Can a Second Mortgage Holder Foreclose?

Can the lender of a second mortgage foreclose on my home if the first mortgage is current?

Can the lender of a second mortgage foreclose on my home if the first mortgage is current?

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  • Default on your second mortgage, can lead to foreclosure.
  • Try to work out a forbearance plan.
  • Attempt a short sale or deed in lieu, before foreclosure happens.

If you become delinquent on your second mortgage, the lender can foreclose on your house and property.

The Foreclosure Process

The foreclosure process varies from state to state, but usually takes from two to 18 months. Generally speaking, if mortgage payments are not received within 150 days, the bank can proceed with the foreclosure process.

If the second mortgage holder forecloses, it is not automatic that the first mortgage holder will foreclose, but to protect their rights it would be foolish for the first mortgage holder not to foreclose as well. Alternatively, the first and second mortgage holder will negotiate a deal amongst themselves where one buys the interest in the property from the other so that only one mortgage holder will foreclose.

The house will be sold, the first mortgage holder will be repaid first, followed by the second mortgage holder if any funds remain.

Typically, in these situations, the sale price is less than the value of the mortgages held against it. If that is the case, then in some states the borrower could still owe an unsecured balance, which is called a "deficiency balance." The good news is that a deficiency balance (if it exists and if your lenders pursue it) is an unsecured debt (like credit card debt) that can be enrolled into a debt settlement program.

In some states (such as California) and in some circumstances, the second mortgage may be what is called a non-recourse loan. (I have written about the California recourse loans issue before.) A non-recourse loan means that the lender has no recourse to collect any deficiency balance against the borrower. Its only recourse is the security on the property itself. You will need to review your loan documents and state laws to determine if your second mortgage is a non-recourse loan. Contact an attorney in your state who is experienced in property law to determine for certain if your mortgages are recourse or non-recourse.

Second Mortgage Foreclosure

According to Bills.com readers I have spoken to and corresponded with, second mortgagees will initially take a hard-line stance in negotiations with homeowners in default. However, once the mortgagee is convinced the homeowner is sincere in their inability to repay the second mortgage and are considering bankruptcy, the mortgagee's position will soften and consider a lump-sum settlement. Readers report that some second mortgagees will settle for 10 to 30 cents on the dollar, depending on the policies of the company.

In the interest of full disclosure, it is possible legally, although not practical economically, for a second mortgagee (sometimes called a junior mortgagee) to foreclose and preserve its interests in the property. The junior mortgagee may pay off the first mortgage to preserve its own interest on the property. Because foreclosure destroys all interests that are junior to the mortgage being foreclosed, the junior mortgagee has the right to pay it off to avoid being wiped out by the foreclosure. The home equity lender may pay off the outstanding balance of the first mortgage and be subrogated to the bank's rights against the debtor.

As this is written in late 2009, it does not make economic sense for a junior mortgagee to redeem the first mortgage because property values in many areas are far lower than the mortgage balances on the attached properties. However, when property values recover the economics of this equation may reverse and we may see junior mortgagees exercise their right to redeem.

Loan Workout Plan

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.

Forbearance Plan

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.

Conclusion

Foreclosure is a serious situation that has negative repercussions on your credit score. Avoid foreclosure if you can. Consider a a deed in lieu of foreclosure or a short sale if you cannot create a loan workout or forbearance plan with the lenders.

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. You can find more information on the Bills.com foreclosure page.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

123 Comments

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  • 35x35
    May, 2012
    William
    We have 2 loans on our home. We have remodified our 1st mortgage ($450k) and we are current on the payments. The 2nd mortgage ($100k) has not been paid for. The private, hard-money lender of the 2nd has taken action by putting a Notice of Default. We would like to stay in the home and have contacted the lender to try to settle or refinance the $100K loan-But have not received any response. The lender of the 1st has told us it isn't necessary to pay the 2nd and we should try to negotiate the loan on the 2nd since the interest on it is so high. The value of the property is about $500k. My Questions: Can the private lender of the 2nd foreclose and require us to move if we are current on our 1st? Does the lender of the 2nd have to pay the 1st in order to foreclose on our home? Is a Notice of Default the same as a Foreclosure? Thank you, in advance for your time on this matter. William P.
    4 Votes

  • 35x35
    Apr, 2012
    jon
    i currently have my 1st w/ bofa i had a second w/them as well, when i modified 2 years ago they told me i no longer had a 2nd. 2 years later i have green tree calling me telling me i owe $95k on my second. there pretty aggressive wanting BS payment plan or 25% to settle and that's with looking at all my financial records. don't know what to do. I'm current on my 1st like everyone else my home is under bought it for $480 now worth less than $300. Can the debt collector garnish my check? or if i short sale will that make em go away? Again green tree claims they did not buy the account they're just handling it for bofa.
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      Your statement, "when i modified 2 years ago they told me i no longer had a 2nd" gives me pause for several reasons. Where did the loan go if you no longer had liability for it? Conversely, if the loan was forgiven and canceled, why is Green Tree attempting to collect on the loan? Do not assume anything here regarding the second — you may have liability for the loan, or you may not. Here is how you can tell: Consult with a lawyer who has real property or loan modification negotiation experience and ask him or her to research this issue.
      0 Votes

    • 35x35
      Apr, 2012
      Jon
      But what if I am liable for that 2nd. Besides settling the account will a short sale also make it go away. Does SB 458 apply here ? And what are the chances they'll try to garnish my check or sue me. Being that the 2nd is with the same bank. I'm still current with my 1st don't know if that matters
      0 Votes

