Information about consequences of default on second mortgage - The Bills.com Blog

If I am reading this correctly. You are stating that they can foreclose on your house for not paying the 2nd mortgage even if you have continued to pay the main 1st mortgage on time every month????? Please advise, as I'm currently sitting in a similiar situation. I owe $365 on first and I have a line of credit sitting at $85k. My husband lost his job. I have been paying the first on time every month, but I'm having difficulty paying the line of credit. Any information would be helpful. Thanks, Dawn

Dawn, if you used your home as collateral to get the line of credit, then yes, they have the same recourse as the 1st mortgage holder in case of default. The 2nd mortgage company can initiate foreclosure proceedings. I would suggest that you contact them as soon as possible and try to figure out a workout plan.

i have a huge mortgage of $999k and second of $300k. my business is failing and the house has been on the market for 15 months. i am current on all payments but don't know where to start. the house appraises for $1.3 but you know the market is horrible. i can continue to make the 1st but it's impossible to make the second. i am sick over this. where do i start???

Have you tried to talk to your lender about Deed in Lieu of a foreclosure? If you are current and the home is not selling, you might want to try this avenue. You cannot afford to default on your second mortgage because that could lead to a foreclosure as well. You could also try to speak to your lenders to see if they will give you a break on your payments so that you can catch up. You could also speak to them about restructuring your mortgage so as to make your payments affordable.

I owe 166,000 on my first and 59,000 on my second mortgage. I am possibly going to have to file bankruptcy due to credit card debt created by my husband that I knew nothing about(community property state). Before I consider filing bankruptcy, I want to try to refinance my first mortgage out of an ARM into a fixed rate while rates are low. My present ARM is 4.375% but my ARM expires in 2 years. I do not want to be stuck with higher interest rates at that time especially if I have to file bankruptcy. I am current on my first and second but wish to only refinance my first in my name only, which my husband has agreed to, and make him responsible for the second mortgage since it is his debt. Current fixed rates are 6.125%. I do not want to do a wrap around mortgage with the first and second because my husband has agreed to let me have the house should we get a divorce and I am not sure I will be able to afford the first and second together on my own. Additionally, I will be paying off his debt. Do banks usually agree to let you refinance on your first only and not make you join your first and second together? Or, should I just ride the ARM and pray the interest rates and my credit scores are better in 2 years when the ARM expires? I am not sure what I should do. If I ride the ARM, I am planning to have the second paid off before I need to refiance the first again. I have money now to pay for closing cost as well if I need to do so. I am afraid that if I ride the ARM that the interest rates will be too high in two years for me to afford the house with the new rates, which is why I am trying to get locked in a fixed even though I will lose out on the 4.375% interest rate.

It is possible to refinance just the first, but it isn’t easy. Your first mortgage is the mortgage listed first with the registrar. When you refinance a first mortgage, any other home loans move up in line, so your second automatically becomes your first. In order to refinance your first as a new first, your second lender must agree to continue subordinating their claim. Some lenders refuse. If your lender refuses, your only options are refinancing both mortgages into one new loan or refinancing both mortgages separately into two new loans. Before refinancing any mortgage, carefully consider your options. Use refinancing calculators to compare costs and savings from all three options and then make the most financially beneficial decision that your lenders will permit.

Wow! Now I'm a little bit confused. I am currently in the process of filing Chapter 13 bankruptcy. I have a 1200.00 first mortgage pymnt on a 193K bal. and a 600.00 pymnt on an 50K second mortgage. All of my credit card debit and collections will be taken care of with filing. The remainder of debt that is going into the repayment plan totals a monthly pymnt. of 794.00. Besides that, I have only normal living expenses to contend with.. phone, tv, insurance, electric, etc. Aug. (this mo.) was the 1st time we had to make all pymnts as stated and we STILL can't afford it! I was told if I defaulted on my 2nd mortgage, not too much would happen because in order for the bank to forclose, the 2nd mtg. co. would have to pay off the 1st mtg. in order to proceed with forclosure. (which would cost them alot more than the loss of the 50k debt) However, that doesn't seem to be what I am reading from the prior blogs??? My hubby and I thought we were doing the right thing, the last possible option, but the right thing... now I feel like I'm taking 10 steps back!!! On top of all this, we have an ARM that goes into effect this October. We have lived here since 97, IT'S OUR FIRST HOME, but I am mentally and physically exhausted. My two children, 14 and 10 are suffering as there has been no excess spending in months.. Not even money for school shopping. I know I can surrender my home in the BK. Is this what it has come to? The bk was able to negotiate the vehicle loan interest rates, why cant anything be done about the 1st or 2nd mtg interest rates? Any suggestions? (SORRY TO FLIP FLOP ALL AROUND IN MY STORY, BUT MY HEAD IS FILLED WITH SO MUCH)Thanks.

Technically, the 2nd Mortgage lender can initiate foreclosure, but realistically they might not do it based on the situation. For example, if they know that the value of the home is barely sufficient to cover the first mortgage, then it will be pointless for them to initiate foreclosure, because once foreclosed upon, any remaining balance becomes unsecured debt, just like a credit card debt, and depending on the state law, they might not even be able to pursue collections on it. I can understand the fact that this is your first home, but if you cannot afford the payments, then there is only so much you can do. You should speak to both of your mortgage lenders and try to work out a solution. if your payment history with the mortgage lenders is good, then I see no reason why they should not be co-operative with you to work things out. But you also have the bankruptcy to contend with, so at the end of the day, you might have to let the home go.

HELP! My home is worth $345k and my 1st is $388k at 7.35% and my 2nd is $78k at 10.35%. I'm thinking I am not too smart to keep paying these payments when I will never get ahead and and I will never be able to refinance.... I could rent a place twice as big for half my mo. payment. At this point my credit rating may have to take a dive. I am I giving up too quickly?

I cannot answer that question without knowing where your property is located. In any case, in my opinion, the mortgage industry is yet to find its bottom, and it will be a while before property values start going up. I would recommend that you start thinking about discussing a short sale option with your lender.

Help! Help! I am getting crazy about this house. I bought this house in 2007 for $414K.I owe $325k for the first and $61k for the second lender. Based on the current market, the house worths $285k. I tried to refinance many times, but I couldn't. I am experiencing a huge financial problem. Almost, I spend more than 95% of my income on mortgage related expenses. I am thinking to ignore the 2nd, what do you suggest?

If you ignore payments on the second, they can initiate foreclosure as well, just that in reality, they will not get any money, since you state that the property is worth less that the balance on your primary mortgage. You should discuss a short sale option with your lenders.

due to a home that is overpriced with 1st and 2nd morgage owed. does the 2nd morgage holder have a harder time forclousing on home if the first is current? basically house is worth the amount owed on 1st morgage 2nd would end up going to collections? collection company would negioate deal to pay off or place judgement against credit that is unpaid . they have so many years from default to try to collect. does florida have rule that you cannot sue head of household? in short , if i stop paying 2nd wost that can happen is they put judgement on my credit then i negioate with collection companies? is this true statement

Yes, your second mortgage lender is also aware of the market conditions, so is the home value is less than what is needed to fulfill both the obligations, then there is really no point in the 2nd mortgage co. to initiate foreclosure. They will try other means.

In the past year we struggled some very difficult times. I was going through the disability process and my husband was losing hours. Both our 1st and 2nd mortgages fell behind. Our first mortgage would not work with us while our 2nd lender did a forbearance. In the meantime my father pasted away unexpectedly and my husband was put on unemployment. Therefore, we could not even make the 2nd mortgage payment anymore. Waiting on pins and needles our 1st mortgage went into foreclosure. With a whole lot prayers and luck I was awarded disability and I was able to sell my father's home. I have been trying to get caught up on all my bills. I have gotten current with my 1st mortgage but not my 2nd. The late fees and interest has racked up to be a lot. How do you suggest I approach the second lender on negotiating these fees if I can come up with some sort of payoff. I could pay off my 2nd at the rate it is right now however I would drain my entire account leaving me with nothing to pay other creditors. What can you suggest?

