & Eugene,

Welcome to Mortgagefit forum.

"what are the possible repercussions if I continue only to pay my monthly payment with my first mortgage?"

Gaskill if you continue paying only the first mortgage, the second mortgage has very less powers to do anything against you. The reason is that his mortgage lien is subordinate to the first mortgage lien.

What it means that even if the mortgage is in default, he will not attempt to foreclose as if he forecloses then he will have to pay off the first mortgage balance out of the sale balance and then anything left after first mortgage is paid can be used in settling the second mortgage dues.

First mortgage holder has the right to recover his dues first because of the first lien position. And if any other subordinate loan attempts recovery of their dues they will have to pay off the first mortgage holder.

But as the second mortgage holder has charged off the loan, it is affecting your credit score. You score must be going down because of the charge off. It will have an affect if in future you plan to take any other type of loan. And the interest rates charged from you will be quite higher than normal because of the second mortgage charge off on your credit report.

Colin

Hi Gaskill,

As the second lien holder has charged off the loan, it means that you no longer have to pay for the outstanding debts towards the second loan. But the lender may inform this to the IRS and you may have to pay the income tax on the amount of the forgiven debt. To know more on the consequences after a loan is charged off, please refer to: http://www.mortgagefit.com/foreclosure/charge-off.html

In regards to the information given about the charge off, you DO still have to pay for your outstanding debt. A charge off is an accounting function that affects the company internally. The mortgage company is basically taking a loss on your bad debt, since you are not paying. You receive a 1099-C at the end of the year, and have to claim the entire amount as income.

You still owe the debt, they will still come after you, and they can still refer you to outside collection agencies who will pursue payment.

Also, the second lien holder can and will foreclose on you for non-payment if foreclosure is warranted. The second lien holder will complete a financial analysis and review the expected return due to them. If the return qualifies under their guidelines, they will commence foreclosure, pay off your senior lien, and take title to your property.

In this case, since they charged off your second lien, they have already made the determination that foreclosure is not warranted.

When you choose to sell your home, the second lien holder still has a lien on your property, and you will need to satisfy both the first and second lien in order to sell.

If your first lien goes into foreclosure, and the bid amount at the sale is not enough to satisfy your total debt, it will create a deficiency balance which you may be liable to pay, depending on your state law.

You would still be responsible for the 2nd lien, regardless of the foreclosure as you signed under the terms of the note.

Hope the info helps!

Hi. my morgage is in charge off status and the morgage company said that if i pay somthing a month . they will not foreclose on my home. Can i trust that? The morgage will not give me the agreement in writing, but the said i can keep my home. What can i do?

you have two options - do what they've suggested and hope they back up their word with deeds; or do nothing and let them foreclose.

as long as you've got proper receipts for payments made, or canceled checks or some other documentation, you can't be hurt. that is, unless you're heading for foreclosure no matter what happens. obviously, all the payments they'd be looking for would have to arrive or else they'd begin the foreclosure.

if the lender charges the loan off and you get a 1099c, well yes there is a tax consequence but if this is the case, then the lender can not pursue the debt any longer as the gain has to be settled with the IRS. Therefore, how is the lien removed from title?

Hi Guest,

You need to get the lien release certificate from your lender itself. No one else can give you the lien release certificate.

Thanks

hello,I'm trying to modify my first mortgage (wells fargo), however the second lien has been charged off. I was told that i need a subordination agreement from the second lien, however the mortgage company has gone out of business, the service provider is wells Fargo, they have informed me that until I'm able to obtain that agreement, I do not qualify for the modification on the first mortgage. How do i go about obtaining this agreement, can someone please advise

Hi Tara!

Welcome to forums!

You can contact Wells Fargo and negotiate with them so that they provide you with the subordination agreement. However, it will be their discretion whether or not they will provide you with that agreement.

Feel free to ask if you've further queries.

Sussane

Hi Sussane


Thanks for responding!

Wells Fargo informed me that i would need to obtain the subordination agreement from the loan provider which is south star funding who have since gone out of business. Wells Fargo stated they're just the servicer of the loan. Wells Fargo is the mortgage company for my first lien, i even asked them what steps i should take because now the second lien has been charged off. I feel like I am going in circles.

Tara

Hi Tara,

I can understand what you must be going through. You're in a tough situation as the original lender has gone out of business. I will suggest you to contact an attorney and take his opinion in this matter.

My first mortage with Aurora / Nationstar is current. My 2nd mortgage with B of A charged off from the bank but has not sold to another institution. They accepted monthly payments for several months, said they would renew but that the account is charged off and won't be reopened and that within a year I need to pay a settlement or refinance (which I would be unlikely to qualify for). Is it possible for them to reinstate either with an agreement or if I pay what is in arrears (6 months plus fees)? If I pay a settlement will that harm my credit any worse than the charge off that is currently on my credit. If I bring it current will the charge off remain on my credit. If I pay an agreed settlement will the charge off remain?

If you pay what you owe along with the late fees, then their are chances that the lender will be able to reinstate your loan.

Hi,I live in Florida and my husband is in the middle of doing a modification with wells Fargo which is the first loan. Wells Fargo has told us that they need a subordination agreement,from suntrust bank which is the second loan. My husband spoke to Suntrust(second loan) and asked to fax the subordination agreement to Wells fargo,but suntrust is giving us a hard time,they haven't faxed anything and they told my husband that he better vibrant friends and family to payoff the second mortgage,which they want to settle if we pay a lump sum of 10,000. We have been making some payments to the second loan,and all wells Fargo is asking for is that subordination agreement. And suntrust told my husband they are in first lien position,but Wells Fargo our first mortgage has spoken to my husband and they said that they have first lean,they still hold they first mortgage. Help,we don't want to lose our home,and Wells Fargo already has a modification that we can afford,but suntrust is being a bully about the whole situation,what should we do,does suntrust have the right not to give us the subordination agreement? Please any advice would be helpful