    • 35x35
      Apr, 2012
      Bill
      Please see the Bills.com resource Is My HELOC a Recourse or Non-Recourse Loan in California? which discusses the issues surrounding the deficiency balance in a junior deed of trust. The article uses a HELOC as an example, but the discussion is really the same for any California junior. See also California Short Sale to see a short discussion of SB 458.
      0 Votes

  • 35x35
    Mar, 2012
    Billy
    My 2nd mortgage lender has accellerated my balance and it looks like it's been charged off. I'm about $20,000.00 underwater on this, so what should I do? I sent them an offer to settle the account @ 5% of the balance.
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      Because the lender wrote-off the account, the lender may choose to sell the rights to your mortgage to a collection agent, so be prepared to repeat your offer to another party. Starting at 5% is fine, and be prepared for a much larger counter-offer. Eventually, you may meet in the middle.
      0 Votes

  • 35x35
    Mar, 2012
    C
    I have two mortgages and a third lien against my home:
    • $243,000
    • $42,000
    • $9,000
    • = $294,000 in loans

    Our home value is $178,000 currently.

    We recently went through bankruptcy due to the loss of my job, but stayed up on our payments on the mortgages. Now that we are discharged of our debts and I have regained employment after 11 months we are having trouble paying all three.

    The first mortgage is an interest-only 5-year ARM we are trying to get a modification on. (Which is a pain in itself) During the bankruptcy our first and second loan were sold to other lenders but are still considered discharged.

    Do you think if we stopped paying on the second and the third lien they would even think about foreclosure when we are so underwater in our value?

    2 Votes

    • 35x35
      Mar, 2012
      Bill
      Tough to answer because it is impossible to predict how the lenders will react. Let me make up odds — if your chances of being on the wrong end of a foreclosure notice are one in five, and you receive a foreclosure notice, it will not matter you took the safe bet.

      This is as far as I will go: If you decide to stop paying the two juniors, save as much as you can in a separate account. If the juniors foreclose, use the funds in the account to negotiate a lump-sum pre-trial settlement.
      0 Votes

    • 35x35
      Aug, 2012
      ben
      How do the junior lenders sue if the debts were discharged in bankruptcy ?
      0 Votes

    • 35x35
      Aug, 2012
      Bill
      In an earlier version of my reply to C.H. above, I overlooked his or her mentioning the mortgages were discharged in bankruptcy. I regret the confusion my earlier reply created.

      The juniors could file a notice of default and foreclose. The bankruptcy discharge removed C.H.'s personal liability for the promissory notes built-into or connected to the home loans, but a bankruptcy usually does not strip the lien from the property. Because the loan is still secured by the property, the lender can foreclose and take possession of the property if the homeowner defaults on their payments.

      There are circumstances where a chapter 13 bankruptcy will strip the lien from the property. This occurs when the market value of the property is less than or equal to the balance of the senior loan.
      0 Votes

  • 35x35
    Feb, 2012
    Greg
    we have 3 loans against our property. our home is currently worth between $365,000 and $440,000 depending on the website. our 1st loan jumbo balance is around 420,000, second fixed is $46,000, 3rd HELOC is $50,000. we realize this is not common to get but it happened. Do you know if we will be eligible for a refi through the recent settlement with the 5 banks. all loans are with different banks, but all are one of the 5 that settled. could we wrap all 3 loans into one with the holder of the 1st mortgage? not finding much detail about how even 2nd mortgages would work with this settlement. Thanks!
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      I imagine that you are speaking about the National Mortgage Settlement. The final terms of the settlement have not be published. However, the implementation will be over 3 years and the loans will be chosen by the lenders. If you are underwater, it is unlikely that you will be able to consolidate the three loans. Bills.com will post updates as the terms of the settlement are released.
      0 Votes

  • 35x35
    Feb, 2012
    Paul
    Hi, My property has two loans (1st 1,000,000 and 2nd 200,000). The home is currently worth about 900k. If I were to stop paying on the 2nd and then ultimately negotiate to pay 10-30% of the value - could I make that agreement contingent on the 2nd releasing their interest in the property and consequently keep the home? In other words, the readers you've heard from who have negotiated with the 2nd - is the 2nd lender completely out of the picture now? Thanks,
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      You can attempt to negotiate with the second mortgage holder a deal whereby they would release the mortgage and lien on the property, and close off the loan based on a negotiated settlement. If the second mortgage lender was to agree to those terms, then they would be, so to speak, out of the picture. I recommend that you speak with a lawyer regarding the terms of the agreement.
      0 Votes

  • 35x35
    Dec, 2011
    Billy
    I have a 1st and 2nd mortgage w/ HSBC. 1st: $78,000 2nd: $13,000 I have a temporary Mort. Mod on the 1st and am 3 mos. behind on the 2nd. Eppraisal says my total property is worth $70,500. Zillow says $76,500. I'm from Tennessee. Because I'm underwater in this, I've been advised to stop paying on the 2nd and wait for an offer to settle. Do you think HSBC might foreclose instead? Is this a risky move on my part?
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      Life is risky, and we accept that risk. The most dangerous places for Americans are our bathrooms, kitchens, and vehicles, but that does not stop us from taking showers, preparing meals, or driving to work every day. The trick is assessing the risk of each of our behaviors.