I have a first and a second on my home, the first is $210,000 and my second is $245,000. I also have two rental properties, two identical triplexes and I owe $350,000 on each, I want to either keep my home or the rentals but not both,( Iwould if I could) my combined mortgage on my house is $3,600 a month and on the rentals is $5000.00 a month. My wife got laid-off and I have to do something. Any advice? THANKS.

You could probably ask for a discount on the late fees, given the hardship that you are going through. They could also possibly add the overdue payments to the loan, so that you are brought up to date but the length of your term is extended by how many ever months you are behind at this time. But they will also see that you have brought the 1st up to date, so I am not sure how willing they will be to negotiate.

Keep the house that you intend on living in for a longer time and also the one which is not subject to a rapid loss in value in this current market. It really depends on how much you can safely afford to pay, every month. You definitely do not want to be in a position where you are unable to afford your mortgage yet again.

My first mortgage is $245,000 @ 6% on a 30yr note (purchased 2002) and the second is $53,000 @ 13% on a 20yr note. I am having trouble making payments on the second mortgage (borrowed 2006). Should I look into refinancing and combining both mortgages (banks permitting) and perhaps take on a new 30yr note or more. Please give me some advice.

Yes, most definitely look into refinancing into one 30 yr loan. Make sure you look into the closing costs and other costs in detail. You should also check to see if there any pre-payment penalties for the 2nd mortgage. That interest rate is extremely high, and given the current market, I see no reason why you shouldn't qualify for a better deal (if you meet all the requirements).

My husband and I have been struggling financially due to a loss of income from him. He was injured and is now filing for disability. I do not make enough money to pay my 1st and 2nd mortgages. I owe $330k on 1st and $139k to the 2nd. My home is worth maybe $340k to $350k. Do you think the 2nd will foreclose on our home if we are up to date with the 1st? I rec'd a "charge-off letter" recently from the 2nd. What do you think that means? Please any advise,response, etc. Under so much stress worrying about our finances.

I have a line of credit that I got in my name not my husband.It is not a 2nd mortgage but I have lost my job and can not make payment. What can they do? How will this effect my husband ? Thank you Susan

A charge-off is basically an accounting term used to classify accounts that are bad debt on a creditors books. You still owe the debt, but now it might be sold to a collection agency for follow up. As the value of your home will barely cover your first mortgage, I doubt that the 2nd will initiate foreclosure. You should have discussed options such as a short sale with both the lenders, but I don't know if that is an option now. You should discuss the same with your lenders. You should not ignore this charge-off letter otherwise the creditors might initiate legal recourses and find other means such as wage garnishments to recover their money. You should also look for a qualified real estate attorney to figure out your best options.

If you miss the payments, the default will be reported on his credit profile and his score will go down. This might even affect the interest rates he has with his other credit cards because the default will be visible to everyone. If you do not make the payments for a long time, then eventually you will face the wrath of the collection agents and possible legal action. You should discuss this with your husband to see what the best recourse would be.

We live in So Cal. We bought a home in 2005 with a 5/1 ARM on the first and a HELOC on the second- at the suggestion of a wonderful mortgage broker, ugh. We refinanced the HELOC with our bank for a fixed 15-yr note. We did not borrow any additional money. Our first mortgage is $420K and our second is now about $97K. I lost my job six months ago and still have not been able to find steady work. Three months after requesting a loan modification with our first mortgage, they tell us we don't qualify for a modification because we don't make enough money- they don't count unemployment compensation in their figures. Houses in our neighborhood are now selling or being auctioned for anywhere from $230K-$300K. Obviously, not even enough for us to short sale and cover our first mortgage. Do you have any suggestions for us? What type of attorney would be best suited to help us wade through some of these options?

The best thing for you to do at this point may be to simply walk away from the home and file for bankruptcy protection. However, what actions you should take will largely depend on your income and your other assets, as well as your future plans, as filing having a foreclosure and bankruptcy on your credit history will likely make purchasing another home or obtaining other credit difficult for at least several years. I strongly encourage you to consult with a bankrutpcy attorney in your area as soon as possible to discuss the problems you are facing and to determine if bankrutpcy will help resolve your financial difficulties. One positive note in your situation is that California law does not allow lenders to pursue borrowers for deficiency balances on purchase money loans; so, if you are forced to allow your home to go into foreclosure, you should not be liable for any balance remaining on your first mortgage after the foreclosure sale. To read more about foreclosure, you should visit the Bills.com Foreclosure page at http://www.bills.com/foreclosure/. I wish you the best of luck for the future!

My first is huge, 1.5 million. The reasons are immaterial, but I'm in default on a 30K second. It's been sold to a collection agency. I've tried to work with them but they are making demands I can't meet. Other than harass me, what can they realitically do? Certainly, they don't want to buy off the first as current appraisal is 750K.

They could potentially sue you in court. The court may award them remedies such as property liens or wage garnishments depending on your state law.

My house went into forclosure in 2005 after my divorce. I moved out, never heard a thing until today when I received a call demanding payment of $58,000.00 The bank was willing for me to make $100.00 a month on this loan which was a second mortgage. Should I pay the monthly $100.00 or file bankruptcy? I am a teacher making $33,000. per year.

You should check if the account is reporting on your credit report, if it is, then you should check if the statute of limitations has expired. If it has, then you do not need to pay this amount. Even if the statute has not expired, then speak to the collection company to see if they will lower the amount due. you need to do some hard core negotiation with them. make sure to maintain all communication in writing, in case you need proof in the future. Bankruptcy is a serious issue, and only a qualified bankruptcy attorney can tell you whether or not it is a feasible option for you.

I am considering 'walking away' from my home. Both my 1st and 2nd mortgages are with the same mortgage company. The balance due is $335K and the FMV is $210K. I keep reading about nonrecourse vs. recourse loans. How can I determine which type I have? For both mortgages, I have pledged the house as colleral.

A recourse loan is one where the lender can come after you for any excess amount of money you owe. A non-recourse loan is a loan that the bank can only look to their secured interest. In other words, they can only foreclose, they cannot get a deficiency judgment and chase you into bankruptcy collecting it. Whether a loan is recourse or non-recourse varies with the state you are in. The big mistake homeowners make is turning a non-recourse second loan into a recourse loan by refinancing it. So how is a second mortgage also a non-recourse loan? Simple, in an 80/20 loan, it was “purchase money” for your home. A purchase money loan is one where the money went from the lender, to escrow, and then to the seller or to pay purchase closing costs. The mistake comes when you refinance your second purchase money mortgage. Because it is no longer a purchase money loan, a refinance transforms it into a recourse loan. That means the lender will chase you into bankruptcy collecting it. Or worse, they will sell it to a debt collector. I suggest that you confirm the status of your second loan with your lender, and see if another form of refinance (to club both the loans) will make it a non-recourse loan.

I own 2 properties and current on both so far but I need help because my equity line is running out. Property 1 I live in as a homestead property in Florida first mortgage of 1 mil dollars and line of credit of 150k that I bought in 2006 for 1.2600,000 I also own a rental property as well with 2 mortgages on it 1st mortgage of 250k and 2nd over 400k and now upside down on both.However second property is rented currently with an annual lease. I'm forced to stop paying mortgage payments on rental property because of loss of income What should I do?

