Posted on: 07th Dec, 2006 03:49pm
If you haven't paid your mortgage for 6 months or you've been through a foreclosure or short sale wherein you couldn't pay off the second loan after getting rid of the first, your lender is likely to issue a second mortgage charge-off.
What is second mortgage charge-off all about?
If your second mtg lender intends to charge off the loan, it means he's declaring the debt as uncollectible. So, the lender will no longer collect payments from you. But this doesn't mean that you don't owe the money. The lender reports the debt as a loss when he files a Profit and Loss Statement (for his company) with the Internal Revenue Service. He sells off or assigns the debt to a collection agency that'll collect the payments on his behalf. So, your debt hasn't been canceled or forgiven.
When a second loan is charged off after a foreclosure/short sale on the property, the mortgage is considered as an unsecured debt since the collateral has been sold off already.
When a second loan is charged off after a foreclosure/short sale on the property, the mortgage is considered as an unsecured debt since the collateral has been sold off already.
What happens after a second loan charge-off?
When a second loan is charged off and sold to a collection agency (CA), it's essential that you negotiate an alternative payment plan with the CA. In case you can't meet up with the monthly loan payments, you may settle the debt for an amount less than what you owe to the CA. Otherwise, you may face any of the consequences explained below:
However, when the second mtg debt is settled, you may have to pay tax on the balance forgiven by the lender. This is because the balance forgiven or canceled debt is considered as your income. But you can avoid paying the tax provided you qualify for mortgage debt forgiveness.
- CA may sue you: If you don't make any payment towards the mortgage, the CA may file a lawsuit against you during the SOL (Statute of Limitation) period. Once you decide to settle the debt, make sure you get a settlement agreement in writing from the CA.
- Property retains the 2nd lien: The charge-off does not remove the second lien from your property unless you pay it off.
However, when the second mtg debt is settled, you may have to pay tax on the balance forgiven by the lender. This is because the balance forgiven or canceled debt is considered as your income. But you can avoid paying the tax provided you qualify for mortgage debt forgiveness.
Will I get 1099-C Form after a second loan charge-off?
Since a charge-off doesn't imply cancellation of debt, therefore the lender won't send you a 1099-C Form. Such a form is sent only when a lender cancels your debt and reports it to the IRS as a tax loss.
Can I remove second loan charge-off from credit report?
You can have the charge-off removed from your report only when you settle or pay off the account in full. Unless you make payments towards the account, the negative item will reflect on your credit report for 7 years. After you settle or pay the charged-off account in full, request the collection agency to update the account status as "Settled charge-off" or "Paid in full" respectively. However, a "Paid in full" is certainly better than a "Settled charge-off" status on your credit report. Know more on how to remove charge-off from credit report.
When a second mortgage is charged off, it brings down your credit score by 50 points or more depending upon the other negative items you may have on your report. The best way to get rid of this negative item is to pay down the debt asap and negotiate with the CA to update your account status accordingly.
When a second mortgage is charged off, it brings down your credit score by 50 points or more depending upon the other negative items you may have on your report. The best way to get rid of this negative item is to pay down the debt asap and negotiate with the CA to update your account status accordingly.
Our 2nd mortgage with beneficial was an original 15,000.00 loan. It has escalated to 32,000.00. They are going to charge off this month. My husband is disabled & 1 child disabled. The loan is only in his name. But my name is on the deed. I understand a 1099 we will receive. What happens to the charge off. with a lien against the home. Will it come off in 7 years? Thanks, Melissa
I have a 30,000 2nd mortgage from 2000 and about 20,000 in credit cards, all have been charged off as bad debts and have fell off my credit report. If I pay any off now will it affect my score that is already in th 630's. I got divorced in 2000, was preg. with my daughter and was on high risk preg. medical leave from work, making 88.00 a month to pay all my bills, I lost everything at that time and am still trying to rebuild my credit. Any advice would be helpful.
Hi mist!
Welcome to forums!
If you pay the charged off account, it will help you in improving your credit scores. It will help you in improving your creditworthiness in front of your creditors/lenders. You can even check out the given page in order to know some steps to improve your score:
http://www.mortgagefit.com/credit-rating/credit-repair.html
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you pay the charged off account, it will help you in improving your credit scores. It will help you in improving your creditworthiness in front of your creditors/lenders. You can even check out the given page in order to know some steps to improve your score:
http://www.mortgagefit.com/credit-rating/credit-repair.html
Feel free to ask if you've further queries.
Sussane
Hi. I currently owe $170K on my 1st, and $306K on my Equity Line (2nd). My house is worth $380K. My 1st is IndyMac, my 2nd JP Chase. IndyMac refuses to modify for me. JPChase offered to modify but the payment is still more that I can afford. JPChase told me that I have 48 hours to accept or decline their offer. If I decline, they will Charge off the $306K. Then, it is off to Collections. Can Chase foreclose on me? Or is the charge off their way of giving up on me. Further, if I negotiate with the collection agency and pay them off, will the lien be removed from my home?
