Posted on: 17th Sep, 2008 12:30am
If you're in financial hardship and you're not paying second mortgage for 150-180 days from the due date, the lender may foreclose your property or file a lawsuit and seize your personal assets. Read through the section below and find out what happens if you stop paying second mortgage.
What happens if I stop paying second mortgage?
If you're not paying your second mortgage, and your home is upside down (combined balance on 1st and 2nd loan exceeds the home value), the lender may not file a foreclosure. That's because he'll have to pay off the first loan before he intends to retrieve the money he has invested on the 2nd loan.
However, even if the second lender forecloses and sells the home for less than the balance on 1st and 2nd loans, the law may not require you to pay the difference or deficiency balance provided the second mortgage is a non-recourse loan. Moreover, certain states have anti-deficiency laws which prevent one from paying the deficient amount provided the second mortgage (such as the 20% of an 80/20 loan) is used to purchase a primary residence.
However, if the second mortgage is a recourse loan, and your state doesn't follow the anti-deficiency laws, the deficiency balance needs to be paid off. In case you don't pay the deficiency or if the lender doesn't foreclose at all, here's what may happen:
However, even if the second lender forecloses and sells the home for less than the balance on 1st and 2nd loans, the law may not require you to pay the difference or deficiency balance provided the second mortgage is a non-recourse loan. Moreover, certain states have anti-deficiency laws which prevent one from paying the deficient amount provided the second mortgage (such as the 20% of an 80/20 loan) is used to purchase a primary residence.
However, if the second mortgage is a recourse loan, and your state doesn't follow the anti-deficiency laws, the deficiency balance needs to be paid off. In case you don't pay the deficiency or if the lender doesn't foreclose at all, here's what may happen:
- Judgment/garnishment: The lender may file a lawsuit in the local court and get a judgment order to collect the unpaid balance. He can come after your assets such as bank account funds. The lender may have your wages garnished. Wage garnishment is a legal process in which an individual's earnings are partly or wholly withheld by the employer (as per court order) for repayment of debt.
- Charge-off: The lender may issue a second mortgage charge off and assign or sell off your debt to a collection agency (CA). The agency will then try to collect the loan payments by all means. If you don't make any payment, here's what the CA can do:
- Harassing calls/letters: The collection agency is likely to harass you with repeated phone calls or payment notices/letters. They may even call you at odd hours and disturb you at your workplace, though such practices are against the Fair Debt Collection Practices Act (law which governs the practices of CAs).
- CA may file lawsuit: The CA may even sue you thereby leading you to legal hassles. They may even get a judgment order from the court and go for wage garnishment or seize your bank accounts.
However, if your second mortgage debt is well past the Statute of Limitation (SOL), the collection agency cannot file a lawsuit. Even if they threaten to sue you after the SOL is over, send a cease and desist letter stating that your debt has crossed the SOL, so they shouldn't contact you any more. Still if they harass you for payments, file a complaint with the FTC or State Attorney General.
What to do if I can't pay second loan
Once your home is sold off at a foreclosure auction, the second mortgage debt or the deficiency balance on it will be considered as an unsecured loan which you can pay off in monthly installments. In case you can't afford to pay the deficiency balance in full, you may negotiate a settlement with the lender or the collection agency to whom the lender may have assigned/sold off your debt.
Paying your second mortgage will help you minimize the chances of getting hit with negative remarks on your credit report. You can thus avoid trashing your credit score and improve your chances of getting loans in future.
Paying your second mortgage will help you minimize the chances of getting hit with negative remarks on your credit report. You can thus avoid trashing your credit score and improve your chances of getting loans in future.
i have a 1st & 2nd mtg and i have requested a short sale. i am able to make my 1st mtg payment but i do not have the funds to make my 2nd mtg pymt. if i stop paying second mortgage what happens? can the 2nd lender foreclose on my house? and if not, what happens to the 2nd loan? if they charge off & put a lien on my house, then i will never be able to sale it because i owe more than the house it worth? any advice? also, if they charge off & put a lien on my house, can i then bk it?
i have filed chapter 7 bankruptcy. i have 2 mortgages and can't continue to pay my second one/ can that 2nd lender forclose my house? i have not reaffirmed that debt!