I cannot tell you how to go about this, because it is you who has to take a call on which property you want to keep and which one you want to let go. I am guessing that in all probability you would like to hang on to the one that you live in. If the loan is upside down, there are several options such as short sale or a deed in lieu of foreclosure that you should discuss with the lender.

i have a first mort. at 63k and a 2nd mort. at 14k. am not having trouble at this time making both payments but would it make sense to refinance and roll the second into a first? this would probably reduce overall payment by about 100 a month. closing costs would be about 5k! thanks

If it gets a you reduction in the interest rate and a the monthly payment, why not, go for it.

I live in Florida and have homestead on my home which is worth abouth $240 000 I owe $40 000 only. I'm ok with this payments but have some vacant rental property. If I don't rent it out soon I will have to stop paying, can lender put lien on my house which is almost paid off? What can happen?

That depends on whom you are referring to when you ask if a lender can put a lien on your home. Homestead protection only applies to other debts that want to put a lien on your home such as credit cards or personal loan lenders. Your mortgage company has full rights to initiate whatever action they deem fit, if you default on an loan that is secured by your home.

I have a first and second mortgage, first for $330, and Second for $60. While I can handle both payments, I'd love to be able to refinance that second mortgage into a much lower rate. Currently,I am getting 8.7%, which equates to roughly Prime + 4.7%. Do you recommend any strategies in discussing this with my second mortgage holder? I know that because my house is probably worth exactly what I have outstanding, it is very hard to refiance, but I'd like to try. Come next year I'm gonig to have to start Escrowing more money, maybe I could use that? What if I just stop paying my mortgage, and then try to work a rememdy with them? Do you think they'll lower the rate if I walk away or will they jack the rate up? Any tips in what to say to the bank to get a lower rate?

Lenders have really tightened the norms for lending ever since the sub-prime crisis. The main factors that lenders consider is basically your income, credit score, and the loan to value ratio (LTV). Being that you have little to no equity in your home, I think 8.7% is a good rate. You cannot go on the offensive and default on your payments and then try to lower your rate, it just does not work that way. Instead, why don't you refinance both the loans into one single fixed rate loan, I think you would get much better savings that way.

My home is worth $134k. I have an 80/20 mortgage totalling $179k. I was laid off and my husband is the only source of income. The 2nd mortgage company offered a modification, but that will result in only $80 off of the payment. My home is not worth the total for the 1st. What other means besides forclosure is there for the 2nd mortgage company to collect?

You have a few options: First (albeit unlikely) you could pay off the second loan in full. Second, you could stop paying and let them foreclose. Lastly, you could negotiate a short-sale and essentially give them the house back for a discount to the loans and try to walk away from the home free and clear. Good luck.

Have my mother-in-law paying a 1st mort 66K bal ( 6.8%)and a 2nd with 22K bal (15.5%). FMV approx 80K. I want to use a Lawyer to help renegiotiate the 2nd, since she does not qualify to refinance on her own. What type of attorney should I be looking for? Thanks David Kesel

I am not too clear as to what you mean when you state the you want to "negotiate" the 2nd mortgage. Do you want to lower the interest rate or are you looking to negotiate the principal balance itself? You should know that if you are looking to negotiate the principal balance, then in most cases, the creditors will not do so unless the loan is close to 6 months in default. Defaulting on your second mortgage will put you at the risk of foreclosure. You should discuss this with a Mortgage/Foreclosure attorney in your area before you take any steps.

I have a 1st mortgage of 470,000 and a 2nd for 87,000 totaling 540,000+ on a house that is appraising for 250,000. I spoke with my 2nd mortgage holder this morning and advised I wouldn't be paying anymore. They said they will not foreclose but will send it to attorney for a charge off...I will then be 1099'd and will have to pay taxes on that 2nd...I then spoke with my tax attorney and they said new law (might want to check in your state) that as long as it is your personal residence you will not be required to pay taxes even though they will send you a 1099. So if you all know for a fact that your house is considerably lower than what you owe on your 1st, then why bother paying the 2nd if you don't care how your credit looks for a few yrs. Its like throwing money away.

These posts have been very informative. Thanks for your time. I am in a situation not unlike some here. I have a house in New Jersey that has dropped in value to approximately $385-410k depending on the source of the estimate. I have a first that is an interest only loan on approx. $335k. The second is a 15 year balloon that I have been paying an extra $200/mo to knock down to about $88k. So, I'm upside down on the house. I've looked at the Hope for Homeowners Act provisions, and I a meet every criteria (debt to income, etc) with the exception of actually making my payment every month. Grrrr. The Act is written pretty much only for those already in default or in danger of foreclosure. Meanwhile, my credit card debt has escalated to about $16k just to be able to make the mortgage payments. I've also had to borrow around $17k from a whole life policy and around $25k from my 401k to make ends meet. I've considered stopping the payments on my mortgages to be able to pay off my credit card debt and then try to take advantage of the reduction in principal under HOPE to sell the home and walk away from it with nothing. Any advice?

Have you discussed a short sale option with your lenders? In this current market, more lenders are willing to work with borrowers in situation just as yours. But, you have to keep an open line of communication with your lenders as the short sale will have to be approved by your first mortgage holder. You have to stop borrowing more funds as you are only "borrowing from Peter to pay Paul". You have sit back and plan a long term budget to see what your cash flow is going to be like. Stopping payments on your mortgage to pay the credit cards does not make sense at all as you are putting your home at the risk of foreclosure. You should look at other options to take care of your credit card debt such as credit counseling or debt settlement. You can read more about these options on our website at http://www.bills.com/debt-help/.

I have a first mortgage of 215000 and a second mortgage of 39000, due to layoffs and surgeries in the past yrs. now the layoffs are worse than ever, i have already talke to the mrtg comp. and they have gave me a special forbearance for a few months. we also filed for bankruptcy last yr but were not yet able to come up with the extra cash to get the bankruptcy going yet. due to the layoffs we cannot keep up with the second mortgage. both are for thirty yrs as it is. is there a way to get rid of the second mortgage along with my unsecured debt in the state of pennsylvania. we dont know what to do . we want our house for ever we dont want to lose it. thank you in advance.

You could explore a chapter 13 banruptcy, where you will repay a portion of your liabilities and will likely be able to keep your home, depending on your payments and cash flow. You will need to seek local counsel from an attorney about your bankruptcy options.

We live in California and behind almost six months on 2nd mortgage( $86,000 ); the Lost Mitigation Department keep telling us that they will look into this...what should we do?

Keep following up with them on a regular basis. The last thing you want is a foreclosure notice (2nd mortgage lender can also initiate foreclosure). As you do not mention anything about your first mortgage, it is hard for me to gauge what they might do. If your home is worth less than the total of both the mortgages, then that might be one reason for them to not do anything. But in any case, be in touch with them regularly and also try to get caught up with your monthly payments.

My home is currenly going up for auction in 1 week. I owe my first and second with the same lender. The second is a 360/180. I asked my lender if I could do a Deed in Lieu. He said no because I have a 2nd mortgage. Is that true? Also, I am trying to do a short sale and the lender is telling me that I have to come in with 25% of the balance of my 2nd and if I dont and the house goes to auction they will pursue the deficiency and garnish my wages. Can they do that as well?

I think you are facing problems because both of your mortgages are with the same lender. Whenever you want to do a deed-in-lieu or a short sale, it is usually the 1st mortgage holder who has to approve it. Now, because you have your second mortgage with the same lender, they are trying to minimize their losses, by putting the 25% requirement on the balance. This might still be a good deal, because second mortgage holders are legally entitled to come after you for any balance after a short sale. Recourses vary from state to state, but if you can finish of the matter right now, I think you will be cutting your losses and avoiding a whole lot of headache going forward.

