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
Hi raffi,
The lender charges off the loan only if he thinks he cannot recover the loan balance from you. If he thinks the debt is recoverable, he would not charge it off. Thus, if the lender has charged off and the sold the debt to a third party collection agency, they will not foreclose on the property.
The lien remains on the property, but the collection agency does not foreclose it. They can sue you for non-payment, get a judgment against you and garnish your wages, etc. The second lender is unlikely to foreclose the property after they have discharged the debt and reported it as their loss. If you file bankruptcy, it will discharge the debt and you will not have to pay the collection agency anything to settle the debt.
The lender charges off the loan only if he thinks he cannot recover the loan balance from you. If he thinks the debt is recoverable, he would not charge it off. Thus, if the lender has charged off and the sold the debt to a third party collection agency, they will not foreclose on the property.
The lien remains on the property, but the collection agency does not foreclose it. They can sue you for non-payment, get a judgment against you and garnish your wages, etc. The second lender is unlikely to foreclose the property after they have discharged the debt and reported it as their loss. If you file bankruptcy, it will discharge the debt and you will not have to pay the collection agency anything to settle the debt.
Our 2nd mortgage was not reaffirmed in C7 BK 1 yr ago. However, we have not been paying it. Now we are ready to sell the house and move on. The question is why is the debt of the 2nd mortgage not on my credit report? Has it been removed b/c I don't owe it?
I payed someone to help me with mortgage loan and I felt she had helped me. But found out that the mortgage company charged off half my mortgage. They said that all I have to pay is 39000.00and the house is mine. It should be payed off in 7yrs. is this true
To misspeaches,
The mortgage company has charged off your debt for accounting reasons. They can still come after you to collect the debt or they can also sell it off to a third party collection agency. It seems that they are willing to settle the debt for an amount less than the actual amount owed. If they are serious about the settlement and if they promise they will not come after you for the remainder of the debt, you can go ahead with their settlement offer. However, you should not rely on they say unless you get something from them in writing about the settlement.
To Andrea,
If your second mortgage was discharged through bankruptcy Chapter 7 and you did not reaffirm the loan, you are not personally liable to repay it. It seems that your second lender removed it from your credit report because it has been discharged through the bankruptcy.
The mortgage company has charged off your debt for accounting reasons. They can still come after you to collect the debt or they can also sell it off to a third party collection agency. It seems that they are willing to settle the debt for an amount less than the actual amount owed. If they are serious about the settlement and if they promise they will not come after you for the remainder of the debt, you can go ahead with their settlement offer. However, you should not rely on they say unless you get something from them in writing about the settlement.
To Andrea,
If your second mortgage was discharged through bankruptcy Chapter 7 and you did not reaffirm the loan, you are not personally liable to repay it. It seems that your second lender removed it from your credit report because it has been discharged through the bankruptcy.
I am in Modifiaction, and have completed the trial periodon the 1st. Now after making payments on this trial and after paying 5 payments the bank has charged of the mortgage. I do have a lawyer and the firm is trying to fix this. Do I have any legal recourse? I am able to make the modifcatiion.
Hi AnnM,
If the mortgage company has charged off the debt and sold it to a third party collection agency (CA), you can talk to the CA regarding the payments. They are more likely to work with you because they want you to pay off the debt. You can tell them that if they keep the monthly payments low, you can afford to make the payments.
If the mortgage company has charged off the debt and sold it to a third party collection agency (CA), you can talk to the CA regarding the payments. They are more likely to work with you because they want you to pay off the debt. You can tell them that if they keep the monthly payments low, you can afford to make the payments.
Hi Jessica, my 2nd mortgage is showing up on my credit report as a charge-off. HOw can I find out the name of the collection agency who is now handling my account? I want to clear this up as soon as possible. Also, because the mortgage is now charged off, does thatm ean that there is an automatic lein on my house? I am current with my first mortgage. Any insight to this would be appreciated. Thanks.
"cbuonopane@revere.mec.edu"
[Email address deactivated as per forum rules.]
"cbuonopane@revere.mec.edu"
[Email address deactivated as per forum rules.]
To cmbfe,
If your second mortgage is charged off, it means the lender is going to report this debt as their loss. He may either have sent the debt to the mortgage companys in-house collections department or have sold it off to a third party collection agency. You can contact your lender and check out who currently holds the right to collect the debt. If the debt has been sold to a collection agency, you can contact them and try and settle the debt for less than owed. The charge-off does not remove the lien from the property.