Hi Riverdude,
Once the loan account is sent to collections, the lender will not foreclose the property. It is the collection agency who can harass you for the payments. You can negotiate with the collection agency and try to get a repayment plan to pay off the balance amount.
Thanks
Once the loan account is sent to collections, the lender will not foreclose the property. It is the collection agency who can harass you for the payments. You can negotiate with the collection agency and try to get a repayment plan to pay off the balance amount.
Thanks
We had a foreclosure sale in January of this year, redemption period is done on July 7th, 2010. The bank Wells Fargo, went into our personal account and removed $1670.00 and we did not know about it. We just received a letter in the mail that said they have the right to setoff our account. Is there anything I can do.
Hi kristenb!
Welcome to forums!
I did not understand as to why the lender deducted money from your personal account. You should contact your lender and ask him to clarify the matter. He cannot deduct money from your account unless he gives you a valid reason for the same.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I did not understand as to why the lender deducted money from your personal account. You should contact your lender and ask him to clarify the matter. He cannot deduct money from your account unless he gives you a valid reason for the same.
Feel free to ask if you've further queries.
Sussane
my second mortgage with chase has been charged-off . i have 75,000 loan/debt and negotiated with chase is for 7,000 lump sum and 600.00 monthly reviewable every six months.chase states we cant have a written contract, is this true?
Welcome yonis,
You should contact Chase and insist for a written contract. Once you have a written contract, Chase will not be able to change the terms as per its wishes.
You should contact Chase and insist for a written contract. Once you have a written contract, Chase will not be able to change the terms as per its wishes.
If you don't make any payment towards the mortgage, the CA may file a lawsuit against you during the SOL (Statute of Limitation) period.
What is the SOL?
I have been paying for 2 years now and husband has lost his job, we cannot pay anymore.
What is the SOL?
I have been paying for 2 years now and husband has lost his job, we cannot pay anymore.
Hi Yvonne,
A statute of limitation (SOL) is a statute which prescribes a given time period during which legal action can be taken by the collection agency against the borrower regarding an unpaid debt.
A statute of limitation (SOL) is a statute which prescribes a given time period during which legal action can be taken by the collection agency against the borrower regarding an unpaid debt.
I have defaulted loan that has been charged to my property,solely in my name.My wife and I are splitting up and she is keeping the house can the second charge be removed as the house will be solely in her name.
Hi aj!
Welcome to forums!
The second mortgage has been charged off and has now become unsecured. However, it will not be removed. Rather, you'll have to pay it off in full.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The second mortgage has been charged off and has now become unsecured. However, it will not be removed. Rather, you'll have to pay it off in full.
Feel free to ask if you've further queries.
Sussane
Hi, i filed for bankrupcy, and not working, i don't have money to pay for my second mortgage, can I just stop paying, what can happens. Can I loose my home, I owe 270k on the house 2 mortgages, the house is worth only about 160 k. Thanks.
Hi Kaiser,
If you've filed bankruptcy and included the property and the mortgage in the filing, then you don't have to make the payments on your second loan. If you've filed Chapter 7 and surrender the property to the trustee, then you'll lose the home.
Take care.
If you've filed bankruptcy and included the property and the mortgage in the filing, then you don't have to make the payments on your second loan. If you've filed Chapter 7 and surrender the property to the trustee, then you'll lose the home.
Take care.
According to you and the IRS a 1099 C cancellation of debt means the debt has not been forgiven. However, I received the property in my father's name through a trustee's deed in probate and then received a 1099 C cancellation of debt in my fathers name which cancelled the entire mortgage debt. The trustees deed says: "grentee(referring to me) is discharged from debts(referring to my mother and fathers estate)."
So, I received the property through probate with a trustees deed and then 1099 C in my fathers name showing the entire mortgage cancelled. I did not have to include the cancellation of debt as income since
I am exempt by federal law. The mortgage company still says I owe the mortgage but has failed to collect or foreclose. This is a junior mortgage that
was secured by my father and mother and their estate is insolvent and I submitted tax forms showing the estate as insolvent.
I filed an lawsuit for quiet title saying the
mortgage is unenforceable since it was cancelled and
the mortgage company failed to foreclose or seek collection of its mortgage.
Am I still responsible for paying this mortgage when there is no collection action or foreclosure action?
So, I received the property through probate with a trustees deed and then 1099 C in my fathers name showing the entire mortgage cancelled. I did not have to include the cancellation of debt as income since
I am exempt by federal law. The mortgage company still says I owe the mortgage but has failed to collect or foreclose. This is a junior mortgage that
was secured by my father and mother and their estate is insolvent and I submitted tax forms showing the estate as insolvent.
I filed an lawsuit for quiet title saying the
mortgage is unenforceable since it was cancelled and
the mortgage company failed to foreclose or seek collection of its mortgage.
Am I still responsible for paying this mortgage when there is no collection action or foreclosure action?