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
My only is new in default and charge-off is on my credit. how do i get that removed?
The only way in which negative references are removed is when they are incorrect. If the default and charge off are correct, then they belong on your credit report and will come off by themselves in 7 years (statutory).
Anonymouskj, please try to establish other tradelines, using secured cards, as one example, and you can overcome the derogatory data. Also, if you have the wherewithal to pay off those old debts, that'd make a favorable impact on your credit as well.
Anonymouskj, please try to establish other tradelines, using secured cards, as one example, and you can overcome the derogatory data. Also, if you have the wherewithal to pay off those old debts, that'd make a favorable impact on your credit as well.
We are trying to get a modification of our mortgage. Chase has been stringing us along for 11 months now. Yesterday we found out that when we refinanced with Chase back in 2007, they never placed a lien on our house, and the purchase price of our house was written in as $0.00. Can anyone tell me if this is good news, and if it will help us with our modification?
Welcome Angela,
If the lender has not placed a lien on the property, then it will mean that you actually don't owe the mortgage! Before taking any further step, you should contact a real estate attorney and check out what steps you need to take in this case.
If the lender has not placed a lien on the property, then it will mean that you actually don't owe the mortgage! Before taking any further step, you should contact a real estate attorney and check out what steps you need to take in this case.
I don't believe that a purchase price that shows up as Zero will have any impact. That they failed to file the lien can have a far greater impact, and Adonis' suggestion that you contact an attorney to assist you is likely your first best bet in this situation. How is it that you found out that the lien was not placed?
My first mortgage is paid on time, however due to job losses, my 2nd mortgage fell behind. When I tried to work out payment arrangements with them, they said it had been charged off. Now they are calling asking for a settlement, but I don't have the amount needed to settle. I have offered 10 percent, but was turned down. I want to start sending in payments to them at 2 or 3 times what the normal payment is, but they say they won't accept anything more than the regular scheduled payment. Why won't they take lump sum increments over the next few months and insist on only 1 regular monthly payment? What will making only one monthly amount payment do?
Hi mcc!
Welcome to forums!
If the debt has been charged off by your original lender, then you're not liable for paying them. You will have to make payments to the collection agency to whom they have sold off your debt account. Unless you go for a settlement agreement, the collection agency may not accept your request for a lump sum payment.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If the debt has been charged off by your original lender, then you're not liable for paying them. You will have to make payments to the collection agency to whom they have sold off your debt account. Unless you go for a settlement agreement, the collection agency may not accept your request for a lump sum payment.
Feel free to ask if you've further queries.
Sussane
It doesn't appear to me that there's a collection agency involved in this situation...is that a proper assessment of what you've told us, MCC?
Why your lender is so adamant about receiving only the regular monthly payment and nothing more or less is rather odd. You'd think that they'd be happy as can be to receive any amount. It's like found money for them, because they no longer consider the loan you have as an asset for accounting purposes. They can now take every nickel you pay them into pure income, which looks nice on their financial records.
I'd say that they're pretty foolish to look a gift horse in the mouth.
Why your lender is so adamant about receiving only the regular monthly payment and nothing more or less is rather odd. You'd think that they'd be happy as can be to receive any amount. It's like found money for them, because they no longer consider the loan you have as an asset for accounting purposes. They can now take every nickel you pay them into pure income, which looks nice on their financial records.
I'd say that they're pretty foolish to look a gift horse in the mouth.
I modified my mortgage and they put an m9 on my credit. I never missed a payment and my score was excellent. thanks
I also would like to know how I can get this off so I can purchase another property?
If you have modified your loan, then it will be mentioned in your credit report. It will remain in your credit report for the next 7 years. I don't you will be able to remove it from your credit report.
i live in illinois. i purchased a condominium with 100% financing. the same bank, bofa holds both the 1st and 2nd mortgages on the property. i fell behind on both mortgages and the 2nd mortgage was charged off in 2008. i have been current on the first mortgage for almost 2 years now and my credit is improved. is it possible to sell or refinance before we pay off or settle the 2nd mortgage? i think the condo is worth about $175k. i owe $162k on the 1st mortgage and $36k on the 2nd. bofa has not tried to collect the 2nd mortgage since charging it off.
hi tom!
welcome to forums!
you can apply for a refinance as you have equity in your property. it will be the lender's discretion whether or not he will consider your request as your second mortgage is a charge off.
feel free to ask if you've further queries.
sussane
welcome to forums!
you can apply for a refinance as you have equity in your property. it will be the lender's discretion whether or not he will consider your request as your second mortgage is a charge off.
feel free to ask if you've further queries.
sussane
A charge off is an accounting tool to eliminate a non-performing asset from consideration as an asset. That doesn't mean the lien on the property is unenforceable, though.
By my reckoning, you have liens totaling $198K on a condo you value at $175K. I don't think a new lender is likely to overlook the second lien; BofA, given your payment history on the first mortgage, might just take a look at you a bit more favorably than in the past. Of course, they'd like to get back a goodly sum on that second mortgage in the process, I imagine.
By my reckoning, you have liens totaling $198K on a condo you value at $175K. I don't think a new lender is likely to overlook the second lien; BofA, given your payment history on the first mortgage, might just take a look at you a bit more favorably than in the past. Of course, they'd like to get back a goodly sum on that second mortgage in the process, I imagine.
I originally paid cash for my home. I took a 30,000.00 equity loan out. It was with one of the unsavory lenders in New York state. I have been in foreclosure status for close to 3 years now. We have been back and forth to court . I have made pay off offers they have refused. Suddenly i get a letter stating the mtg. co has instructed their attorneys to drop the foreclosure lawsuit and the reason being is the lender is "Charging off the loan" i am baffled any help would be appreciated.