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 credit card charged a charge off in my credit card bill on line. does it may affect my personal properties if they still pursue my debts as an attachment if they will file a lawsuit?
Hi jfranzl,
If they file a lawsuit against you and get a judgment, then they can place a lien on your property.
Thanks
If they file a lawsuit against you and get a judgment, then they can place a lien on your property.
Thanks
I have a secondbmortgage through benefical since 2005. I recently got injured and was unable to work. i have a disablility insurance company who denied my claim. so i have an attorney workingbon thatbfor me. they owe me over 50G. So i have been unablrbto make paymentsbon my second mortgage. And it has just been sent to chargd off department. I am scared to death they will take my home. my home is work 40g and i owe 34g.to the first mortgage. will beneficial attemt to take my home? Please answer asap. im very nervous.
Thank you,
Dan Brogan
Thank you,
Dan Brogan
Hi dab,
As you've mentioned that Beneficial has charged off your account, then I don't think they will come after your property again. It is the collection agency who will contact you for the payments.
Thanks
As you've mentioned that Beneficial has charged off your account, then I don't think they will come after your property again. It is the collection agency who will contact you for the payments.
Thanks
If the second mortgage charge off is recent (within 30days), can you request the bank to pull it back and work out a repayment/catch up plan with them if your financial situation has changed
Thanks for sharing your opinion, JayR!! :)
I filed bankruptcy a few years back. I have been current on my first annd still live in my home My second mortgage sent me a 1099 c cancellation of debt. And yet they refuse to get off title. Can they have it both ways. Report to the IRS as a tax loss and cancel my debt yet still remain on title??
hi randall!
welcome to forums!
if the second mortgage lender has forgiven the debt, then they will send you the 1099c form. as far as removing them from the title is concerned, you should contact the attorney and take his opinion in thi regard.
feel free to ask if you've further queries.
sussane
welcome to forums!
if the second mortgage lender has forgiven the debt, then they will send you the 1099c form. as far as removing them from the title is concerned, you should contact the attorney and take his opinion in thi regard.
feel free to ask if you've further queries.
sussane
Thanks for this forum! My 2nd servicer and I are trying to fashion a mod, but I'm not sure it'll happen prior to the mortage being charged off. Now, I'm clear I will have to pay some CA on the debt, relying on my ability to negotiate. And I know that I will have to seek 1099 forgiveness if all this is done by the end of 2012.
So my question is: when it goes to charge off, they can't foreclose, right? The home is about five grand above upside down, assuming Zillow is correct. I don't mind paying a lower debt amount if I am sure there can be no foreclosure.
So my question is: when it goes to charge off, they can't foreclose, right? The home is about five grand above upside down, assuming Zillow is correct. I don't mind paying a lower debt amount if I am sure there can be no foreclosure.
Hi Itsdawhiz,
Once the loan is charged off, the lender won't foreclose the property. In such a situation, the loan is assigned to a collection agency.
Thanks,
Jerry
Once the loan is charged off, the lender won't foreclose the property. In such a situation, the loan is assigned to a collection agency.
Thanks,
Jerry
Thanks, Jerry! One last question: the new debt (which the mortgage company sells to a Collection Agency), is it secured by the house? So is there still a lien? Or is it just the kind of debt that if I don't pay they will get a judgement and attach wages... btw, I have no plans NOT to pay a lower debt! Thanks!
Hi Itsdawhiz,
If the debt is charged off, it becomes an unsecured debt. If the collection agency gets a judgment, then it can place a lien on the property.
Thanks
If the debt is charged off, it becomes an unsecured debt. If the collection agency gets a judgment, then it can place a lien on the property.
Thanks
Hi, please try to follow me here and I'll try to make sense. Back in '07, I bought a condo for $180k. 1st was $144k & 2nd was $36k (80/20). Value of it plummeted, stuff happened and stopped making mortgage payment Jan '09. I made no 1st or 2nd payments for the entire '09. Property went into foreclosure status at the end of '09. 2nd lender "Relived the Debt" between the foreclosure occured. Before foreclosure was complete, 1st lender asked about a "remodification". Penalties & interest got rolled into new loan and wouldnt be reported to credit agency. 2nd was gone & I could afford just the one payment so I went that route & havent missed a payment since. 2nd mortgage did go on my credit report as a Foreclosure. I got a statement from the 2nd lender in '10 that said "loan was charged off of our system at the discretion of the investor on the account". I had to call & ask for this statement but besides that, they have never reached out to me since the end of '09. This "foreclosure" is the only negative on my credit report. Since I thought it was part of the "Relief of Debt Act", I dont think it should be on my credit report. Plus, I still own the property. Is it possible to have this fixed on my credit report? If so, what would I need to do? My accountant said I didnt need to claim as income b/c it was relieved. What are your thoughts? I believe this to be a unique case so I have no clue what I can do here and I want to clean up my credit report. Let me know if you need clarification. Thank you, Paul
Hi Paul,
If the property has been foreclosed by the lender and sold off, then you wonmain the owner of the property. As far as negative items are concerned, they will remain mentioned on your credit report for 7 years.
If the property has been foreclosed by the lender and sold off, then you wonmain the owner of the property. As far as negative items are concerned, they will remain mentioned on your credit report for 7 years.
Hi
Our second mortgage was charged off by National city before it merged with Pnc mortgage. Then it was reconveyed for the full amount of the balance to Greentree Mortgage. I have a deed of trust and recording letter stating that. We finally shortsold and settelled with greentree. Now Pnc doesnot want to remove charge off status from our account even though they show paid and zero balance. Do we have any options here.
Thanks for any help
Our second mortgage was charged off by National city before it merged with Pnc mortgage. Then it was reconveyed for the full amount of the balance to Greentree Mortgage. I have a deed of trust and recording letter stating that. We finally shortsold and settelled with greentree. Now Pnc doesnot want to remove charge off status from our account even though they show paid and zero balance. Do we have any options here.
Thanks for any help