      Yes, it is risky to stop paying your second mortgage because the second mortgagee has the legal right to initiate foreclosure proceedings. The questions is, will it foreclose? Probably not, based on my observation of second mortgagees. However, that does not mean I am (or anyone else can be) 100% certain of that guess. What is the upside to stopping payment? A settlement of the second for 15-30 cents on the dollar — maybe more, maybe less. What is the downside? The potential that your second mortgagee may skip the negotiations and foreclose. Given the numbers you shared, it makes little financial sense for the second to foreclose.
      0 Votes

    • 35x35
      Dec, 2011
      Billy
      Thank you for your quick response. I do want to keep my home and DO NOT want to file BK. I think I will continue the waiting game and hope we can reach a settlement. I've read some confusing things about an impact to 1099s at tax time? Can you explain? Thanks again.
      0 Votes

    • 35x35
      Dec, 2011
      Bill
      Tax issues come into play if you reach a settlement wtih your lender and some of your debt is forgiven. Please read about the Mortgage Forgiveness Debt Relief Act and ask any follow-up questions on that page.
      0 Votes

    • 35x35
      Dec, 2011
      Billy
      I have another question please. When HFC set my loan up (both 1st and 2nd) they had me sign it,and recently I noticed that my name "Billy" was on the documents, Not "William David" which is my legal name. Would that make a legal difference? Thank-you.
      0 Votes

    • 35x35
      Dec, 2011
      Bill
      The answer to your identification question depends on your state laws. Consult with a lawyer in your state to learn if there is any merit to your argument that you have no liability for the loan because the lender used your nickname instead of the name that appears on your birth certificate. I do not see much of an argument here, but again, this is a question best asked of a lawyer who is familiar with your state laws.
      0 Votes

  • 35x35
    Nov, 2011
    Joan
    I have 1st ($79,000) and 2nd mortgage ($26,788) and will be unable to make payment soon. If I file suit for bankruptcy, will I have to pay 2nd mortgage?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Depends on the chapter of bankruptcy for which you qualify. Chapter 7? Yes, you still have to pay both mortgages or risk an eventual foreclosure. Chapter 13? No, the lien will be stripped and you will not have personal liability, nor will the second be able to foreclose. Consult with a bankruptcy lawyer to learn more, and which chapter applies to you.
      0 Votes

    • 35x35
      Feb, 2012
      azelda
      i file a bankruptcy last year and it was final discharged in july 2011. i received all 3 credit reports and my equity line of credit was included in the bankruptcy. my first mortage is current never late but i just realize by the credit reports the equity line of credit shows 0 balance. my question am i still obligated to paid this debt if i don;t can they forclose my home and my first mortage i have never been late.
      0 Votes

    • 35x35
      Feb, 2012
      Bill
      Your bankruptcy lawyer should have explained the following: A home loan consists of two parts
      1. A promise by the borrower to repay loan. This is sometimes called a "note."
      2. A legal claim to the property if the borrower defaults.

      A chapter 7 bankruptcy strips the note — it removes the personal liability to repay the loan. That is why credit reports stop showing mortgages upon a discharge.

      Do you still reside in the property in question? If no, then do not pay any mortgages on the property because you have no personal liability for the notes. If you reside in the property, then pay the first mortgage as usual, and consult with your lawyer about the second. Depending on your equity in the property, you may want to negotiate a lump-sum settlement on the second.

      0 Votes

  • 35x35
    Nov, 2011
    Patricia
    We have a 1st and 2nd mortgage. The first is doing well but the 2nd mortgage is currently 96 days late. We lost one income and I haven't been able to find another job for 2 years. The 2nd mortgage informed us that they will start proceedings if 2 payments are not in the office by 11/18/11. The problem is we can't pay two payments but can make one payment. We are don't know what to do because our house doesn't cover both mortgages if we sell (just enough for the 1st mortgage). We don't want to foreclose but we don't have money to pay out of pocket "if" the house sells. Please help!
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Yes, a second mortgage can foreclose, although any proceeds will first be applied to the lender in first lien position, most likely the first mortgage holder. If you wish to avoid foreclosure, then try to negotiate with the lender. Their position is really dependent on your financial situation, beyond that of the property. The less assets and income you have will make it less desirable for the second mortgage holder to foreclose.
      0 Votes

  • 35x35
    Nov, 2011
    Lori
    We were in default with our first mortgage but have now become current after over a year of struggling. During that time the holder of our second mortgage charged-off our account but has not started any kind of foreclosure proceedings such as filing a default with the county clerk (We are more than eight months behind in payments). We stopped getting statements from them shortly after the charge-off, and are now simply getting collection letters which state that they want the full balance of the loan (over $100,000) or they will consider taking "legal action". They amount keeps going up so we assume they are still charging us interest. We have been in contact with them and have tried to work out payment arrangements, but they have been dissatisfied with our requests and thus no agreement was ever reached. My question is this...If things continue as they are with this company, what "legal actions", other than filing a default (foreclose) and making negative reports to the credit reporting agencies, can they take? Essentially, since this is a second mortgage, can they choose not to foreclose and instead take us to court to recoup the full amount of the loan? (FYI: We live in California, and our second would not be considered one of the Non-recourse types since we originally got it to consolidate some debts. Also, if our house was ever sold it would not get enough to pay off both loans.
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      It is possible for the lender to file a breach of contract lawsuit against you and pursue you for the amount owed.