Unfortunately, mortgage lenders have no legal obligation to agree to deed in lieu of foreclosure agreements or short sales with borrowers who are struggling with their mortgage payments. Reading your question, it seems that the lender is unwilling to give up its rights to the second mortgage loan, which it may be required to do under a short sale or deed-in-lieu agreement. You may be able to save the home by filing for Chapter 13 bankruptcy, which allows many delinquent homeowners to bring their mortgages current and to repay their deficiency over an extended period of time; this can be especially helpful for those homeowners who are able to make their regular payments, but who are unable to catch up on their deficiencies. If you cannot afford to keep your home, and the lender is unwilling to work with you to mitigate the damage, you may have no choice but to allow the foreclosure sale to proceed. Depending on your state's laws related to post-foreclosure collections, the lender may be able to pursue you for payment of the difference between your mortgage balance and the amount received at the foreclosure auction (called a "deficiency balance"), as well as any portion of your second mortgage which is not paid by the auction proceeds. Some states (California, for example), do not allow lenders to pursue borrowers for deficiency balances on first mortgages, but do allow them to collect on second mortgage deficiencies. If you owe a deficiency balance which you are unable to pay, the creditor may be able to sue you and, if it obtains a judgment against you, garnish your wages, levy bank accounts, etc. (depending on your state law) for payment of the debt. If you find that you are responsible for a large deficiency you may be able to prevent further collection activity, including wage garnishment, by filing for Chapter 7 bankruptcy protection. If you qualify to file for Chapter 7, you may be able to discharge any deficiency balances resulting from your foreclosure, as well as any other unsecured debts you may owe. I strongly encourage you to consult with an attorney licensed in your state as soon as possible to discuss your state's laws regarding the collection of deficiency balances, and whether or not filing for bankruptcy protection is a viable option to help protect your wages and assets from collection action by your mortgage lender.

I am currently trying to refinance both my 1st mortgage and home equity loans to combine them into one single fixed rate loan to lower the interest rates and monthly payment. My home is in Florida. I have applied with the 2nd mortgage company for a refinancing, but have been denied. I owe $212,000 on my first mortgage and $78,000 on my second mortgage. My 1st mortgage is fixed @ 6.25% and the 2nd mortgage is fixed at 8.50%. I believe my home is worth less than the total of both the mortgages. The loans are from different mortgage companies. My credit report is poor due to a chapter 13 bankruptcy that is approximately 3 years old. The bankruptcy has been discharged and pay offed, but still sits on my credit report. My monthly payments for both loans which includes the escrow account for insurance and property taxes are about $2700.00 per month. I am recently divorce and do not know that I continue paying the 2nd mortgage payment. I have been current with my payments on the loans, but don’t know how much longer I can do it. I am teacher and have a second job to help afford the payments. 90% of my income goes to my mortgage payments. I do not have credit debt or a car payment. I just have my day to day living expenses. I don’t know if I should walk away from my home or just stop paying on the 2nd mortgage loan since I can’t afford it. Please help! I need some advice.

Given that you recently filed for bankruptcy coupled with the fact that your home is worth less than the total of your mortgages, it is going to be difficult for you to refinance. You should work on improving your credit score. Meanwhile, you should also speak to your mortgage companies and explain your situation to them to see if they can offer any kind of loan modification or re-structuring.

i have a construction loan 155,000 and the bank wont let me have any more money on the construction loan can i get a second construction loan my payments are current and never been late what do i do i need help

This depends on the value of the property and the approximate value of the puilt up property. You have to keep in mind that lenders will only lend about 80% of the value.

Help! I have a first mortage of $433,000 that is current and a second mortage of $100,000 that went to a collection agency. The hous is worth maybe $600,000 I told the agency that i have nothing, no money. They said they would see me in court. The second in with Benefical/Household Finace. What is the likely hood that they would foreclose? Help i need suggestions.

Be careful as even the 2nd mortgage lender has full rights to initiate foreclosure proceedings. If they see that your home is worth enough to pay back both the mortgages, then they just might initiate foreclosure. People have the misconception that if they are current on the 1st mortgage, the second mortgage company cannot do anything, which is incorrect.

okay what if the second will not neogiate with me? what should i do?

pay the past due payments and get current on the loan.

I live in Michigan and have a 1st mortgage of $180K and a second of $150K. The value of my house has dropped to about what I owe on the first. Due to loss of income, I have fallen behind on the second and am approaching 5 months behind. I do not think the second is going to foreclose, and the account will charge-off soon. Once the account charges off; I would think it would to go a collections agency. I do not want to lose my house. Do you think I would be able to negotiate with the collection agency at a latter date and reach some type of settlement? If we reached a settlement agreement, would the second lien eventually be removed from my house?

Yes, you will be able to negotiate a payment plan given their willingness to do so. Once you pay all the agreed upon dues, the lien will also be removed.

I am in a situation that developed over the last week. I live in Illinois, I just moved into a newer home 7/08 owe 206,500 with an interest rate of 5.78% valued at 230,000. I placed the previous residence on the market 8/08 still owe 110,000 for the 1st and 29,000 for the second its value dropped to to 128,000 was appraised at 165,000. Currently its listed as rental or rent to own or just please buy. My husband is out of the picture as was just sent to jail due to domestic violent act to our child. I am working professional who was working full time and parttime prior to this. I have the homes, still paying school back, truck note credit card debt, and two children. Of course I am devestated. I elected a short sale (contract is with realtor as a back up to the rental agreement). Would I qualify for hardship under the HOPE act?? What is the best next step I need my credit to stay on as my spouse of 13 years is out of the picture. I am the primary mortgage holder(he just signed one document on both deals). Does he have rights to use of either homes for equity?? His case has sent a bunch of lawyer advertisements to our home. Iam need to seek a lawyer too. Please advise

I have a First of $275,000 and a second of $94K. The current estimated value is between $280,000 and $300,000. If I continue paying the Second and not the first then what happens? The home will probably sell for about what the First Mortgage is,leaving no residual for the second. If and when the First forecloses what happens to the second equity line which is with another lender?

To Sher - The short sale would be a good option for you, if the lender is agreeable. Also, for the Hope for Home owners program, you will have to discuss that with your current lender as well. Read more about it at:http://portal.hud.gov/portal/page?_pageid=73,7601299&_dad=portal&_schema=PORTAL and http://www.bills.com/blog/the-hope-for-homeowners-program/.

Gerald Lewis - If there is a balance on the 2nd mortgage, it will remain as an unsecured deficiency balance and will be reported on your credit profile. The lender will pursue all collection efforts. If they are successful in getting a judgment against you in court, they may even garnish your wages.

To Sher - I strongly encourage you to consult with an experienced consumer rights attorney as soon as possible. I am not an attorney, and therefore cannot provide you with legal advice. In addition, there are far too many factors to take into consideration for me (or anyone) to try to answer your questions without a much more thorough understanding of your family's financial circumstances. For example, the best option available to you may be to file for bankruptcy protection, allow your second home to be included in the bankruptcy, and reaffirm the house note on your current residence. However, your income may be a concern, as it could limit the type of bankruptcy available to you. In addition, the fact that your husband is listed as a borrower on the mortgage notes could result in creditors pursuing him for payment even if you file for bankruptcy protection. As you can see, many complex issues must be taken into consideration, which is why you should consult with a qualified attorney who can review your case in depth and provide you and your family with comprehensive legal and financial advice. In regard to your potential eligibility for assistance under the Hope for Homeowners Act of 2008, I doubt that you would qualify due to the recent purchase of your current home. This law was designed to help consumers and banks in rewriting loans on homes which had significantly dropped in value or for which there was In most cases, for a homeowner to qualify for help under this act, the property for which the mortgage is being modified must be the borrowers primary residence, and the loan must have been made before January 1, 2008. In your case, your current home loan is likely too new, and your second home is no longer your primary residence, so I would be surprised if either loan qualified to be rewritten under the Hope for Homeowners plan.