If your second mortgage is charged off, it means the lender is going to report this debt as their loss. He may either have sent the debt to the mortgage companys in-house collections department or have sold it off to a third party collection agency. You can contact your lender and check out who currently holds the right to collect the debt. If the debt has been sold to a collection agency, you can contact them and try and settle the debt for less than owed. The charge-off does not remove the lien from the property.
I'm doing a short sale for another homeowner and trying to satisfy a 2nd lien. I have an old statement that's originated with WAMU, called and spoke with a rep at WAMU/Chase.
Was told the account number does Not come up in their system, and there is no history of it at all.
home owner do not have any updated info about this loan because they no longer live in the house and all letter were returned back to sender.
where and how can i track down this loan?
Thanks, :?:
Was told the account number does Not come up in their system, and there is no history of it at all.
home owner do not have any updated info about this loan because they no longer live in the house and all letter were returned back to sender.
where and how can i track down this loan?
Thanks, :?:
Hi Guest,
I think the homeowner can check his credit report to find out the status of his loan account. If the original lender does not have any information about this account, chances are that it has been charged off and sold to another company or a collection agency. If the account has indeed been charged off, it should show up on his credit report.
I think the homeowner can check his credit report to find out the status of his loan account. If the original lender does not have any information about this account, chances are that it has been charged off and sold to another company or a collection agency. If the account has indeed been charged off, it should show up on his credit report.
Hello Jessica,
I am modifing my first loan, the second loan was charge off and the agency told me that it's nothing that they can do, but I could continue making the payment if I wanted. Because of all our financial hardship, I was thinking to do a Bankarrusi but I heard it's not wise while you are in modification. So, I stared to settle all the account, but when I call the second loan. They told me that they have already charge off. What do you think is the best thing to do... I feel a scared! if you can help me answer my question, let me know. I thank you for your time.
Thank you!
I am modifing my first loan, the second loan was charge off and the agency told me that it's nothing that they can do, but I could continue making the payment if I wanted. Because of all our financial hardship, I was thinking to do a Bankarrusi but I heard it's not wise while you are in modification. So, I stared to settle all the account, but when I call the second loan. They told me that they have already charge off. What do you think is the best thing to do... I feel a scared! if you can help me answer my question, let me know. I thank you for your time.
Thank you!
hi ana,
if your second loan has been charged off and sold to a collection agency, they will come after you for the debt. you are still in the process of doing a modification on your mortgage. but it is not guaranteed whether you will qualify for the modification or how much it will reduce your monthly payment.
bankruptcy will affect your credit negatively. so, you should first try to pay off the loans on your own. you can wait for the first lender to respond to your request for the loan modification. in the mean time, you can talk to the second lender and find out if they have sold off the debt to any collection agency. in case it has been sold off, you can talk to the collection agency and try to settle the debt for an amount less than what you originally owe. if none of the options work, you can consider the option of filing bankruptcy.
thanks,
jerry
if your second loan has been charged off and sold to a collection agency, they will come after you for the debt. you are still in the process of doing a modification on your mortgage. but it is not guaranteed whether you will qualify for the modification or how much it will reduce your monthly payment.
bankruptcy will affect your credit negatively. so, you should first try to pay off the loans on your own. you can wait for the first lender to respond to your request for the loan modification. in the mean time, you can talk to the second lender and find out if they have sold off the debt to any collection agency. in case it has been sold off, you can talk to the collection agency and try to settle the debt for an amount less than what you originally owe. if none of the options work, you can consider the option of filing bankruptcy.
thanks,
jerry
took out second mortgage in jan 2004 sold house in 2007 not enough to pay 2nd mortgage but it was not registered against our house with land registry. not sure where we stand as paperwork states agreement void if not properly registered can you advise
If the borrower dies and the heloc is in theior name soley and the property is deeded to another person, what happens then? The estate is insolvent.
we have been approached by our mortagage lender to refinance our loan so that they, in turn, can sell the loan and get it off their books. they want to lower the interest rate from 6% on 1st w/ 7 yr. arm to 47/8% on 30 year. also as part of terms would be a debt forgiveness on 1st and write off of our 2nd. we have conventional loan now and what they are offering is fha. do we have to pay tax on forgiven amount and how many points would this effect our credit scores? what other things do we need to know when considering this? are we still responsible for paying the 2nd?