      Consult with a bankruptcy attorney to see if you can discharge the debt you owe in a Chapter 7. If you can do so, you can use that as leverage to negotiate a settlement that the lender is reluctant to consummate with you now. If you can't qualify for Chapter 7 and the lender sues you, you could end up facing wage garnishments and bank levies, consistent with the collection laws in your state.
      0 Votes

  • 35x35
    Oct, 2011
    janice
    Hello,We were late on our payments on our first, so the private party who has our 2nd paid them and put a foreclosure on us. We are now up to date with the first. My question is since we have a second with the private party, who paid up our lates, keep collecting from us monies on the $35K even though it is not part of the foreclosure. The foreclosure peopl told us that he is not allowed to take any money from us during these 90 days? What is the law on this? Thanks, Janice
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      The facts in your message confuse me, and I suspect there are relevant facts that would be revealed only after an in-person interview and review of the written documents alluded to. Consult with a lawyer in your state who has experience litigating foreclosures. You need more help than someone can provide via e-mail and Web postings.
      0 Votes

  • 35x35
    Oct, 2011
    Lori
    We filed Chapter 7 BK which was final in March 2011. We were going to reaffirm both 1st and 2nd mortgages but decided not to do so after receiving the reaffirmation agreements. 1st was initiated with a local bank but sold a year later to Fannie Mae. It is still serviced by original bank and is currently at $89,000. 2nd is with Chase at $43,000. We just had a market analysis done by a realtor which indicated a listing price of $109,000 - $114,000 based on area comps. We have continued to make payments on the first but stopped making payments on the 2nd in February based on the advice of our BK attorney. We received a letter from an attorney for Chase stating that while we no longer have personal liability they still hold a valid lien against our property. Can we make a settlement offer to Chase and if so will they release their lien on our property? How does the agreement have to be worded so that Chase has no further legal attachments to the property? If we offer them 10 cents on the dollar is this an acceptable settlement amount?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      You are on the right track. Your most prudent course of action is to either involve a lawyer in the negotiations, or negotiate yourself and ask your lawyer to review the proposed contract before you sign so that you understand all of its terms and conditions. In general, there is nothing tricky about a settlement agreement. Be sure the contract states the amount both parties agree to is for a final settlement, and that the lender has no recourse or option to create a collection account or balance due for the forgiven / canceled amount.
      0 Votes

  • 35x35
    Sep, 2011
    Tom
    We have a 1st and 2nd mortgage with the same lender. We are current on the first mortgage and we are in the middle of loan modification process. We have not paid on the 2nd mortgage for the last four months due to financial problem. The lender is now telling us that our house is going to be on Foreclosure due to delinquency. Can the lender foreclose on us? If we are modifying the first loan, are we obligated to pay while it is in modification process? We are thinking about just paying for the 2nd mortgage for now and not on the 1st mortgage. Can you provide an advice for us?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      In general, if you fail to pay the monthly amount you agreed to on time, any mortgage or deed-in-trust lender has the right to foreclose. Consult with the negotiator who you are working with on the modification. If the negotiator tells you to stop paying your mortgage as a condition to complete a successful modification, then make sure to get that statement in writing. Consult with a lawyer to discuss your rights if the mortgage servicer is simultaneously telling you to stop making your monthly payments and threatens foreclosure.
      0 Votes

  • 35x35
    Sep, 2011
    Bonko
    I have 1st and 2nd mortgage 80/20 with different banks.I owe on 1st 240000 and 2nd 62000. My house is worth no more than 215000.I am current on both mortgages but it is really hard for me to keep up. Can I negotiate settlement on my 2nd for one lump sum without defaulting? My 2nd holder mortgage is CCO. My household incomes are around $3200 a month. I tried to modify my first but my request was denied. I have a rental property that have some equity, may be around $35000. Could this be a problem for modifying my 1st and negotiating a settlement with my 2nd? Your opinion is greatly appreciated. Thank you.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      To reach a settlement, you likely will have to provide detailed financial statements, demonstrating why you can't afford to maintain your obligations. Owning a valuable asset, such as your rental property, can certainly impede a settlement. I am not sure how much of a factor, if any, your ownership of the rental property was in your denial for a loan modification.

      It may be possible to reach a settlement without defaulting on the second, but the vast majority of settlements take place after default.
      0 Votes

  • 35x35
    Sep, 2011
    PP
    I have paid off my first mortgage of my primary home in CA with BofA, but still struggling with $ 317,000 second mortgage with the same bank. My question is what should be the best way out, if the current value of the house is less than what I owe? Walk away, BK, or modification?

    Are there any programs that possibly reduce principal? I am now overwhelming with all kinds of payments. Need help!!
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      The best information I can offer is to investigate the FHA short refinance program, which may reduce your principal and interest.
      2 Votes

  • 35x35
    Sep, 2011
    Paulino
    I am in the middle of a settlement with my lender HSBC. They are my lender for the first and second mortgage. We agree to a settlement in the second mortgage for 20% of the value. MY concern in all of this is because is the same company that own both mortgage they will try later to do something with the first that put me in some situation in losing my home. Please, your comments.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      The language of your settlement and your first mortgage agreement are important. I suggest that you review both with an attorney, to make sure that not fulfilling your original obligations on your second mortgage does not jeopardize your first mortgage and, therefore, your home.
      0 Votes

  • 35x35
    Aug, 2011
    Amanda
    I have a 1st mortgage with a note of $260k and a 2nd mortgage with a balance of $50k. I am current with both lenders. I plan to sell my house but think it will sell for ~ $280k. My 2nd lender is a Credit Union and they are stating that they do not take settlements, do not negotiate, simply foreclose. Is this the case? Can credit unions refuse to take settlements (i.e. 30 cents on the dollar, etc.). Can the credit union come after me for any residual balance I owe, assuming the sale of the house makes the 1st lender whole and there is only a few dollars left over to pay the 2nd lender?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      No creditor is forced to take a settlement. A settlement is a negotiation between creditor and debtor.