We currently have a first mortgage of 191,000 and a second mortgage of 76,000. We are currently in the middle of a chapter 7 bankruptsy and expect to recieve our discharge in March. We have no debt except for the mortgages of about 2600.00 a month, my wife is diabled and just lost here part time job because of the economy. We are current on both mortgages but have zero money after paying mortgages and utilities and food. The value of our house is maybe 200,000 dollars, we have been toying with the idea of not making the payments to the second, do you think they would foreclose or just charge off. If they did charge off would I be able to stay in my house if I stay current on the first mortgage payments?

Technically speaking, even the second mortgage holder can initiate foreclosure proceedings if you default on their loan, but it needs to make financial sense for them to do so. As your home is barely worth enough to cover the first, the second will probably not get any money even if they were to initiate a foreclosure. Here is the good news: Lenders and servicers don't like to foreclose on mortgages. Foreclosures cost more than can be made back, so lenders foreclose only as a way of limiting losses on a defaulted loan. If homeowners get behind on payments, lenders will most likely work with them to bring the loan current. In order to do so, however, the owner must stay in communication with the lender and be honest about the financial situation. The lender?s willingness to help with current problems will depend heavily on past payment records. If the owner has made consistently timely payments and had no serious defaults, the lender will be more receptive than if the person has a record of unexplained late payments. For those falling behind in payments or who know they are likely to do so in the immediate future, they should contact the lender right away about meeting to discuss alternative payment arrangements. An agreement between borrower and lender to prevent the loss of a home is called a loan workout plan. It will have specific deadlines that must be met to avoid foreclosure, so it must be based on what the borrower really can do to get the loan up to date again. The nature of the plan will depend on the seriousness of the default, prospects for obtaining funds to cure the default, whether the financial problems are short term or long term and the current value of the property. If the default is caused by a temporary condition likely to end within 60 days, the lender may consider granting "temporary indulgence". Those who have suffered a temporary loss of income but can demonstrate that the income has returned to its previous level may be able to structure a "repayment plan". This plan requires normal mortgage payments to be made as scheduled along with an additional amount that will end the delinquency in no more than 12 to 24 months. In some cases, the additional amount may be a lump sum due at a specific date in the future. Repayment plans are probably the most frequently used type of agreement. In some cases, it may be impossible to make any payments at all for some time. For those who have a good record with the lender, a "forbearance plan" will allow them to suspend payments or make reduced payments for a specified length of time. In most cases the length of the plan will not exceed 18 months and will stipulate commencement of foreclosure action if the borrower defaults on the agreement. Foreclosure is a serious situation that has serious repercussions. If you can, you want to avoid a foreclosure as much as possible. Bills.com is here to help. We also offer helpful guides, foreclosure FAQs, glossary terms, and other helpful tools to help you keep your home and avoid a bank repossession.

I owe $1,050,000 on my first mortgage, and $850,000 on a second line of credit. My house is now at best worth $1.6 million, and I don't know if it is sellable in this market. My income has changed drastically and gone from $1 million a year to $200,000. In addition, my company is running out of money and most likely just about to go under, so I expect to be unemployed soon. I have perfect credit, and have been current on payments until now, but this is going to change very soon if I lose my job and I will default. There is no way for me to get from underneath this mountain of debt. A relative is willing to buy my second if I could get the lender to agree to a reduced buyout of 35 cents on the dollar, in exchange for equity in my house. What are my chances at getting the lender to agree to this?

It really depends on the lender, you should contact them and try to negotiate a modification. Ultimately I don't think you will be very successful. Your best bet would be to try an obtain a short sale agreement.

We owed 565K for our house in California.The short sale we tried was not approved by the second lender, so we had to go through the foreclosure process.The house is now sold for 410K, but the second lender is now sending us notices to pay for the balance(150K).What can we do?

I own primary and vacation home. I have been current on my payment. Recently my income reduced from 100k to 75k. I bought vacation home 200k 2006 -current value now 100k. I should negotiate for loan modification or sort sale agreement!

John - You need to speak to your lender to see if they are willing to explore either of those options. A loan modification (if you can realistically afford the payments thereafter) will help you keep the loan. In a short sale, you would be selling the home with some negative hit to your credit. Both of these options have to be agreed upon by your lender.

Christina - If the loan was for purchase money only, then according to California law, they cannot try to collect the deficiency balance. But, if you happened to refinance your loans at any time, then you basically turned the loans into a recourse status wherein the lender CAN come after you. You should try your best to work out a payment plan with the lender as the lender can go to court, and if successfully in getting a judgment will be able to garnish your wages among other things. I suggest that you also take an opinion from an attorney licensed to practice in the State of California.

I have a home that is probably valued at $165,000-$170,000 ( I hope). My first has a balance of $137,000 which I am current with. However my second for $30,000 is 5 months past due. I have spoken to my second holder and they say because I am behind they won't go for a short sale. They have offered that I catch up by paying 3 months of the past due but my income has dropped over 30% this past year and my cash flow is tight. After factoring in a possible sale and real estate commissions, I will be in the red by about $5000.00 which I do not have. Is it better to just pay the first and see if the second decides to foreclose or just let the house go? My first is $1100.00(p,i,t,i)plus $250.00 for my second for a total of $1350.00/month Oh by the way, there is a house 2 doors down that is being sold by a bank asking $130,000 which can effect my selling price by about $10,000 I am struggling with what to do. I have some credit card issues so as for my once 750 beacon, my credit is shot

It is better that you make the payments and have the 2nd lender agree to the short sale, but make sure to get everything in writing as they are known to go back on their words once you make the payments. I say this because both of your lenders will have to agree for the short sale to take place. if they do not, then you are probably facing a foreclosure and a deficiency balance thereafter. Lenders can still try and collect on this deficiency, the consequences of which could be garnishment of your wages.

I have A 1st mortgage of 55k and am current, took out an second for 18k in 2001 shortly thereafter I had a Heart attack and subsequent bypass surgery which was finacially devastating and my wife had lost her job around that time,also had many other financial hardships so we had no choice but to file a chapter 7 The Second we had was with Ditech, as far as I know looking over the bk documents we reaffirmed the 1st and 2nd but during that time of the bankruptcy my wife was taking care of the bills and had contaced Ditech about making the scheduled payments again and Ditech had told her that this was tied up in bankruptcy and that they couldnt speak with her about it,the bankruptcy was discharged and we still had tried to contact them and basiclly we were told this was settled in the bankruptcy ,we contacted bk attorney and he said we needed to make the payments but ditech quit sending monthly statements so we fast forward 7 years and find out that they sold the note off to a Note Tacker corp and that they were calling the loan and that amount was 40k the property at best is 75k as of today, we now have have recived the foreclosure petition it shows on my credit report that Ditech charged it off balance 0 Note tracker has contacted us but havent been the most pleasent people to deal with I have offered a cash settelment but no deal. wonder if you have any suggestions and while I admit I should have taken care of this along time ago the question is why did they wait so long am also wondeing if Obamas plan will help me in this matter would like to keep the home

Having lost my job and with no prospect of finding one I have had to abandon my house in Florida with 2 mortgages (separate lenders) and return to the UK to a jointly owned house (which mercifully is debt free). I stopped making the payments 3 moths ago. My first mortgage in Florida might be recouped by a foreclosure, but certainly not the second. Can I just ignore the whole thing and hope it all goes away! Am I in a better position if I offer to pay the second mortgage a very small monthly payment of say $100 (it should be over $700) or is that just a waste of more money?

