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 Becky,
Charging off the loan means that the lender is no longer interested in collecting the debt from you. The lender may sell off the debt to a collection agency who in turn will collect the debt from you.
Charging off the loan means that the lender is no longer interested in collecting the debt from you. The lender may sell off the debt to a collection agency who in turn will collect the debt from you.
Hi, my HELOC shows in my credit report as charge-off and one month later as discharged it trough bk 7. the charge off disapered, can I breath now
Hi sofy!
Welcome to forums!
You may have included the charged off HELOC in your bankruptcy filing and received a discharged from it. Now, you're not personally liable to pay that debt. Contact your bankruptcy attorney and he will better guide you in this regard.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You may have included the charged off HELOC in your bankruptcy filing and received a discharged from it. Now, you're not personally liable to pay that debt. Contact your bankruptcy attorney and he will better guide you in this regard.
Feel free to ask if you've further queries.
Sussane
Sofy, you should have been breathing all along - I hope you're still with us!
Becky, it's not that the lender is "no longer interested" in receiving payments from you. It's that they don't expect any more payments, and to carry your loan on their financial records as an "asset" is pure folly. They charge it off as a loss and hope to recover their funds at a later date.
Becky, it's not that the lender is "no longer interested" in receiving payments from you. It's that they don't expect any more payments, and to carry your loan on their financial records as an "asset" is pure folly. They charge it off as a loss and hope to recover their funds at a later date.
if my morgage compay sells to a collection agency, what are the methods they can come after you for payments,,,can they attempt tp garnish my wages :roll:
Hi biggruss,
The collection agency will contact you and harass you for the payments. Moreover, the collection agency can even file a lawsuit against you. If the collection agency is able to get a judgment against you, then they will get the right to garnish your wages or place a lien on your other properties.
The collection agency will contact you and harass you for the payments. Moreover, the collection agency can even file a lawsuit against you. If the collection agency is able to get a judgment against you, then they will get the right to garnish your wages or place a lien on your other properties.
My 2nd Loan got charge off in Jan.01 2009. But in collection they are increasing the amount but i am paying my 1st loan every month. My house price is less then half. What I have to do?
Hi Andy,
You should contact the collection agency and negotiate with them for a repayment plan and request them not to raise the amount every month considering your financial situation. This might help you in resolving the matter
Thanks
You should contact the collection agency and negotiate with them for a repayment plan and request them not to raise the amount every month considering your financial situation. This might help you in resolving the matter
Thanks
My mortgage is charged off I'm still making monthly payments to my mortgage company. Starting Sept 1 my mortgage will be transferred to a different company. Will my mortgage still be in charge off status?
Welcome ron,
If the mortgage company has charged off the loan and assigned it to a collection agency, then the mortgage will remain in a charged off status.
If the mortgage company has charged off the loan and assigned it to a collection agency, then the mortgage will remain in a charged off status.
If we had a second mtg to buy the home and used as purchase money and ended up forclosing doesn't the second mtg get forclosed on also? We have a charge off with a balance outstanding on our credit even though it was original purchase money
Is a second lien from the seller erased from the credit report after 7 years?
hi jlo,
the second mortgage lender can charge off the balance amount and assign it to a collection agency if he is unable to recover the loan.
welcome guest,
if the second lien is paid off, then it might get removed from your credit report after the 7 years. however, if you haven't paid it off, then it may remain in your credit report as a negative item.
thanks
the second mortgage lender can charge off the balance amount and assign it to a collection agency if he is unable to recover the loan.
welcome guest,
if the second lien is paid off, then it might get removed from your credit report after the 7 years. however, if you haven't paid it off, then it may remain in your credit report as a negative item.
thanks
my home was foreclosed and the resold and i had a second mortgage that was sold to someone else who want me to pay should that second mortgage be consider in the forclosure
Hi breadboy!
Welcome to forums!
I guess the second mortgage lender was unable to recover his dues after your property was sold off. In such a situation, you're still liable for paying off the second mortgage dues to the lender or the person whom the loan has been sold off.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I guess the second mortgage lender was unable to recover his dues after your property was sold off. In such a situation, you're still liable for paying off the second mortgage dues to the lender or the person whom the loan has been sold off.
Feel free to ask if you've further queries.
Sussane