But what if I want to keep the house?
I filed Bankruptcy I have 2 mortgages and can't pay my second one. It is a line of credit loan. I want to keep my house can the 2nd lender forclose my house I have not reaffirmed the debt.It was discharged aug2010 I am currant on my loan up to this point.
I stoppped making payments on my mortgage and also my second mortgage what can they do to me, its already in forecloser and I refuse to file bankrupcy, I also owed another house. What could happen just decided to stop like everyone else
Hi!
Welcome to forums!
To Melisa,
The second lender has the rights to foreclose the property if he does not receive his payments.
To Guest,
If you stop making the payments, the lenders will foreclose your property and will come after you in order to recover the deficient balance.
Sussane
Welcome to forums!
To Melisa,
The second lender has the rights to foreclose the property if he does not receive his payments.
To Guest,
If you stop making the payments, the lenders will foreclose your property and will come after you in order to recover the deficient balance.
Sussane
My 1st mortgage is with B Of A., it was 15 years @ 70,000. It is now about 8 years @ 56,000 @ 830.00 per month. My 2nd is with Wells Fargo for 72,000. I've had it for about 10 years. I live in Las Vegas, Nevada. At the time of the 2nd my townhouse was worth $250,000, it is now worth less than $90,000. I am on Social Secuity and can not afford to pay the 2nd anyway. What are my options ?
Welcome Guest,
If you're unable to pay the mortgage but want to save the property, then you should apply for a loan modification with both the lenders. If the lender accepts your request, then you will be able to get an affordable repayment plan which will help you in paying off the mortgage in an easier way.
If you're unable to pay the mortgage but want to save the property, then you should apply for a loan modification with both the lenders. If the lender accepts your request, then you will be able to get an affordable repayment plan which will help you in paying off the mortgage in an easier way.
i have a second mortgage of 7.6% interest only by green tree, i cant get help to refinance from any body because house is under water. how can i force the second mortgage to refinance or renegotiate the terms.
or should i take the matter up in court? i have paid almost a 1/4 of the loan in interest only any the principal is untouched.
i have been late on payments every month for the last 6 months and there is no incentive to pay this loan but i am too attached to my home.
or should i take the matter up in court? i have paid almost a 1/4 of the loan in interest only any the principal is untouched.
i have been late on payments every month for the last 6 months and there is no incentive to pay this loan but i am too attached to my home.
TTGO...it's not likely that the second mortgagee will bring about a foreclosure suit if you simply stop making payments. I say that based on your statement that the "house is under water." Second mortgagees in such a situation are in deep trouble, as there exists no equity for them to reap in a foreclosure.
All funds would go to the first mortgagee in a foreclosure. The holder of the second lien is more likely to charge off its account (after a prolonged period of delinquency, of course), and sell the debt to a collection agency. You'd then hear, pretty regularly, from the collection agency, in their efforts to obtain payment.
Of course, you'll ignore those calls, as most do. The result will put your credit report in tatters, but that's probably small potatoes in relation to your attempt to keep your home.
As long as you are making the first mortgagee happy, there's little likelihood that they'll take you to court in an effort to foreclose. The second mortgagee, having charged off the debt, will have obtained what it can from the collection agency, and that's pretty much it for them in this case.
Does this solve your problem? Not likely, of course; but it's a probability of what you can anticipate going down the road.
All funds would go to the first mortgagee in a foreclosure. The holder of the second lien is more likely to charge off its account (after a prolonged period of delinquency, of course), and sell the debt to a collection agency. You'd then hear, pretty regularly, from the collection agency, in their efforts to obtain payment.
Of course, you'll ignore those calls, as most do. The result will put your credit report in tatters, but that's probably small potatoes in relation to your attempt to keep your home.
