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 am four months into my trial mod period with Chase. I have a second (equity line) with US Bank. When should I talk to US Bank about coming to some sort of settlement on my 2nd. As of right now I have not missed a payment on my 2nd. In fact I still have available credit of 60K. It has never been adjusted even though the value of my home has dropped in half. My question is should I wait to clue in US Bank until after my 1st is modified or should I talk to them now?
to beachbound,
the first lender will have higher claims over the property. the second mortgage is subordinate to your first loan. you will have to negotiate with your first lender in order to sell off the property and get rid of it. once the property is sold off, you can negotiate with the second lender and request him to forgive the balance loan.
to flowzip,
your query has been replied to in the given page:
http://www.mortgagefit.com/postdeal/about44695.html#185218
take a look at it. hope it helps you.
the first lender will have higher claims over the property. the second mortgage is subordinate to your first loan. you will have to negotiate with your first lender in order to sell off the property and get rid of it. once the property is sold off, you can negotiate with the second lender and request him to forgive the balance loan.
to flowzip,
your query has been replied to in the given page:
http://www.mortgagefit.com/postdeal/about44695.html#185218
take a look at it. hope it helps you.
We have a 2nd mortgage on a commercial building which has been charged off. We have not been able to make the full payment since March, but have paid at least 1/2 or more every month. (Payment is $825 - we pay between $400 - $525) We never receive any coorespondence from the collection agency. This month our payment was returned. We can't seem to get any answers. Can you help me understand what is happening?
Hi EncoreDeb,
As you are not making the full payments, you don't receive any statement from the collection agency. You should contact the collection agency and negotiate with them so that they can reduce your payments and give you an affordable payment plan which will help you in paying off the dues.
As you are not making the full payments, you don't receive any statement from the collection agency. You should contact the collection agency and negotiate with them so that they can reduce your payments and give you an affordable payment plan which will help you in paying off the dues.
if your home is taken for unpaid property taxes,are you still responceable for a morgage charge off.
You will be liable for charged off mortgage balance. You will be liable for paying off the dues.
i refied about 4 years ago and i think ive got myself in a jam.I owe 540,000 on my first and secdond and the house is currently worth about 380,000.The worst part is I notice the 1st and 2nds seem to never pay down any of the principle mortgage and seem to be "interest only"payments right now.When I called National City about my 2nd they said that in 10 years it will start to pay down the principle yet my payment will be about high 500's/month and we pay 350 ish/mo now.So is the first going to adjust the same way and if it does with the same % of increase i'll be sunk.We had a bankruptcy about 2 years ago with a franchise business rip off gone bad so our credit is not so perfect and that coupled with being upside down in the mortgage i'm lost !!!any ideas would be greatly appreciated
habitat for humanity has my first mortgage....beneficial has secound ive lost my job due to downsizeing and can no longer pay beneficial ..still paying habitat past due is to much to catch up to they wont talk about it....beneficial calls and gets threatning what to do
Hi superher,
As you don't have equity in your property, you won't be able to refinance your mortgage for better rates and terms. If you want to save the property, then you should apply for a loan modification. This will help you in getting a better payment plan to pay off the dues. However, your term for loan payment will get increased.
To tacojoe,
You should contact your second mortgage lender and try to get a payment plan to pay off the dues in a better manner. You can even apply for a loan modification with them. However, it will be the second mortgage lender's discretion whether or not he will consider your request.
Thanks
As you don't have equity in your property, you won't be able to refinance your mortgage for better rates and terms. If you want to save the property, then you should apply for a loan modification. This will help you in getting a better payment plan to pay off the dues. However, your term for loan payment will get increased.
To tacojoe,
You should contact your second mortgage lender and try to get a payment plan to pay off the dues in a better manner. You can even apply for a loan modification with them. However, it will be the second mortgage lender's discretion whether or not he will consider your request.
Thanks
i hired someone to help with both loans the first was on the hamp by the time this was done they told me the 2nd was in collections now they are no where to be found i have recieved a letter from a collections agency what do i do
Hi jeannie,
As your account has been sent to collections, the collection agency will come after you in order to recover the dues. You will have to negotiate with them in order to pay off the dues and get rid of the debt.
