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
Welcome Lili,
If the lender has charged off the loan, he will not be ready to remove the status. It will remain in your credit report for the next 7 years.
If the lender has charged off the loan, he will not be ready to remove the status. It will remain in your credit report for the next 7 years.
my husband filed chapter 7 we have asecond morgage we were told it would be dismissed , and my credit would not be effected , i have a charge off from citibank our 2nd mort. on my credit report will it be dismissed after the statue of limitations is up ? what will happen if i don't pay it?
After two forebearances, I entered into a loan mod w/Bank of America for my 1st. Sometime in the midst of this, CitiMtg who holds my 2nd, charged-off my loan. I've been dealing with two collection companies. The first didn't report all of my payments, the second is pushing for larger payments. If it's charged-off and there are no plans to sell for the next 38 years, 10 months, is there a legal obligation to pay the collection company?
Hi pebbles,
After the statute of limitations is over, the collection agency won't be able to file a lawsuit against you. However, you'll still owe the debt and it will remain in your credit report for the next 7 years.
To lucky,
You're legally obligated to pay off the collection agency as you owe the debt to them. You can try to set up a repayment plan with the collection agency and pay them off.
After the statute of limitations is over, the collection agency won't be able to file a lawsuit against you. However, you'll still owe the debt and it will remain in your credit report for the next 7 years.
To lucky,
You're legally obligated to pay off the collection agency as you owe the debt to them. You can try to set up a repayment plan with the collection agency and pay them off.
So my 2nd loan got charge off and i end up paying the collection agency for 25,000 and now it is pay in full...just got 1099 for the remaining of the loan..do i qualifield for the debt forgiveness act.. on that its my primary home..
though it was your primary home, the balance was forgiven for the second mortgage. in such a situation, you may not be able to qualify under the debt forgiveness act.
After being transferred out of state for work (and being on the market for over two years), I decided to pursue a short sale -- and obtained a viable purchaser right away. The Chase negotiator kept telling us that the HUD was under review -- that lasted until December 2009, when the buyers finally had to walk away because they couldn't wait any longer. After I lost the first buyer, I was able to find a second short sale purchaser right away and, once again, I stayed on the negotiator and we were able to close on April 30, 2010.
During the entire time I was waiting for Chase to approve the HUD(s), I called Chase on a weekly basis -- each time being assured that they would not initiate foreclosure proceedings in my situation. However, in August 2009, Chase "pulled back" the loan from foreclosure at the last minute and I was told that "the right hand wasn't speaking to the left" and that the foreclosure department simply "didn't know" that we were negotiating a short sale and had a viable purchaser. I was assured it would not appear on my credit report -- the whole point of doing a short sale was to keep "foreclosure" off of my credit report! Even though that was cancelled, two months after the closing -- I received a letter saying that Chase had again referred my account to foreclosure. I was able to call the attorney and they again "cancelled" the sale, but my credit report is a disaster.
My credit report shows that my first mortgage was "RD" "foreclosed/ repossessed" in March 2010 and that my first mortgage was "legally settled for less than full balance after foreclosure proceedings began." My Experian credit report also continues to report the account as more than 120 days over due. Since June 2010, I have asked Chase seven times to correct this, and every time they say they will look into it, the problems don't get fixed. Although I was never actually foreclosed on, I have had to live with one listed on my credit report for well over 6 months after alerting Chase to the problem -- do I have any potential causes of action against Chase?
My second mortgage is also a mess -- although I was completely unaware of it at the time, Chase actually "charged off" my second mortgage in August 2009. I didn't know that at the time of the closing, and I agreed to have $4,200 of the sale proceeds go to Regency Credit, LLC (CA) to release the security interest -- which they received. Even though I tried to negotiate with Chase and CA before closing to settle the second, they flattly refused to even discuss it as an option and they retained the right to come after me for the deficiency. In August 2010, I paid Chase/ Regency $12,000. Before I agreed to pay, I received an e-mail from Chase (with copy to the collections agency) saying that "Upon receipt of our settlement funds, we will settle the account in our system and your credit bureau will be updated to reflect settled in full" -- I also received a letter from Regency the same day accepting the settlement and agreeing to "forgive any deficiency balances" upon receipt of the funds. However, my credit report actually still says that the second mortgage was "charged off" ("KD" - key derogatory) in August 2009 and again in August 2010. I have tried to work with Chase since September 2010 to fix this. What is the difference between forgiven and charged off? can my credit report list my account as having been both "charged off" and then later "forgiven"? I received a 1099 for tax year 2010 -- if Chase actually charged it off (first) in 2009 how can they 1099 me for 2010 and do I qualify for the debt relief act? finally, what, if any, legal recourse do I have against Chase for wrongfully reporting the status of my account after my repeated requests for them to correct the problems?
