Posted on: 19th Jun, 2009 06:42 pm
do you have any recommendations for me to settle a $200k second mortgage debt that was discharged in bankruptcy yet is still tied to a house lien, since we'd like to stay in our house only paying a 1st mortgage? here's more details if it helps...
my ch7 bankruptcy was completed and my mortage debts discharged. my wife and i decided to surrender the home, since the home's appraised value is $370,000 with $430,000 in loans. the 1st mortage company, citi, has contacted us to work out a good deal or else begin foreclosure proceedings, so we have started filling out applications. however, boa has a lien on our house from the 2nd mortgage which was about $200,000. we have no obligation to pay it whatsoever, but i am willing to use some 401k money to settle for $10-20k since we could keep our house, keep some equity and negotiate a better 1st mortgage.
my thought process is if boa does not settle, they will only get whatever is leftover after a house firesale (probably $300-350k) minus the 1st loan and back-payments ($250k) minus foreclosure-related costs ($30-50k) minus home repairs needed to sell ($20-30k). basically, they will get $0-30k after a 1-year process and their own costs. so, i think a settlement makes sense for them, but boa indicated in my first phone call with them that they don't offer much if any discounts until foreclosure begins although the loan mitigation department is supposed to call me within 3 weeks. the customer service rep also mentioned that sometimes boa will just buy out the 1st mortgage but i think the costs would be similar to them either way.
my ch7 bankruptcy was completed and my mortage debts discharged. my wife and i decided to surrender the home, since the home's appraised value is $370,000 with $430,000 in loans. the 1st mortage company, citi, has contacted us to work out a good deal or else begin foreclosure proceedings, so we have started filling out applications. however, boa has a lien on our house from the 2nd mortgage which was about $200,000. we have no obligation to pay it whatsoever, but i am willing to use some 401k money to settle for $10-20k since we could keep our house, keep some equity and negotiate a better 1st mortgage.
my thought process is if boa does not settle, they will only get whatever is leftover after a house firesale (probably $300-350k) minus the 1st loan and back-payments ($250k) minus foreclosure-related costs ($30-50k) minus home repairs needed to sell ($20-30k). basically, they will get $0-30k after a 1-year process and their own costs. so, i think a settlement makes sense for them, but boa indicated in my first phone call with them that they don't offer much if any discounts until foreclosure begins although the loan mitigation department is supposed to call me within 3 weeks. the customer service rep also mentioned that sometimes boa will just buy out the 1st mortgage but i think the costs would be similar to them either way.
hi doubletrouble,
as you have been discharged from chapter 7 bankruptcy, you are personally not liable to make any payments to your lenders. but since the home loan is a secured loan, if you do not make the payments the lender will foreclose on the house. since your house is upside down and you want to let go of the property, a settlement for the second mortgage holder will, no doubt, make more sense.
the second mortgage holder can sue you if you do not pay off the loan. but they would most likely want to do a settlement with you as they do not want to spend too much money by dragging the matter to court. however, withdrawing money from 401k to pay off the debt will not be a very good option as you will have to pay a penalty and taxes for withdrawing before the scheduled time. instead, you can work out a repayment plan with the second lender and pay off the debt over a certain period of time.
as you have been discharged from chapter 7 bankruptcy, you are personally not liable to make any payments to your lenders. but since the home loan is a secured loan, if you do not make the payments the lender will foreclose on the house. since your house is upside down and you want to let go of the property, a settlement for the second mortgage holder will, no doubt, make more sense.
the second mortgage holder can sue you if you do not pay off the loan. but they would most likely want to do a settlement with you as they do not want to spend too much money by dragging the matter to court. however, withdrawing money from 401k to pay off the debt will not be a very good option as you will have to pay a penalty and taxes for withdrawing before the scheduled time. instead, you can work out a repayment plan with the second lender and pay off the debt over a certain period of time.
Jenkin7,
Tahnks for the reply. I do not think the 2nd mortgage holder can sue me for non-payment since that debt was discharged in Ch 7 bankruptcy. Their only hope is to get foreclosure leftovers which I've estimated at $0-30K. So, I think they have financial incentive (and government encouragement) to settle with us. I'm trying to figure out the best way to do that.