As your account has been sent to collections, the collection agency will come after you in order to recover the dues. You will have to negotiate with them in order to pay off the dues and get rid of the debt.
Hi Jessica,
We transacted a short sale on our home with the bank holding our 2nd Mortgage earlier this year. When the transaction was underway, I emailed the person at the bank helping us with the process and explicitly asked if, after the conclusion of the short sale, the account would be paid in full and we would not be held responsible for anything further. He confirmed back in writing (via email) that once they received the payout amount agreed upon for the short sale, my account would be "paid in full" and I would not be held responsible for the deficiency.
So now, several months later, I'm suddenly getting calls from a collection agency. When I called back and asked why they were calling, I was told that the bank we had the 2nd mortgage with had turned the account over for collection. I asked that they stop calling me and submit any inquiries in writing and that I would reply in writing. The agent was extremely belligerent, and i'm guessing that's not going to be the end of these calls!
So today I both phoned and emailed the bank agent who helped with the short sale and assured me that following that sale, the account would present as "paid in full". I forwarded back to him, as reference, his email to me confirming this. I let him know that I'm now being harassed by a debt collector. So far, no reply from him.
I checked my credit report and while my overall score is still Good (above 700), I do see that the account in question is showing up as charged off vs. settled in full.
According to some internet research, this debt collector is known for fraudulent practices and is being sued for same. Now I'm trying to figure out: does it seem more likely that this debt collector is coming after me via fraud, or that the bank agent who did my short sale was wrong or lying to me? Or perhaps none of the above?
We transacted a short sale on our home with the bank holding our 2nd Mortgage earlier this year. When the transaction was underway, I emailed the person at the bank helping us with the process and explicitly asked if, after the conclusion of the short sale, the account would be paid in full and we would not be held responsible for anything further. He confirmed back in writing (via email) that once they received the payout amount agreed upon for the short sale, my account would be "paid in full" and I would not be held responsible for the deficiency.
So now, several months later, I'm suddenly getting calls from a collection agency. When I called back and asked why they were calling, I was told that the bank we had the 2nd mortgage with had turned the account over for collection. I asked that they stop calling me and submit any inquiries in writing and that I would reply in writing. The agent was extremely belligerent, and i'm guessing that's not going to be the end of these calls!
So today I both phoned and emailed the bank agent who helped with the short sale and assured me that following that sale, the account would present as "paid in full". I forwarded back to him, as reference, his email to me confirming this. I let him know that I'm now being harassed by a debt collector. So far, no reply from him.
I checked my credit report and while my overall score is still Good (above 700), I do see that the account in question is showing up as charged off vs. settled in full.
According to some internet research, this debt collector is known for fraudulent practices and is being sued for same. Now I'm trying to figure out: does it seem more likely that this debt collector is coming after me via fraud, or that the bank agent who did my short sale was wrong or lying to me? Or perhaps none of the above?
Just checked email and the bank agent replied, confirming that what he confirmed to me earlier is correct. It's looking more like this is an error where the account should not have shown as charged off in the first place.
Whew!
Whew!
We just got our modification approved on our 1st mortgage and started to work on my 2nd(HELOC) with Chase. I has been charged off and taken to a 3rd party. It was not sold but has gone to a servicing agent. My balance is 143,000.00. Our 1st mortgage is 350,000.00 and we that is basically what my house is worth now. I would really like to settle this and be done with it. I of course want a low settlement cause the value in my house is no longer there. Am I going to have to settle for a higher price than if it was actually sold for pennies on the dollar? Is it also easier to settle at the end of the year cause everyone wants to close their accounts out as well? I am not sure how to handle this now because I was expecting it to be sold. Any help would be great!
Hi Med!
Welcome to forums!
You will have to contact the concerned lender and apply for settlement. It will be the lender's discretion whether or not he will consider your request for settlement. Both of you will have to negotiate and reduce the payments so that it becomes affordable for you to pay off the dues.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You will have to contact the concerned lender and apply for settlement. It will be the lender's discretion whether or not he will consider your request for settlement. Both of you will have to negotiate and reduce the payments so that it becomes affordable for you to pay off the dues.
Feel free to ask if you've further queries.
Sussane