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 got a divorce 4 years ago and was awarded the home. The 1st mortgage, Wells Fargo is in both my and exhusband name, but the 2nd, Chase is in his name only. He told that the bank had charged it off and it was sent to a collection agency. Now the collection agency says that Chase has taken it back and they no longer have the loan. I have tried to talk to the collection agency when they had it to try and settle, but they would not talk to me without a 3rd party authorization. I called Chase and they will not talk to me either. What does it mean when a bank takes back the collection from a collection agency? Is it still a charge off? I am concerned that they may try foreclose, can they if it has been charged off? Thanks,
Hi Esther!
Welcome to the forums!
If the bank takes back the account from the collections, then it won't be considered charge off any further. As the Chase loan is only in the name of ex-spouse, the lender won't speak to you. Your ex needs to have a word with Chase in this matter.
Feel free to ask if you've further queries.
Sussane
Welcome to the forums!
If the bank takes back the account from the collections, then it won't be considered charge off any further. As the Chase loan is only in the name of ex-spouse, the lender won't speak to you. Your ex needs to have a word with Chase in this matter.
Feel free to ask if you've further queries.
Sussane
i have a customer who has been foreclosure on his property in10/2009, since the second loan was charge off and re[ported to the credit bureau, but since the time of the foreclosure the bank never send any bill for the payment, I like to know how long has to pass according to the statues of limitations on the state of virginia to be removed from the credi9t bureau, it is any way to do it or we have to get in contact with the bank
Hi rene!
Welcome to the forums!
A similar query has been replied to in the given page: http://www.mortgagefit.com/inprocess/about56761.html
Take a look at it. I hope it will help you.
Sussane
Welcome to the forums!
A similar query has been replied to in the given page: http://www.mortgagefit.com/inprocess/about56761.html
Take a look at it. I hope it will help you.
Sussane
If 2nd mortgage become an unsecured debt when it sold off to another lender or debt collector. Can they still do foreclose on your house in WA state as an unsecured debt position on 2nd mortgage or they can only try to collect the debt from you traditional way?
Hi seattle,
A similar query has been replied to in the given page:
http://www.mortgagefit.com/Mortgage-Basics/If-collection-agency-brought-2nd-mortage-Can-they-stil-foreclose-on-my-house-if-i-have-equity-on-my-house.html
Take a look at it. I hope it will help you.
A similar query has been replied to in the given page:
http://www.mortgagefit.com/Mortgage-Basics/If-collection-agency-brought-2nd-mortage-Can-they-stil-foreclose-on-my-house-if-i-have-equity-on-my-house.html
Take a look at it. I hope it will help you.
My husband and I just found out that our second mortgage has been charged off and it has been sent to a collection agency. We are current on our first mortgage. Can the Collection Agency foreclose on us? Can they possibly garnish my husband's wages even if its barely enough to cover our first mortgage? Any information is greatly appreciated . Thank you so much
Hi Lynn,
Collection agency normally don't foreclose on the property. Rather they harass for payments. If they file a lawsuit and get a judgment against your husband, then they can garnish his wages.
Collection agency normally don't foreclose on the property. Rather they harass for payments. If they file a lawsuit and get a judgment against your husband, then they can garnish his wages.
I have a second that is a HELOC on my home. I haven't paid this HELOC for over five years. What is the statute of limitations in California to collect this debt.
Hi Needserenity,
Well, HELOC is a revolving credit and SOL for such credits in California is 4 years.
Thanks
Well, HELOC is a revolving credit and SOL for such credits in California is 4 years.
Thanks
How can I find out if my mortgage was part of the wells fargo write off
Hi glinch,
You will have to contact Wells Fargo and they will be able to inform you whether or not your loan was a write-off.
Thanks
You will have to contact Wells Fargo and they will be able to inform you whether or not your loan was a write-off.
Thanks
I had a foreclosure 5 years back.The HELOC was charged off and still available in credit file.I purchased a new home through FHA loan 18 months back.My credit score is around 720.I am paying off my credit cards regularly in the last 5 years and the remaining balance is approx. 8K.
Will I be able to borrow money from this new home if enough equity is available?I live in the state of VA.Please advise
Will I be able to borrow money from this new home if enough equity is available?I live in the state of VA.Please advise
Hi Guest,
If the new home has equity in it, then depending upon that you will be able to get a loan on it. However, you should take steps to get that HELOC out of your credit report.
Thanks
If the new home has equity in it, then depending upon that you will be able to get a loan on it. However, you should take steps to get that HELOC out of your credit report.
Thanks
I purchased my home in 1/2006. I got a HELOC on in it just in case, as I am self employed- and thank goodness I did as I needed it. In 2006 business fell completely and I ended up using a lot of that money to run my business. But since the market lasted longer than expected I ended up filing bankruptcy in September 2009. When I filed bankruptcy I included my 1st and 2nd mortgage. I then modified my 1st, at that time I wasn't sure what to do with my 2nd. This year my GMAC (my 2nd) sold off to Ocwen. I have not heard anything from GMAC since filing bk except this year which was a letter stating they transferred or sold to Ocwen. I received one letter from Ocwen stating they now have my loan. So my question is
its been over 5 years since I made a payment (10/9/2008 to be exact). So does this fall under the statue of limitations? And if so, how do I handle something like this? Also my 1st TD is still over what my house is worth.
its been over 5 years since I made a payment (10/9/2008 to be exact). So does this fall under the statue of limitations? And if so, how do I handle something like this? Also my 1st TD is still over what my house is worth.