From the information you provide in your question, it sounds like you did not actually reaffirm on your 2nd mortgage during your bankruptcy, meaning that the mortgage balance was probably discharged during the bankruptcy. While you may not be liable to Ditech, they are entitled to take possession of the property securing the note (your home). I do not know why they have waited so long to move forward with foreclosure, but in IA the statute of limitations on written contracts is 10 years, so they are probably still within the legal time limits. The best thing I can recommend would be to hire a qualified attorney who can assist you in working out a repayment plan with the company that now owns the mortgage. I would recommend that you seek a second opinion from a different attorney in your area, as you do not seem to have a lot of confidence in your former bankruptcy attorney. I wish you the best of luck in resolving this problem!

The fact that you are living overseas would generally lead me to say that paying on the second mortgage debt may be a waste of money, as the creditor is unlikely to go to the trouble of trying to enforce the debt in the U.K. That said, if you have any other assets in the U.S., such as bank accounts, other property, etc., then the second mortgage holder may try to enforce its debt by obtaining a judgment and executing against your assets. Theoretically, if the creditor obtains a judgment against you, it could move to domesticate its judgment against you in the U.K., meaning that it could try to execute against assets you own in the U.K. While this is possible, it is extremely unusual for a creditor to pursue international judgment domestication for relatively small consumer debts. Bottom line, I don't think that you have much to worry about regarding this debt, but I encourage you to consult with an experienced solicitor to discuss the potential consequences of letting this debt go unpaid. I wish you the best of luck!

I have filed chapter 7 and it has been discharged. I am behind on my 2nd mortgage and received a letter from them about a week ago saying it was going into default. However, I received a notice from the credit reporting agency I have saying the this mortgage company has discharged this loan. I am in the situation of most that are writing in the blog where my home is worth about what I owe on the first. Does the "Discharge" notice from the reporting agency mean that the 2nd mortgage company will not take further action?

In a chapter 7 bankruptcy, that is usually the case, but I would confirm that with your bankruptcy attorney.

I am currently in a Chapter 13 plan, but have not been able to keep up with my mortgage payments. I have a 1st and 2nd mortgage. I am current on the Chapter 13 payments. If the home is foreclosed, will i be liable for the deficiency? I live in Indiana.

That will really depend on the timing of the foreclosure, but yes, you will be liable for the deficiency. You should speak to your bankruptcy attorney immediately and let them know that you are finding it hard to keep up your payments, they might be able to modify filing.

Bill, I My husband and I currently have a home with a mortage of 600K, his business took out a business line of credit of 380K using our home as a collateral. The loan is under the company name with my husband as the guarantor. We can afford the 1st mortgage payment but his company can no longer afford to pay for the line of credit. We do not want to lose our home and if the 2nd lender tries to foreclose, will my credit be affected even though my name was not on the 2nd line of credit loan?

If your name is on the primary mortgage and the home gets foreclosed on, then your credit will be affected too.

Bill, I have a first loan of $409k, and a line of credit $127k. Do I need both lenders to agree to do a short sale? My income is reduced and I am moving out of town and do not intend to keep the house. Also, should I keep making payments or just stop paying and negotiate with the lenders? I can make payments for another few months but don't know if I should. Right now I am thinking keep paying the LOC but stop paying the first loan. Thanks for your help.

Generally speaking, any entity or entities that hold the home as security will need to approve the short sale. This means both the 1st and the 2nd mortgage company. As you are in the process of discussing a short sale, it would be in your interest to continue making the payments on the notes lest you risk of the talks failing on account of your missed payments.

Bill I work in the Real Estate Market in California and sell new homes. I just got laid off. I own a home with a First Mortgage of 310000 and a second of 55000. The current value of the property is 250000. I am currently paid with no late payments. With my loss of job I was thinking of offering the 2nd lien holder a small amount of money maybe 3 to 5k to get out of the second without incurring any late payments. Have you seen this work? Or do you have any other suggestions.Thanks

Steve, California happens to be one of those states where in if your loans were only for the purchase (purchase money loans) then they are non-recourse, meaning the lender will not be able to pursue collections for any deficiency balances. But, if you refinanced the loans at any point then the loans become recourse loans. If your loans are non-recourse, then the lender might be willing to negotiate with you, although I do not have any anecdotal evidence about the amount settled. Further more, creditors tend to negotiate settlements mostly for clients who are already late on their payments, and even when they do settle, they will report to the credit bureaus that the loan was settled for less than what was owed. Working out any kind of a solution will be difficult considering you do not have an income right now, I would suggest that you wait till the point you are employed again and then try to get the loans refinanced through the new plan announced by President Obama, you can read more here: http://www.financialstability.gov/makinghomeaffordable/refinance_eligibility.html

I sold my house in 2006, the buyer could not come up with all the money so I carred them on a second. They have defaulted on me, and now I find out the bank also. The bank is foreclosing in June, how can I get my money, not being a bank.

When you sell a home, you also need to transfer the title in the buyers' name and make sure that they are responsible for the mortgage payment. From what you state, it seems that you let them stay in your home in good faith while the title as well as the mortgage was in your name. If there is no paperwork involved, then there is little you can do to recover your money as the mortgage company will hold you responsible for the payments.

Sorry for the misunderstanding. They have a mortgage with the bank for 90% of the loan. I have a promisary note for 10%. The title/deed is in their name. I am trying to find out what steps I can take to get my money from them. I live in Wyoming.

You will have to sue them in court based on the promissory note that you have. As I am not an attorney, I cannot give you legal advice, it would be best that you consult with an attorney to find out what the best recourse would be.

Hi, I purchased a house in California in 2004 with a 1st and a 2nd loan. The 2nd loan was sold twice so I ended up with a completely different 2nd then when I signed our loan docs. The 1st foreclosed on the house in 2007. What is technically supposed to happen to the 2nd loan, am I responsible for the 2nd and/or can they charge off the loan? Also, if the house does not sell at auction and the 1st sells the house for more then they are owed are they supposed to notify the 2nd? I am so confused with what the process is, can you please help me.

If your home sells for more that what you owe, the 1st lender will get all the money and whatever remains will be claimed by the 2nd mortgage company. If the sale proceeds are not enough to cover the 1st loan, then the 2nd mortgage will now become an unsecured debt, but you will still be responsible for it as it will be reported on your credit report.

I am a real estate note dealer, I work with buyers who are waiting to make estimates on cashflow notes, (Mortgage, promissory etc.) If you have no other choice but to foreclose, don't just let your home go, you can get some money out of the house by selling it at a discount.

I NEED TO KNOW IF ON OUR SECOND MORTGAGE IS $24,000 AND FIRST IS $26,000.MY HUSBAND IS RETIRED AND I HAVE NO HEALTH INSURANCE I HAD TO GO INTO THE HOSPITAL FOR 3 DAYS $15,000 MY MEDICINE IS OVER $400 A MONTH AND NOT SURE OF MY HUSBAND.IF I CALLED ON THE SECOND MORTGAGE WOULD THEY LOWER THE PAYMENTS WHICH IS $334.44 BUT WHEN YOU DON'T HAVE ENOUGH AND OTHER HIGH BILLS WHAT CAN WE DO?

There is no way anyone can guess if they will agree to your requests. Call them up and have an honest discussion with them. If that does not work, then you might want to try and refinance both the existing loans into one loan for a longer term, which could technically reduce your monthly payments.

I have been reading through all the comments about defaulting on a 2nd,is there a time limit on the 2nd mortgage holder for filing a forclosure?What if the market comes back up?Also if I am reading it right,can you or can you not have the second discharged in a bankruptcy?