      You can't sell the home without the second mortgage holder agreeing, if you can't pay them off. The lien they have will prevent you from doing a short sale.

      It is my understanding that to foreclose, the credit union would have to pay off the first mortgage. That doesn't seem like it would be a smart decision on their part, given the value of your home. Still, they can play hardball, if you decide to not make your payment.
      0 Votes

  • 35x35
    Jul, 2011
    Chuck
    I have a first mortgage for $470k with Everhome Bank and a second for $80k with a small local bank. The home was listed for $599k but got no offers and may not sell for more than $475-$500k due to some underlying issues. I am trying to modify the first mortgage to get lower payments since I am 2 months behind in payments on both loans and my income has been drastically cut. My question is, in determining my ability to afford a modification, do you think Everhome will contact the second mortgageee to have them reduce payments too? Will they seek to buy out the second morgagee to avoid them forclosing? What do you think is the most likely scenario? Also, at what point does it make sense for me hire an attorney? Thanks!
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      Were you short-selling the property, the answer to your question would be "Yes, the senior and junior work together." However, for a modification of the senior, I have not seen the junior involved. However, that is not to say it never happened.
      0 Votes

  • 35x35
    Jul, 2011
    Nikki
    My hse value is $180K. Owed on 1st is $210K, owed on 2nd is $120K. PITI for both $2100 (2nd mtg is int only pmnt $500) Because I work in mortgage lender (Mtg. Broker) my income has dropped significantly in the past 3 yrs, to say the least. My past 3 yrs average is a measly $2500 per month. Basically I've been living off my savings for the past 3 yrs, which is, obviously unsustainable. I could prob afford the 1st mtg piti ($1600) w/ help of boyfriend moving in. I am wondering about not paying the 2nd. They would not foreclose because there is no equity for them. I'm hoping I could get them to accept a reduced settlement of $30K. Then I would still have some savings left and also be able to (with help) pay the 1st mtg and I could stay in hse. Is this something that seems do-able? From what I've read it sounds like it would be. What would be the best way to go about it? Simply to stop making pmnts and then try and negotiate, or file bankruptcy and then try and netotiate? I have no other debt to include in the bk., so that seems odd to file Bk, also I'm afraid they'd try and take all of my savings (which again.. is all I have to live on with such a meager income. I am a single Mom too). Any advice for me?
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      It is plausible financially, and many Bills.com readers report they did what you are suggesting. However, your plan requires the cooperation of the second, which in my experience and in the experience of Bills.com readers, is not guaranteed because there is no legal requirement the servicer negotiate reasonably.

      What you suggested makes the best of a bad situation for all parties.
      1 Votes

    • 35x35
      Jul, 2011
      jd
      HI, I have a second home, with only a heloc. I live elsware. The value of the home is about $15,000 give or take, I owe 120,000.00 I have an ARM with low payments right now, but they will go way up in the future. I make good money but not to the point that I can pay ever be out of this mess. what would be the best course of action to take. I dont qualify for BK (make over the limit) if they forclose in Arizona they can come after me for the remander of the amount which will be about $100,000 give or take....I am current and have a 800 fica score...please help It appears as though there is no way out!!! could I offer them a lump sum to just not forclose and just "call it even"? If it went into default would they then negotiate? for a lump sum? and if they forclosed would they take a lump sum say 30% to 50% given i have a good job? would they rather sue for garnishments then take a cash payoff? last question? if they did forclose would the balance I owe be subject to interest and at what percentage if any? I know they usually use that as a tool to get people to pay just the balance and they waive interest, but does me having a good jog take negotiations off the table? thanks any help is appreaceated!!!
      0 Votes

    • 35x35
      Jul, 2011
      Bill
      Each of your questions are appropriate and reasonable given your situation. However, each is a variation on, "If I take action X will my mortgage servicer take action Y?" I cannot speak for your mortgage servicer. Unfortunately, the decision-trees mortgage servicers use when processing foreclosures are proprietary, and probably vary as each learns more about the loans in their portfolios. Also, each borrower's finances vary, and what steps a servicer takes for you may be different from the steps it takes for your next-door neighbor.

      Bills.com readers report mortgage servicers negotiate lump-sum settlements for deficiency balances at small fractions of the original balances. However, if you are a high-income person with significant assets, then that generalization may not be true for you.

