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
Do we need to get an approval when the 2nd has been charge off We are
doing a short sale of my house
doing a short sale of my house
I keep reading "pay it off". If we could pay it then it wouldn't be a charge off in the first place. Obviously that isn't an option. SOooo what now?
If your 2nd Mortgage is charged off, do you have to claim the charged off amount as income on your taxes? I know if you sale or refi the property you have to pay the charge off, but what about the 1099 rule.
Benson,
I work with helping people save their homes from Foreclosure, and yes you can ask your Bank to charge off the 2nd. The worst that can happen is they say no, but in my experience if you keep asking they will do it. Let them know how much you can honestly pay on the first and bring up charging off the 2nd. If they say "No", ask them to submitt it to their supervisor for review. I have done several this way.
I work with helping people save their homes from Foreclosure, and yes you can ask your Bank to charge off the 2nd. The worst that can happen is they say no, but in my experience if you keep asking they will do it. Let them know how much you can honestly pay on the first and bring up charging off the 2nd. If they say "No", ask them to submitt it to their supervisor for review. I have done several this way.
hello all ... this is my first time .. i have a question .. i live in calif . i have a 1st and a 2nd the same company . my house apprise for around 120000 if lucky. the mod is a 4.5 with late payments and fees included to the princpal amount . now 180000for 40 years and a 2nd of 80000 for a total of 240000 with a house like said aprox 120000 . do i sign the new mod and forget the 2 nd or do i walk away and file chapter 13 on the sencond
hi easycom,
do you want to keep the house or just want to let it go? if you want to keep it, you should pay your first mortgage because that has a first lien on your property. in that case, you can file chapter 13 bankruptcy and pay off your first mortgage. since the property is underwater, the second mortgage has now become unsecured and could thus be discharged through the bankruptcy. this will make sure that you do not lose the house.
do you want to keep the house or just want to let it go? if you want to keep it, you should pay your first mortgage because that has a first lien on your property. in that case, you can file chapter 13 bankruptcy and pay off your first mortgage. since the property is underwater, the second mortgage has now become unsecured and could thus be discharged through the bankruptcy. this will make sure that you do not lose the house.
How long can a house be put up for short?
I am divorced and signed over the house to the ex. She stopped making payments for approximately 6 months and I just found out that my name was still on the loan. They are foreclosing on the house but we also have a second mortgage that is up to date. How would I go about taking my name off this loan?
We are seniors aged 70 + and my husband is disabled. we have no jobs now and live on SS which is hardly 1500 + we rent part of our house for 2500. Because of our medications and two loans on the house we find it very difficult to manage.
My question is can I sell or transfer this property tomy two sons' names without any cost to us or them.
My question is can I sell or transfer this property tomy two sons' names without any cost to us or them.
Both my husband and I were layed off in May up till this time I had the been paying the second mortgage directly withdrawn from my checking account. I am now 2 months behind I keep calling them and sent in the requested paperwork for a hardship program but They keep saying it's under review and keep saying they will put a rush on it to the manager. I was never late and I did not miss a payment until June/july now and we are going into August. I can not afford the total payment and they will not take a partial saying their system does not reconize a partial payment. What should I do?
to dwayne,
there is no such time limit as to how long you can put the house up for sale. you can put it up for sale as long as you want. but generally, you need to look for other options after a certain point in time, if the house does not sell.
to koa,
you signed over the house to your ex. but it does not transfer the loan to your ex. the only way you can get your name off the loan is through a refinance. you can remove your name from the mortgage only if your ex refinances in her name.
to shirley,
you can transfer the property to your two sons through a quit claim deed as a gift. you will be required to pay a gift tax on it. but you can claim gift tax exemptions. however, if there is any mortgage on the property, you will not be able to transfer it. your sons need to refinance in their names to relieve you from the responsibility of the mortgage.
to nova,
have you sent them a hardship letter? if you have sent them hardship letter, financial statements and all other required documents, you have no other way but to wait till they process your request for a hardship program. with the number of defaulting borrowers increasing, the mortgage companies are over-burdened with applications of loan modification. this has increased the average time to process modification applications. stay in constant touch with the loss mitigation dept. of your mortgage company and wait for a few more days till they process your application.
there is no such time limit as to how long you can put the house up for sale. you can put it up for sale as long as you want. but generally, you need to look for other options after a certain point in time, if the house does not sell.
to koa,
you signed over the house to your ex. but it does not transfer the loan to your ex. the only way you can get your name off the loan is through a refinance. you can remove your name from the mortgage only if your ex refinances in her name.
to shirley,
you can transfer the property to your two sons through a quit claim deed as a gift. you will be required to pay a gift tax on it. but you can claim gift tax exemptions. however, if there is any mortgage on the property, you will not be able to transfer it. your sons need to refinance in their names to relieve you from the responsibility of the mortgage.
to nova,
have you sent them a hardship letter? if you have sent them hardship letter, financial statements and all other required documents, you have no other way but to wait till they process your request for a hardship program. with the number of defaulting borrowers increasing, the mortgage companies are over-burdened with applications of loan modification. this has increased the average time to process modification applications. stay in constant touch with the loss mitigation dept. of your mortgage company and wait for a few more days till they process your application.
If a 2nd mortgage holder charges off the debt, does that mean the lien is removed?
Hi Rob,
A charge off does not mean the lien is removed from the property. If your second lender has charged off the loan, it means they will show the loan as their loss for accounting purposes. They will no longer be collecting the payments from you. Instead, they have sold the the mortgage to a collection agency. You will now have to make payments to them. You can also negotiate with them and ask them to accept a short payoff.
A charge off does not mean the lien is removed from the property. If your second lender has charged off the loan, it means they will show the loan as their loss for accounting purposes. They will no longer be collecting the payments from you. Instead, they have sold the the mortgage to a collection agency. You will now have to make payments to them. You can also negotiate with them and ask them to accept a short payoff.
What happens after a charge off and its sent to a collection agency? I understand we are still responsible for the amount charged. Do these agencies adjust off some of the balance? Also, if an agreement is made by both parties, do we get to select the payt amount? If the agreed amount is paid in full, is that the last of it? How does it affect your credit report and score?
To curious,
Collection agencies often agree to accept a short payoff. How much they will settle for depends on how successfully you can negotiate with them. If you make an agreement with the collection agency, you can select your payment amount. But the collection agency has to accept that, otherwise they will not enter into the agreement. Once the charge off has been paid in full, it will definitely have a positive impact on your credit.
Collection agencies often agree to accept a short payoff. How much they will settle for depends on how successfully you can negotiate with them. If you make an agreement with the collection agency, you can select your payment amount. But the collection agency has to accept that, otherwise they will not enter into the agreement. Once the charge off has been paid in full, it will definitely have a positive impact on your credit.