To my knowledge, there is no statute of limitations on foreclosure for a secured lien holder, though this probably varies significantly by state law, so I encourage you to consult with a local attorney who can advise you on the specifics of your state foreclosure laws. As to dischargeability, you can generally discharge any mortgage in bankruptcy, though it would usually require you to surrender the property to the lien holders (the first and second mortgage lenders) before the debt can be discharged. After foreclosure, you can also probably discharge the debt, since it would no longer be secured. The likelihood of discharging the second mortgage in bankruptcy and keeping the home are very slim. If you want to file bankruptcy, bring your mortgages current, and keep the property, you may want to consider Chapter 13 bankruptcy instead of Chapter 7. Again, I strongly encourage you to consult with an attorney in your state if you are considering filing for bankruptcy protection to discuss the implications of bankruptcy in your case.

I have been approved for a refi of my first mortgage under the Obama plan. My second mortgagee gave a list of 15 items to satisfy before they would subordinate. Two of which the Obama plan does not require for the making homes affordable product. They want an appraisal and verification of income. The Obama plan is stated income and as far as the appraisal, I offered to pay it out of pocket but was told that it would not matter because it would probably would be too low and they would not subordinate anyhow. So what do I do? I have contacted the second lender to see if they would waive the two conditions and 3 different people refused. I currently have a complaint with the FDIC. My second mortgagee is a participant in the Obama program and knows all this. Help anyone?

Currently owe 550k with no second on a house worth about 425k. Have a temporary workout that is over of 2 months where the payment was reduced from 3800 to 3100. We were told after 2 months we would work out new deal if payments were on time (they were) We lost our jobs and are hoping to get work soon. We can continue to make payments for a while but are afraid they will find out. Hoping affidavit we signed while working is enough to finish mod. Advice?

if you have a first and second mortgage in the state of florida on you home and default on the second mortgage and is still paying the first can the bank take your home for the second mortgage.The first mortgage balance is 98.0000 and the second is 100.000

Ricky, you should really talk to an attorney in Florida about your situation to determine if your second mortgage is a recourse or no-recourse loan.

I have post a Blog On a second Mortgaga in Florida I got a reply and this wedsite told to to talk to attorney about if my secomd mortgage is a recoursc or a non recourse loan can someone explain to me what this means

A recourse loan is one where the lender can come after you for any excess amount of money you owe. A non-recourse loan is a loan that the bank can only look to their secured interest. In other words, they can only foreclose, they cannot get a deficiency judgment and chase you into bankruptcy collecting it. Whether a loan is recourse or non-recourse varies with the state you are in. I don't know what Florida's rules are regarding recourse and non-recourse mortgage loans, which is why I recommended that you take your loan documents to a Florida attorney, who will be able to answer your question about your rights regarding the second mortgage.

I have a 1st mortgage of 200k on a home in az (new in 2005). I also have a 2nd of 30k for an in ground swiming pool (built in 2006). Due to the market and the number of forelosures in my neighborhood the value has gone down drasticly and is now only worth 120k. We are looking to relocate due to my wife being let go and finding a job in another city. We have been pre approved for another home loan. We dont want to keep the first home and will not be able to rent it for more than 800/mo (1st and 2nd combined is 1700/mo). So it seems our only option would be to let it go. Is there anything else we can do to minimize our loss ?

Try to avoid foreclosure if you can. Three ideas: First, look at the Making Home Affordable program. Second, consider a short sale. Read more about short sales in my reply to another reader here: Foreclosure Short Sale. Finally, consider a Chapter 13 bankruptcy.

I have two rental houses, one in Minneapolis, Minnesota (owe 212K + 10K, FMV 170K) and one in SanDiego CA (owe 353K + 27K, FMV 310K), both of them are being managed by properties management companies,both of them have 2 mortgages each, both of them are underwater and are occupied with tenants paying current on rents, but the rents i got does not cover the 1st mortgage on each. I have missed a one payment on the house in san diego because i used the rental income to pay for tax+insurance. For the one in Minnesota, i missed one payment on the 1st mortgage and 2 payments on the second mortgage because I have been using the rental income to pay tax+insurance, both houses are with CHASE mortages for the 1st mortgage, 2nd mortgage for both houses are with different banks. I told the banks my situation that I'm not abandoning any of them but want to continue to manage the properties thru the properties management companies if the banks will allow me to miss a few payments so i can cover tax+insurance and just add the missed payments to the principles, otherwise the they the bank can take the house if they want, they told me to continue to keep making payments. I'm current the only one employ in the family and my income can only cover my primary resident where I'm currently live, I have pretty much no funds left to continue making up for the short everymonth. I'm really don't want to continue managing the 2 rental properties anymore unless the banks allow me to miss a few payments so i can take care of tax+insurance and maybe repair expenses if they come up. What do you think I should do with the 2 houses from now? Sincerely.

If property values were increasing, I'd recommend trying to renegotiate with your lenders until the values bring you above water again. But I don't think values will rebound anytime soon. The two rental properties are bleeding you to death. If you don't rid yourself of them you risk foreclosure not only on those properties but your residence as well. Contact your mortgage companies now about short sales on each rental. If they balk at the idea, tell them you have a bankruptcy attorney on speed-dial. Because if they don't work with you on a short-sale Chapter 7 or 13 are your next options.

I am in a sore predicament and I am so worried my blood pressure just remains at 168/98 even with medication. I owe $251000.00 to my first mortgage holder and 34700.00 to the 2nd. The house now values 107000 but I do not mind as I am in for the long term.I stopped paying both in November 08 that was after I had been battling with both to make my mortgage more affordable and they refused. All the sources I was using to make up the mortgage payent of almost 3000.00 had dried up. I had used up my savings and 401K plus personal loans, and credit card. I responded to an ad from Apply2Save and they took $1000.00 from me and did nothing. Now they have filed for bankruptcy. In desperation I allowed another company Best Interest Rate Mortgage Co. to dupe me out of another 2040.00. My 2nd mortgage holder wrote me a letter saying that they would satisfy the loan for $3000.00 I got the check ready and the agent at Best Interest Rate Mortgage Co. told me not to do anything until they told me to. The first mortgage co has initiated a work out with me to modify my loan they have asked me to pay 2014.12 for 3 months and I have a court appointment on 9/24. The house is in foreclosure while all this is happening.The 2nd wrote off the loan and is now threatening me (they have been taken over by GMAC. I am scared to talk to them. I am sick and I just can't take the pressure. Both me and my husband are still employed with much less income than we use to and medical bills as we both are suffering from illnesses, me with diabetes, hypertension and he prostate cancer survivor with hyperactive thyroid. I want to pay I just can't pay what they want. Can anyone advise me what to do?