      I realize my answer may not satisfy you, but unless and until the deficiency balance negotiating process becomes transparent for consumers, all we have are generalizations.
      0 Votes

  • 35x35
    Jun, 2011
    Jackie
    I have a 1st Mortgage with Bank of America for $450,000 and have a 2nd mortgage for $80,000. I was approved a loan modification on the first one, which I will start payments in July, but the 2nd modification ended up being more expensive than before I was given the modification and I can't not afford to pay it. The house is currently worth about $280, but since the 1st modification was at 3.75% for 40 years, I rather stay in the house than have to move out without credit to buy another property. However, because we haven't been paying the 2nd mortgage for 30 months the bank called us to tell us that they were going to forclose the house because of the 2nd mortgage delinquency. Being that the 1st and the 2nd mortgage are both from the same bank, can they forclose the property because of the 2nd mortgage eventought I will be paying for the 1st one? Please advise.
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Two loans serviced by the same mortgage servicer — all one big happy family, right? Not necessarily. The first loan contains funds from Investor A, and the second probably contains funds from Investor B. In this situation, your mortgage servicer has two fiduciary responsibilities — one to Investor A and another to Investor B. One investor cannot dictate terms to the other. If B wants to foreclose, A cannot stop it because B has the legal right to do so. The servicer must act in the investor's best interest and according to its wishes.

      Obviously, I cannot say you have an Investor A-Investor B situation I described. However, it fits the seemingly schizophrenic behavior you described.
      0 Votes

  • 35x35
    May, 2011
    Joe
    Can a second mortgage that has been sold to a collection agency be foreclosed upon by the collection agency... Can that same mortgage owned by the collection agency be place in a bankruptcy action.
    0 Votes

    • 35x35
      May, 2011
      Bill
      1. If the collection agent bought or was assigned all rights to a mortgage, it has the right to foreclose.
      2. Any mortgage the debtor has liability for may be included in a bankruptcy filing. Who owns or has the right to collect the mortgage is irrelevant for the purposes of a bankruptcy.

      Consult with a bankruptcy lawyer to learn more about bankruptcy. See the Bills.com bankruptcy section to learn more.

      0 Votes

    • 35x35
      May, 2011
      Lisa
      We have a 1st mortgage with Chase of $150,000, and a 2nd mortgage with Bank of America of $250,000. We filed bankruptcy a year ago and did not keep the house. We are still living in it and the 1st mortgage(Chase) is asking if we want to work out a refi. The market value is maybe 210,000, but our home is 13 years old now and needs some work. We could afford the 1st mortgage, but not the 2nd. My questions are several. 1. Which bank would forclose on us first. 2. Is it taking so long because our 2nd mortgage is larger than the first? After reading your posts, is it possible to refi the 1st and maybe give the 2nd mortgage a lump settlement of say 20k
      0 Votes

    • 35x35
      May, 2011
      Bill
      First a general observation about foreclosures in mid-2011. In general, the mortgage servicers are not any more organized, from the perspective of an outsider observing their behavior, than they were two years ago. Regarding a foreclosure, it would be foolish to predict the behavior of a mortgage servicer in general, and even more foolhardy to predict their timing. For example, we are still receiving reports of homeowners who are in the middle of mortgage modification negotiations receiving foreclosure notices. Meanwhile, unoccupied properties sit for years without attention or activity by the servicers.

      Regarding your questions, I am assuming your Chapter 7 filing resulted in a successful discharge of your debts, you did not reaffirm either mortgage, and that you continue to occupy the property. If so, I cannot answer your first two questions for the reasons I mentioned here. Assuming the market value of the property is $210,000, and the balance of the first is $150,000, the second has a bit of leverage against you. Let us assume it forecloses and auctions the home tomorrow for $210,000, the first will be paid in full, and the second will see about $60,000. Assuming $210,000 really is the fair market value, the second should not accept anything less than $60,000 as a settlement. After all, if you offer it $20,000, the negotiator will say, "Thank you, but we'll just foreclose and get $40,000 more." You either need to do a little more research on the fair market value of the property, or scrape together a better offer to settle the second.
      0 Votes

    • 35x35
      Jun, 2011
      Carrie
      My husband and I filed chapter 7 bk in 2009 and was discharged 10/2010. We did include our home with our first and second mortgage in the bk. In regards to our 2nd mortgage, the second mortgage holder (was Ditech/GMAC originally then GreeTree is servicing the loan or it was sold to them now ) refuses to offer us an application to modify our 2nd mortgage with them unless we pay $900.00. We told them that we have been paying all that we can (which is $100/month for the past several months, orig. payment is $279). They told my husband that they were going to most likely charge off our account and place it in collections. Greentree was calling a couple of times a week at our home and work, and then for the past 3 weeks all calls have stopped. They did not send me a statement for June as well. Would it be best to try to negotiate a settlement for the 2nd mortgage, with them to show the mortgage closed/paid/settled for a lesser amount and them release the lien? Or should we wait until they charge it off to a collection company and then begin negotiation? We want to remain in our home. We live in Mississippi, we owe 93k on the first and 44k on the second. The house is on the high end worth 98k. Homes in my subdivision are selling anywhere from 65k-105k. Our goal would be to keep the house, as we can pay the first mortgage. Just not the second.
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      Unfortunately, mortgage servicing is an opaque process, as is the collections business. Giving you definite answers to your questions is impossible. It appears, note that word choice, that Greentree is in the process of selling or sold your second. That is good news, because Greentree most likely sold it for less than the balance of the note. This gives you some negotiating room because the collection agent may have the right to collect the full balance, it will almost certainly settle for a fraction of the balance due.
      0 Votes