This situation has just ruined my credit, which has been an incredible hardship -- what can I do to correct my credit report and do I have any legal recourse might I have? I'm sorry this is so long, but it has definitely been a trying process!! Thank you so much -- any advice you could offer would be appreciated more than you know.
During the entire time I was waiting for Chase to approve the HUD(s), I called Chase on a weekly basis -- each time being assured that they would not initiate foreclosure proceedings in my situation. However, in August 2009, Chase "pulled back" the loan from foreclosure at the last minute and I was told that "the right hand wasn't speaking to the left" and that the foreclosure department simply "didn't know" that we were negotiating a short sale and had a viable purchaser. I was assured it would not appear on my credit report -- the whole point of doing a short sale was to keep "foreclosure" off of my credit report! Even though that was cancelled, two months after the closing -- I received a letter saying that Chase had again referred my account to foreclosure. I was able to call the attorney and they again "cancelled" the sale, but my credit report is a disaster.
My credit report shows that my first mortgage was "RD" "foreclosed/ repossessed" in March 2010 and that my first mortgage was "legally settled for less than full balance after foreclosure proceedings began." My Experian credit report also continues to report the account as more than 120 days over due. Since June 2010, I have asked Chase seven times to correct this, and every time they say they will look into it, the problems don't get fixed. Although I was never actually foreclosed on, I have had to live with one listed on my credit report for well over 6 months after alerting Chase to the problem -- do I have any potential causes of action against Chase?
My second mortgage is also a mess -- although I was completely unaware of it at the time, Chase actually "charged off" my second mortgage in August 2009. I didn't know that at the time of the closing, and I agreed to have $4,200 of the sale proceeds go to Regency Credit, LLC (CA) to release the security interest -- which they received. Even though I tried to negotiate with Chase and CA before closing to settle the second, they flattly refused to even discuss it as an option and they retained the right to come after me for the deficiency. In August 2010, I paid Chase/ Regency $12,000. Before I agreed to pay, I received an e-mail from Chase (with copy to the collections agency) saying that "Upon receipt of our settlement funds, we will settle the account in our system and your credit bureau will be updated to reflect settled in full" -- I also received a letter from Regency the same day accepting the settlement and agreeing to "forgive any deficiency balances" upon receipt of the funds. However, my credit report actually still says that the second mortgage was "charged off" ("KD" - key derogatory) in August 2009 and again in August 2010. I have tried to work with Chase since September 2010 to fix this. What is the difference between forgiven and charged off? can my credit report list my account as having been both "charged off" and then later "forgiven"? I received a 1099 for tax year 2010 -- if Chase actually charged it off (first) in 2009 how can they 1099 me for 2010 and do I qualify for the debt relief act? finally, what, if any, legal recourse do I have against Chase for wrongfully reporting the status of my account after my repeated requests for them to correct the problems?
This situation has just ruined my credit, which has been an incredible hardship -- what can I do to correct my credit report and do I have any legal recourse might I have? I'm sorry this is so long, but it has definitely been a trying process!! Thank you so much -- any advice you could offer would be appreciated more than you know.
Hi amy!
Welcome to forums!
When your lender forgives the dues, he won't actually come after you to recover the balance amount. Moreover, you'll receive a 1099c form from the lender regarding the forgiven debt and you will be liable for paying taxes to the IRS. Charged off means that the lender is not interested in collecting the debt from you any more. He may sell off the account to a collection agency who will come after you in order to recover the debt.
You should contact a lender in order to find out what legal actions you can take against Chase as they were not reporting your account correctly to the credit bureaus. You may send proper documents to the credit bureau and ask them to update your credit report.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
When your lender forgives the dues, he won't actually come after you to recover the balance amount. Moreover, you'll receive a 1099c form from the lender regarding the forgiven debt and you will be liable for paying taxes to the IRS. Charged off means that the lender is not interested in collecting the debt from you any more. He may sell off the account to a collection agency who will come after you in order to recover the debt.
You should contact a lender in order to find out what legal actions you can take against Chase as they were not reporting your account correctly to the credit bureaus. You may send proper documents to the credit bureau and ask them to update your credit report.