First, if you are not involved in a loan modification already (which it appears you may be involved in) look into the Making Home Affordable program. I don't need to tell you to watch for scam artists. Second, remember that the second mortgage holder is in a precarious situation. In general, if you stop paying a second mortgage, it is within the second mortgage holder's right to foreclose on the property. However, if the second mortgage holder forecloses, the holder of the first mortgage holder will be inevitably be notified and they will foreclose, too. Because the first mortgage holder is the first in line for repayment when the property is sold, the second mortgage holder is usually left with little or nothing, especially with the way the property market has fared lately. The second mortgage holder's remedy is to sue the property owner for the balance of the loan, and by this time the owner usually has no assets. Therefore, the second mortgage holder has every incentive to find a way to reach a repayment agreement with the property owner. I can't understand why you were advised not to settle the second mortgage for $3,000 on a $34,700 balance -- that strikes me as a terrific bargain. I recommend you contact Best Interest Rate Mortgage Co. and ask them why they did not advise you to accept that offer. Finally, if the stress of dealing with your mortgage issues is causing a deterioration in your health, it is time to hire an attorney to handle the negotiations for you. An attorney's time is not cheap, but neither is your health or peace of mind.

do we need to file bankrucy before we stop paying on our 2nd mortgage? we just got a loan mod from the 1st (countrywide) and like it but the 2nd wont budge. our home is underwater about 90,000 ..the 1st we owe 250,000 and the 2nd we owe 54,000...our home is only worth 219,000. So we just cant stuggle to pay the 2nd anymore. what should we do about not paying the 2nd?, stop now and wait for the 6mo. period for them to charge it off- or send to collections? or file for bk b/f we get behind? also we want to stay in our home if possible and avoid any short sale or foreclosure. is that possible in this markt? also can the 2nd mrtg. holder come after our personal prop. we just had to do the cash for clunkers for a new vehicle (owe 10,500 w/ a payment of 240. a mo.) and i have a 2007 van paid off.. can they take those in bk???.... we also have a rental prop. but its underwater we owe 147,000 and its only worth around 95,000, so would they take that??can the bk court include that rental unit into the bk, so we dont have such a high payment? or is it better to let it go? we have a renter in it now who cover all but 50. a month, so its costing us $$$ to keep it every month, and its under value??

Take these questions to an attorney experienced with bankruptcy in the state where you reside. He or she will be able to review your entire financial situation and your state's bankruptcy exemptions to create a strategy that minimizes your losses. Generally speaking, a debtor has a great amount of leverage as a delinquent account nears 120 days. It's at 120 days where the creditor is required to write-off the debt. Some creditors are highly motivated to not write-off an account. If your creditor is one of these, then they will be active in negotiating with you at this stage. Other creditors are more hard-nosed and only start negotiating after the account is past 120 days. It's impossible to say where in this spectrum your mortgage holder will be. Regarding the vehicles, you may not be allowed to keep both vehicles, which are relatively high value. Each state has different bankruptcy rules for vehicle exemptions, so your attorney will need to give you specific advice on this matter. Regarding the rental property, you need to include all of your assets and liabilities in your filing. How each will be treated is up to the bankruptcy trustee. Again, your attorney will give you more specific advice.

I have a 1st and 2nd mortgage with the same lender. I currently reside in Louisiana. I have been offered a discount payoff agreement for my 2nd of $2800 which I owe a balance of $28,000 that is 6 months past due. I want to know if this is legal.

If it is an offer straight from the second mortgage holder, then it is most likely a legitimate offer. Is it legal? Yes. Should you accept it? I can see no down-side to accepting the offer. The alternative is foreclosure, a process in which no one wins. With this offer, you get the second mortgage off of your back for 10 cents on the dollar, and the second mortgage holder gets to recover a small amount without spending a dime. I see this as a win-win, especially in light of The Mortgage Forgiveness Debt Relief Act, which allows homeowners to exclude from income debt canceled or forgiven by lenders.

I live in Riverside County, Ca. I have a first and second mortgage with two different lenders. I owe 625k combined and it is now worth 385k. Due to financial hardship, I have not been unable to pay the second mortgage since Jan 2009 and several credit cards are late. The first mortgage is being paid on time. What actions will the second mortgage company take against me? Will they go after personal property and seize my bank accounts? My credit has plummeted. What should I do in this situation?

First, as a California resident with a California home, rules may apply to you that make it impossible for the second mortgage company to collect a deficiency balance from you. Please read the first two sections of this answer for more information: "Is My HELOC a Recourse or Non-Recourse Loan in California?" I realize you may not have a Home Equity Line of Credit, but the legal principles are the same. Second, I recommend you read "Collections Agencies, Collections Laws and Your State's Statute of Limitations" to understand more about the collections process. I recommend you consult with an attorney in California who can look at the entirety of your financial situation -- and the nature of your mortgages in particular -- and get his or her recommendation on the best course of action for you.

Bill my situation is slightly different but concerning. I'm in Fl and underwater on my 2 rental properties. I am currently up on my payments but one of the properties a triplex.......one tenant is moving out, the two others are not paying fully and I've had to put over 3,000 in work and now fix up the one for a new rental. It's like good money going after bad, another words a cesspool which I don't think I can win on. Plus it is now a pretty bad area, but near my own house, so convenient. I have assets from rentals up north, and receive monthly monies that I use to pay off my mortgages and live on. If I in some way start defaulting on my mortgage or short sale or lose the property, can they come after me for the money that I receive from my rentals up north. The bank is Chase and I am going to call them. But I can't sleep thinking about it. Any suggestions of what to do here? Thanks! Anita

In response to your first question, the short answer is yes, if you allow a foreclosure on a property the creditor can pursue you to pay the deficiency balance remaining on the loan. The creditor has the option to file a lawsuit against you, and if you lose, can receive a judgment that allows the creditor to garnish your wages, levy your bank accounts, or put a lien on your other property. Foreclosure may not be necessary. First, I recommend you read "Can a Second Mortgage Holder Foreclose if the First Mortgage is Current?," which outlines some of your options. Yes, it is written in the context of a problematic second mortgage, but your choices and potential courses of action are the same. Second, I recommend you read "A Deed In Lieu Of Foreclosure vs. A Short Sale" to learn more about these two options. This article also discusses your liability if you allow a foreclosure. Finally, do what you can to avoid a foreclosure.

We have a 1st at 100K and a home equity line at 12K. We defaulted on the 2nd due to a online payment error that was caught too late. We tried to settle the 2nd and pay a reduced amount but we can barley get anyone to return a call. No foreclosure proceedings but the information I read here today has be worried now. Should we try to begin pay again and get caught up?

Be persistent in trying to reach the home equity lender. Make notes of each and every time you call and keep copies of all correspondence you send the company. I am sure that the lender would like nothing more than for you to pay the entire amount. However, you may be able to get them to agree to a lump-sum settlement on the balance remaining. Get any settlement offer in writing before sending the company your final check.

I am currently in foreclosure, I have a 1st in the amount of $348,000 and the 2nd is $88,000 two different mortgage companies. FMV of my home is currently $165,000.00 I am currently working with a public organization to get the 1st restructured it is my understanding that they only do 1st. I'm not sure how I can approach the lender of the second the interest is 11% for 15 years, would you recommend mortgage forgiveness debt relief, how should I approach this situation?

This is a common situation. First, determine if you are in a recourse or non-recourse state, and if your second mortgage is considered a recourse or non-recourse loan. You did not mention the state you are in, so I cannot determine that for you. You have a measure of leverage over the second mortgage holder if you live in a non-recourse state because the second mortgage holder has no legal means to collect the deficiency balance from you if you default. If the second mortgage is non-recourse, the second mortgage company will be extremely motivated to negotiate a lump-sum settlement from you, because the alternative for them is a total loss. However, even if your second mortgage is a recourse loan, the chances of the second mortgage company seeing their full balance is repaid is slim. Therefore, you should be able to negotiate a lump-sum settlement. Be polite, firm, and persistent in your negotiations. Depending on the quota the customer service representative has at the call center for the second mortgage company, you may be able to negotiate an agreement where you pay 10 cents on the dollar to resolve the second mortgage. Your alternative is bankruptcy.

I am currently enrolled in a modification program. Our first mortgage is working with us. The second mortgage cannot be modified until the first is finished. We are going through a 3 month probation with the first mortgage company to show that we will comply with the modification. The second mortgage company has threatened to write off the loan. My lawyer said that if this happens they may sell of the loan to a collection agency. They then would not be able to assist if the collection agency tries to sue. What kind of lawyer would we need to seek out to assist if that happens?

Apparently, your attorney practices in a narrow range of law. Ask your attorney for a referral to an attorney with experience in consumer law.