    • 35x35
      Jun, 2011
      Donna
      I thought that if the mortgages were included in Chap 7 and not reaffirmed that the mortgage servicer could not call you about paying the debt. Is that not correct? If it is then Greentree should not be contacting you at all and that may be why the calls have stopped as they realized they were breaking the bk protection laws. Now if you reaffirmed the mortgages then yes they can call to ask for payments. If you did not reaffirm the 2nd mortgage then you should offer them a settlement if you want to get rid of the lien especially since you don't owe them a dime if the mtg was discharged. They may settle for as low as 5%.
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      Do you reside in the property encumbered by the mortgages? If yes, then you must continue to pay the mortgages or face eviction. The Chapter 7 removes your personal liability, so if you chose to walk away from the property you would have no liability for any deficiency balance. However, a Chapter 7 discharge does not allow a homeowner to live in a property without regard to the mortgages.
      0 Votes

    • 35x35
      Jun, 2011
      Donna
      No I did not mean live there with no regard to the mortgage however if you do not reaffirm then they cannot contact you except to start foreclosure process according to my bk atty. That was the point that I was trying to make. Yes you should make your payments especially on the 1st mtg even after discharge if you wish to keep the home.
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      I am unaware of this rule. Consult with your bankruptcy lawyer, and ask him or her to cite the rule you mentioned. Please share it here, as I would very much like to relate this rule to Bills.com readers who are in the same situation as yours.
      0 Votes

    • 35x35
      Jun, 2011
      Donna
      My atty said that since the mortgages were discharged through the bk 7 and not reaffirmed that there is nothing for the mortgagor to collect therefore they cannot call and ask for payment. He said it was just like with discharged credit card debt as no debt remains so there is nothing delinquent to collect. The difference is the lien remains and either you continue to pay the mortgage in what is called a "ride through" or you stop paying and turnover the property or try to negotiate a settlement especially on 2nds with no equity. I wasn't able to get an exact law number or anything so I don't know what else to tell you. Is my atty incorrect?
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      I think I am confused by the facts in your question. If the bankruptcy filer continues to reside in the property, then the home loan lender(s) has/have the right to expect the borrower to pay the monthly payments. And if the borrower does not, the lender may foreclose, regardless of the status of the bankruptcy, or if the bankruptcy is chapter 7 or 13. I think we both agree on these rules and facts.

      In some Circuit Courts, a chapter 13 bankruptcy will strip a second mortgage, which removes the requirement for the borrower and resident of the property in question to pay that loan.

      In general, I do not contradict a reader's lawyer. He or she has all of the relevant facts before them, which I never do. Also, the reader's lawyer has experience with local court rules and studied the reader's state laws, which in many cases I have not.
      0 Votes

  • 35x35
    Mar, 2011
    Michael
    We have a first with ASC for $384,000 and a second with HSBC for $98,000. The home is valued at about $300,000. Both loans are current, but the second was interest only for five years and just entered the ten year repayment period. We expected a payment increase, but were shocked when it went from $500 to $2253! It turns out there's a clause which says the minimum payment applied to principal can never be less than 1/60th of the remaining balance. This drives up the payments at the beginning of the repayment period. As a result, we can't make the payments. We're starting the modification process, but it's been suggested that since we're not yet behind they won't deal with us. I'd like to skip the steps of threatening letters and phone calls and ruining our credit and go right to the part where they remove that clause and we continue to pay. Is that possible? Should we continue to pay what we were paying in the meantime?
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      You wrote, "it's been suggested that since we're not yet behind they won't deal with us." Who "suggested" this? If it is one or both of the mortgagees, then go up the chain of command there and find if you can skip the credit-score devastation phase and jump to the serious negotiations.

      Keep in mind there is a great deal of evidence to suggest that even in March of 2011, more than three years into this crisis, the mortgage servicers are still understaffed, operating inefficiently, are inconsistent, and operate in a manner that harms both the mortgage investors and homeowners. My rant does nothing to help you move forward, but is meant to reassure you that you are not alone in your frustration.

      Ask your mortgage servicers about the FHA Short Refinance program and if this program applies to you.
      0 Votes

    • 35x35
      Apr, 2011
      Feeling scammed
      I am behind on both mortgages and have been working to modify for 1 1/2 years. Today I received a call from Citi mortgage's (my second) pre charge off department, who said I could present a settlement and that he is often seeing success with 10% of the balance. I asked him to send me the paperwork and I would do what it took to come up with the cash. He faxed a document called "Documents needed for a deed-in-lieu/settlement". Do these two items go hand in hand...to me they are VERY different. I feel slightly scammed and of course he was unavailable when I called him to ask questions. I would appreciate some insight.
      0 Votes

    • 35x35
      Apr, 2011
      Bill
      I cannot comment on documents I have not read. Take the proposed settlement Citi sent you to a lawyer in your state who has experience in contract law or real estate law. He or she will advise you of your rights and liabilities under the proposed contract.
      0 Votes

  • 35x35
    Mar, 2011
    elaine
    we are current on the first mortgage, owing 93,000.we haven't paid on 2nd mortgage in about 7 months because we are in process of filing bankruptcy and our attorney told us not to pay 2nd mortgage.now lender of 2nd mortgage has contested this. what should i expect? will we lose our home?
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      I am uncertain what you mean by the servicer of the second mortgage (or the second mortgagee itself) "contesting" your not making your monthly payments. Of course, it will not be happy with your non-payments because the mortgage servicer wants you to honor your contract. Consult with your bankruptcy lawyer about the message(s) you received from the second.
      0 Votes