As long as you are making the first mortgagee happy, there's little likelihood that they'll take you to court in an effort to foreclose. The second mortgagee, having charged off the debt, will have obtained what it can from the collection agency, and that's pretty much it for them in this case.
Does this solve your problem? Not likely, of course; but it's a probability of what you can anticipate going down the road.
Thanks very much for the info GMA, I guess I have to save my pennies and look forward to a settlement offer from the collection agency.
I truly went into this blindly, I took the money to pay off some bills and never realized what a mess I put my family through signing a deal with the devil 10 years interest only @ 7.6% for 10 years and a balloon payment at the end.
I honestly have tried every possible avenue to get the second refinanced and I have gotten every door shut in my face.
I truly went into this blindly, I took the money to pay off some bills and never realized what a mess I put my family through signing a deal with the devil 10 years interest only @ 7.6% for 10 years and a balloon payment at the end.
I honestly have tried every possible avenue to get the second refinanced and I have gotten every door shut in my face.
Hello and thank you in advance for answering my question. I have two mortgages on my home in Georgia. My first one ($38,000) is with a mortgage company out of MS. My second mortgage is with Wells Fargo. I am current with first and have not paid second since September 2009 due to being laid off as a teacher assistant. I have attempted to do a HAMP on both thru the first mtg company but was unsuccessful, and was told by first that we did not qualify because of my unemployment funds ($110.00 wkly). I have not recvd any unemployment since March of 2010, and I am still unempl. but in school to further my education. My husband and I recvd a letter in March of 2010 from Wells Fargo stating that we owed $66,000 (true amt is $56,000) on their loan and they were going to place it in some attorneys office, and they wanted to affirm the amount that we owed. We signed the letter stating that yes we owe but not that amt and had it recorded in our county's clerk office. As of today we have not heard from anyone. We even tried to get NACA to help us out but to no avail we cannot get any help at all. I recently checked my credit report and it stated that the Wells Fargo account was "Charged Off." What does that mean and what solutions do you recommend as our home is deeded to my husband and it sits all around FAMILY OWNED PROPERTIES. WE HAD THIS HOUSE BUILT AND IT WILL DESTROY MY HUSBANDS FAMILY IF WE LOSE IT. Thank you for allowing me to post......
Your emphasis on the family is striking. If your husband's family will be destroyed in the event you lose the home, why is it that they're not involved in helping out (or maybe you just didn't say so)?
A charge off is an internal elimination of the loan from the lender's books - it's consider a total loss, so they don't any longer pretend that the loan being held is an asset. It's really a bookkeeping entry and more of a formality than anything else as far as consumers are concerned.
That doesn't make it unenforceable.
What was the deal with NACA that you couldn't obtain assistance?
A charge off is an internal elimination of the loan from the lender's books - it's consider a total loss, so they don't any longer pretend that the loan being held is an asset. It's really a bookkeeping entry and more of a formality than anything else as far as consumers are concerned.
That doesn't make it unenforceable.
What was the deal with NACA that you couldn't obtain assistance?
The calls for payment from the second mortgage is increasing and won't stop I have been able to avoid all calls with 18--/877/866 if I think it might be the mortgage company. I would like to know if I should inform them of my intent of not paying the second mortgage or should I write a letter addressed to the mortgage company informing them why i cant continue to pay a mortgage with interest only on an underwater home?
It's not too difficult to avoid the collection calls - you simply don't have to pick up the phone. That won't dissaude them from calling. After all, they want their money, and it's abundantly clear that lenders seeking their payback don't pay much attention to what you tell them on the odd occasion when you do answer the phone. They call today, and you mention that you're out of work; and when they call tomorrow, you'll have to reiterate precisely the same things you told them today because there's a new person on the phone who apparently can't read the notes from the day before. Yes, it's exasperating.
Thanks for your time and prompt acknowledgement. In regards to my husband's family helping; they are all senior citizens and on fixed incomes. As far as NACA goes ONLY after 2 years of trying to sit down with one of their representatives did they advise that they could not help with the SECOND MORTGAGE because they only work with first mortgages. And since the first was current there was nothing that they could do!