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
Hi JonLedin!
Welcome to forums!
I guess there has been a misunderstanding. A 1099c form means that you debt has been forgiven by the lender ad you're liable for the taxes on that forgiven amount. Once the mortgage has been forgiven, the lender will not be able to come after you to collect the dues. In that case the lender will not be able to come after you for collecting the dues.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I guess there has been a misunderstanding. A 1099c form means that you debt has been forgiven by the lender ad you're liable for the taxes on that forgiven amount. Once the mortgage has been forgiven, the lender will not be able to come after you to collect the dues. In that case the lender will not be able to come after you for collecting the dues.
Feel free to ask if you've further queries.
Sussane
My 2nd mortgage was charged off in 2008. My credit report shows PAID/CLOSED. I have never been contacted for any kind of payment - no collections. When I called the lender they had no record of me or my loan. Can I get the lien removed? if so, how?
I received a letter from a lawyer regarding my 2nd mortgage :notice to sale property
I was told my 2nd mortgage on default for non replacement of a cheque nsf... it was replaced, however, a after month, the bank deduct the monthly pay...then after that no more deductions made...i called why no more deductions from my bank...i was told that it is because my 2nd mortgage was already in the hands of their client (lawyer)...
I called their lawyer, i spoke and i faxed my request to the 2nd mortgage company of my intent to put my account to date...and even wishes to renew my 2nd mortgage with them. My question: what do i do this time... i am so confused...can i ask my first mortgage to assumed the 2nd mortgage?
I was told my 2nd mortgage on default for non replacement of a cheque nsf... it was replaced, however, a after month, the bank deduct the monthly pay...then after that no more deductions made...i called why no more deductions from my bank...i was told that it is because my 2nd mortgage was already in the hands of their client (lawyer)...
I called their lawyer, i spoke and i faxed my request to the 2nd mortgage company of my intent to put my account to date...and even wishes to renew my 2nd mortgage with them. My question: what do i do this time... i am so confused...can i ask my first mortgage to assumed the 2nd mortgage?
hi persephone,
if the lender has not assigned the account to a collection agency and has forgiven the dues, then you can contact the lender and ask him to give you a lien release certificate. this will help you in removing the lien from the property.
to jjjil,
if your second mortgage has been charged and assigned to a collection agency, then you'll have to contact them and negotiate for a payment plan in order to pay off the dues.
if the lender has not assigned the account to a collection agency and has forgiven the dues, then you can contact the lender and ask him to give you a lien release certificate. this will help you in removing the lien from the property.
to jjjil,
if your second mortgage has been charged and assigned to a collection agency, then you'll have to contact them and negotiate for a payment plan in order to pay off the dues.
MORTGAGE COM. PUTTING SCREWS TO ME AND LYING.
Hi JEWEL,
It will be better if you could explain your situation in details. This will help me as well as other forum members to offer you a suggestion.
Thanks,
Jerry
It will be better if you could explain your situation in details. This will help me as well as other forum members to offer you a suggestion.
Thanks,
Jerry
Our first mortgage has been modified, but our second mortgage has been "charged off". What are my remedies and what remedies does the loan holder have against me.
Hi Les,
You've mentioned that the second mortgage lender has charged off your account. This means that the lender has declared your mortgage account as un-collectible. You will have to contact the lender and find out if he has assigned the account to any collection agency. If yes, then you'll have to negotiate with that collection agency and pay off the dues.
You've mentioned that the second mortgage lender has charged off your account. This means that the lender has declared your mortgage account as un-collectible. You will have to contact the lender and find out if he has assigned the account to any collection agency. If yes, then you'll have to negotiate with that collection agency and pay off the dues.
We have two mortgages on our property, the first with Citi and 2nd with Chase. We are 85 days behind on our 2nd, first is already approved for modification and working on the second modification. Chase threatening to charge off when the account is not even 90 days delinquent, and would not accept any partial payments. Any ideas how to deal with this.
We had a mortgage loan through a company that stopped doing mortgages. The loan was sent to a collection agency and they agreed to a short sale. After having an appraiser come out and survey our home they gave us a settlement amount of approx. $19,000 for the area (original loan amount $130,000). They set up a few appointments for people to come see the house and after about 3 or 4 showings we never heard from them again. It is now showing on our credit that the mortgage has been charged off. What does this mean as far as we're concerned? Can we still continue to live here? How do we make sure no one comes after us and our stuff doesn't end up on the street out of the blue? There is not even any contact information to reach anyone. We are so confused. Please help!
Hi Ashfaq,
You will have to negotiate with the lender so that he accepts your partial payments. You should contact your lender and let him know about your financial situation. If the lender is convinced about your financial situation, then youl be able to get a payment plan from him which will make it affordable for you to pay off the dues.
To anonymous,
Charge off means that your lender has declared the mortgage account as uncollectible. The lender will not collect the payments from you. He may now assign the account to a collection agency who will in turn collect the dues from you. You will be able to stay in the property but the charge off will remain on your credit report.
Thanks
You will have to negotiate with the lender so that he accepts your partial payments. You should contact your lender and let him know about your financial situation. If the lender is convinced about your financial situation, then youl be able to get a payment plan from him which will make it affordable for you to pay off the dues.
To anonymous,
Charge off means that your lender has declared the mortgage account as uncollectible. The lender will not collect the payments from you. He may now assign the account to a collection agency who will in turn collect the dues from you. You will be able to stay in the property but the charge off will remain on your credit report.
Thanks
is it wise to allow CA to place lien on my property until I can pay an unsecured debt I owe?
Hi Guest,
If you let the CA place a lien on your property, then it will be difficult for you to sell off the property unless you pay off the lien. Rather, you should contact the CA and set up a payment plan with them to pay off the dues.
To Elmo,
In my opinion, it is better to negotiate with the CA regarding your primary residence first. Once you complete this dealing, then you can start dealing with the CA regarding your rental property. As far as getting an offer is concerned, it will depend upon your CA. You'll have to negotiate with them in this regard.
Thanks
If you let the CA place a lien on your property, then it will be difficult for you to sell off the property unless you pay off the lien. Rather, you should contact the CA and set up a payment plan with them to pay off the dues.
To Elmo,
In my opinion, it is better to negotiate with the CA regarding your primary residence first. Once you complete this dealing, then you can start dealing with the CA regarding your rental property. As far as getting an offer is concerned, it will depend upon your CA. You'll have to negotiate with them in this regard.
Thanks
we are relocating for a job and our home is worth more than our 1st but not more than the combined 1st and 2nd. We'd like to settle directly with our second and then sell it and pay off our 1st in full while avoiding a short sale or any credit implications. Have you seen this? How receptive would the 2nd lender be to a settlement or a recharacterization of the loan as unsecured. It's not an issue of not being able to afford payments. Thank you!