Feel free to ask if you've further queries.
Sussane
My 2nd mortgage just got charged off. how does that effect my 1st mortgage if it is still current? Can they forclose or make me lose my home because of the charge off??
Thank you so much for your response! I am in a spot because Chase has reported to the IRS that the account was charged off and that is the way Chase is reporting it internally and on my credit report, but I have a letter stating that the remaining deficiency would be forgiven -- not charged off. Is it better for your credit to have the debt charged off versus being forgiven? I ask because I am trying to decide whether to bring this to Chase's attention -- or just leave it be (I'd rather have a slightly lower credit score than have to pay taxes on a forgiven balance!). What do you think?
I have one more related question -- Chase officially "charged off" my second mortgage in August 2009 (before my short sale), and after the short sale, I paid them $12,000 to settle the debt (in August 2010) after which they charged it off a second time. First, can they do that -- I mean, can they charge off the same account twice (one before the short sale and one after settling the balance) with both appearing on my credit report? Second, since they originally charged it off in 2009 -- shouldn't I have received a 1099c for the 2009 tax year instead of for 2010?
Finally, you said I should contact a lender to see if I have any causes of action against Chase -- did you mean an attorney?
Thank you so much!
Amy
I have one more related question -- Chase officially "charged off" my second mortgage in August 2009 (before my short sale), and after the short sale, I paid them $12,000 to settle the debt (in August 2010) after which they charged it off a second time. First, can they do that -- I mean, can they charge off the same account twice (one before the short sale and one after settling the balance) with both appearing on my credit report? Second, since they originally charged it off in 2009 -- shouldn't I have received a 1099c for the 2009 tax year instead of for 2010?
Finally, you said I should contact a lender to see if I have any causes of action against Chase -- did you mean an attorney?
Thank you so much!
Amy
I lost my only home in foreclosure and after two years I started receiving letters asking me to pay for the second loan on that house. I didn't pay and I recently revised my credit report and it shows the amount as charge off 70k.
Which is the best way to get rid of this without paying for something that I don't even own? (if there is a way) The only other thing that I am still paying is my car 14k.
Which is the best way to get rid of this without paying for something that I don't even own? (if there is a way) The only other thing that I am still paying is my car 14k.
Hi woody,
The charged off second mortgage won't affect your 1st mortgage. The collection agency won't be able to foreclose the property. However, they will come after you in order to collect their dues.
To Amy,
If your debts are being forgiven, then you won't have to pay anything to the lender. However, you may have to pay taxes on the forgiven debt. If the debt is charged off, the collection agency will come after you for the dues.
Chase cannot charge off the same account twice. Moreover, once they have charged off the account, they cannot collect any dues from you. You should have paid off the dues to the collection agency and get rid of the debt.
As far as your last question is concerned, I guess Sussane meant that you should have a word with an attorney.
To Alma,
You're liable to pay off your second mortgage though the property was foreclosed by the first lender. You should negotiate with the collection agency and try to get a payment plan in order to pay off the dues.
The charged off second mortgage won't affect your 1st mortgage. The collection agency won't be able to foreclose the property. However, they will come after you in order to collect their dues.
To Amy,
If your debts are being forgiven, then you won't have to pay anything to the lender. However, you may have to pay taxes on the forgiven debt. If the debt is charged off, the collection agency will come after you for the dues.
Chase cannot charge off the same account twice. Moreover, once they have charged off the account, they cannot collect any dues from you. You should have paid off the dues to the collection agency and get rid of the debt.
As far as your last question is concerned, I guess Sussane meant that you should have a word with an attorney.
To Alma,
You're liable to pay off your second mortgage though the property was foreclosed by the first lender. You should negotiate with the collection agency and try to get a payment plan in order to pay off the dues.
If I want to purchase another home will they collect the charge off second lien from previous foreclosed home at closing? or can they put a judgement on the credit report?
Hi Monica!
Welcome to forums!
I don't think the lender will come after you in order to collect the second lien from the previously foreclosed home. Moreover, as it has been charged off, there are chances that it is with a collection agency. The collection agency can come after you in order to collect the dues.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I don't think the lender will come after you in order to collect the second lien from the previously foreclosed home. Moreover, as it has been charged off, there are chances that it is with a collection agency. The collection agency can come after you in order to collect the dues.
Feel free to ask if you've further queries.
Sussane