I came across information about a 2nd Lien Program as part of the Home Affordable Mortgage initiative. Since we are well over 180 days delinquent on our 2nd mortgage, it appears the government would give them 3 cents per dollar of debt they extinguish including removal of the lien. That would be just over $6K in my case. I've heard others say some investors have been paying 2-3 cents per dollar for bad 2nd mortgages although I doubt they'd pay for a discharged one, so the 2nd mortgage company can either take a guaranteed $6-7K or hold out for $0-30K in non-guaranteed leftovers after a long foreclosure process. Or, as another option, I'm wondering if the 2nd Lien Program would allow them to extinguish all but $5-10K of the debt allowing them to still get paid about $6K by the government plus $5-10K by me in a modified loan plus government rebates for loan modification giving the 2nd mortgage company $11-16K total thereby splitting the difference for the maximum $30K they can expect to get in foreclosure leftovers. I am expecting calls from the Loan Mod groups at the 2 mortgage companies over the next 2-3 weeks, but I want to have a strategy and knowledge in place by then. Thoughts?
Tahnks for the reply. I do not think the 2nd mortgage holder can sue me for non-payment since that debt was discharged in Ch 7 bankruptcy. Their only hope is to get foreclosure leftovers which I've estimated at $0-30K. So, I think they have financial incentive (and government encouragement) to settle with us. I'm trying to figure out the best way to do that.
I came across information about a 2nd Lien Program as part of the Home Affordable Mortgage initiative. Since we are well over 180 days delinquent on our 2nd mortgage, it appears the government would give them 3 cents per dollar of debt they extinguish including removal of the lien. That would be just over $6K in my case. I've heard others say some investors have been paying 2-3 cents per dollar for bad 2nd mortgages although I doubt they'd pay for a discharged one, so the 2nd mortgage company can either take a guaranteed $6-7K or hold out for $0-30K in non-guaranteed leftovers after a long foreclosure process. Or, as another option, I'm wondering if the 2nd Lien Program would allow them to extinguish all but $5-10K of the debt allowing them to still get paid about $6K by the government plus $5-10K by me in a modified loan plus government rebates for loan modification giving the 2nd mortgage company $11-16K total thereby splitting the difference for the maximum $30K they can expect to get in foreclosure leftovers. I am expecting calls from the Loan Mod groups at the 2 mortgage companies over the next 2-3 weeks, but I want to have a strategy and knowledge in place by then. Thoughts?
Hi
The Second Lien Program under the Making Home Affordable Program will definitely be a good option for you. If your second mortgage holder is participating in the Second Lien Program, your second mortgage will automatically be modified when the modification is done on the first mortgage. The incentive the govt. is paying to the loan servicers participating in the program is good. So, it is expected that BoA will work with you to reduce the amount of the loan balance and settle the debt. First talk with them and check if they are participating in the Second Lien Program. There is no such specific strategy for the negotiations. If you think you need any professional help to carry out the negotiations, you can contact a debt settlement professional.
The Second Lien Program under the Making Home Affordable Program will definitely be a good option for you. If your second mortgage holder is participating in the Second Lien Program, your second mortgage will automatically be modified when the modification is done on the first mortgage. The incentive the govt. is paying to the loan servicers participating in the program is good. So, it is expected that BoA will work with you to reduce the amount of the loan balance and settle the debt. First talk with them and check if they are participating in the Second Lien Program. There is no such specific strategy for the negotiations. If you think you need any professional help to carry out the negotiations, you can contact a debt settlement professional.
I have a first with bank of america $187,000 which is 30 days behind, I also have HELOC that i took out in August of 2004 of 55,000. Made timely payments on the second of between $150 -$250 until August of 2009 when the payments re-amortized to $540 per month. I am now six months behind. I submitted for a loan modification and received a 60 day letter of offer which is due to expire in the next 3 days - offer was $404 per month at 3.75% until 2027. I had been reading about settling a 2nd mortgage, recourse and non recourse loans and thought I might try that route. In the meantime I am affraid the offer will go away. I received a bankruptcy discharge in 2009 in August. Can CHASE foreclose on my house. the value is $155,00 on the high side.
Hi Gina!
Welcome to forums!
If your first lender is offering you a modification, then I think you should accept it. If you do not do so, the offer will expire and there are chances that the lender may not give you such an offer again. As the second loan is with a different lender, you will have to contact the lender and negotiate with him.
Sussane
Welcome to forums!
If your first lender is offering you a modification, then I think you should accept it. If you do not do so, the offer will expire and there are chances that the lender may not give you such an offer again. As the second loan is with a different lender, you will have to contact the lender and negotiate with him.
Sussane