  • 35x35
    Oct, 2010
    Bill
    Mortgage modification negotiations are a long, slow, white-knuckle ride. Your anxiety is justified, understandable, and common for almost everyone in your situation with whom I have spoken. What makes matters especially terrifying is the banks appear to be incapable of handling the large volume of modifications requested, routinely lose parts of their customer's files, ask customers for the same forms repeatedly, then deny the application and blame their customers. You were smart and hired an attorney to file the modification application. He or she probably completed the application completely and accurately, and kept copies of all correspondence with Chase. If Chase denies the application for arbitrary reasons, you will have a head start on suing Chase if the bank was negligent or breached its contract with you. I am not a fortune teller, but I can say your hiring an attorney to negotiate with Chase gave you the best chance of a positive outcome. Regarding your foreclosure question, the answer is yes, but it makes zero economic sense to do so. Please reread my original answer above for a more complete analysis.
    2 Votes

    • 35x35
      Feb, 2011
      Larry
      I worked out a loan mod for my 1st mortgage and tried to do the same with my credit union who holds the 2nd. They would not even consider any modification. My house is valued at 225,000 with a 360 1st and 65K second. Is it possible to BK the 2nd only?? My second question is that two years ago I entered into a debt settlement agreement and last year one bank agred to an amount. I received a 1099 for a 9400 defieciency balance to be ADDED to income. I thought I was doing the right thing and now more debt. Any way to offset this?
      0 Votes

    • 35x35
      Feb, 2011
      Bill

      You mentioned bankruptcy. Bankruptcy is all or nothing when it comes to listing your creditors. You must disclose all of your debt obligations if you file for bankruptcy, including both mortgages. In some jurisdictions, bankruptcy can remove the liability of a second mortgage. If you live in the Ninth Circuit -- Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington – and the balance of the first mortgage equals or exceeds the property’s market value, the bankruptcy trustee can strip the lien on the second. If you live in another circuit, the rule I just mentioned may not apply, depending on if and how your federal circuit court decided this question. A local lawyer experienced in bankruptcy will give you precise advice based on your circuit court’s decisions.

      When a financial entity forgives more than $600 in debt, the creditor is required to issue a 1099-C. When you receive a 1099-C, you may be required to declare the forgiven amount as income and pay taxes on it. It can be possible to avoid declaring the forgiven debt as income, if you are eligible to use the IRS Form 982. I recommend that anyone who has a forgiveness of debt issue to hire a tax professional to prepare the return that uses the Form 982. That way, the form is filled out properly and the tax pro can determine if you meet the IRS test for insolvency that is required to avoid declaring the forgiven debt as income. Some refer to this as CODI.

      Separately, while I understand your frustration if you end up responsible for paying income tax on the $9,400 that was forgiven, but please keep in mind that the taxes you will owe on the $9,400 is a lot less than your paying the creditor back the $9,400 in full. If you end up with a small tax debt that you can't pay in full, then you can set up a long-term payment plan with the IRS.

      0 Votes

  • 35x35
    Oct, 2010
    sunny
    I hired an attorney to help with a modification. Even though I was not behind- i could see if happening when the ARM expired and the full payment was due. It was an interest only loan for 5 years. Husband lost job. My home value is now $275k with a first of $300k with Chase and a second at $170.k . Chase has been in negotiation for the modification for over 9 months. No decision. Now second wants to foreclose. Atty strongly urges not to pay either until settled. He says I qualify for the modification. I am scared to death. My credit is now ruined. Can the second (who by terms of the subordination was supposed to reduce my LOC to $100k and did not, so it was used up to 170k)evict me ?
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    See the Bills.com resource Negotiate Mortgage Settlement, which explains how to reach a settlement with a mortgage servicer.
    0 Votes

  • 35x35
    Sep, 2010
    Arthur
    I am very confused I need some advice, I have purchased my house in 2006 I have a 1st of $667,000 that I have recently got modified and I am current on my payments and I have a second home equity line with country wide/Bank of America for $850,000 that I am behind on my payments for 6 months. Recently I had the property appraised the value came in at $900,000 I owe $617,000 more than the value I have been calling B of A almost every day to find a solution and they told me they have no program for me at this time. I need help I don’t know what to do anymore.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    Charge-off is an accounting concept. Charge-off is not forgiveness. See the Bills.com resource Charge Off to learn more about this oft-misunderstood term. I assume what you mean is a mortgagee charged-off a loan secured by real property, and you want to know if the mortgagor can sell or gift the property. Certainly he or she can, subject to the mortgage on the property. Whether the mortgage payments are current or not current is irrelevant.
    0 Votes

  • 35x35
    Sep, 2010
    l.wright
    Once a property has been charged off, who does it belong to? and if it still the homeowners can you sell/give it away??
    0 Votes

  • 35x35
    Sep, 2010
    Hank
    I own a home that is valued at $330k. I owe a 1st mtg to 5th/3rd bank of $335k and a second with Greentree of $80k (original purchase money loan). My 1st mortgage with 5/3 Bank has modified my loan even though the 2nd refused to resubordinate the new modified loan. The 2nd mortgage has only given us a temporary 12 month modification. I have recently filed for BK 7. I reaffirmed the 1st mortgage but not the second mortgage. Am I in a more commanding position to request a payoff settlement on the second mortgage because I did not reaffirm the 2nd mortgage when I filed for BK 7? We are current on both mortgages but are feeling like walking away because we can no longer handle the payments. We would like to stay in our home and pay just the 1st mortgage.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    In theory, you are in better position to negotiate with the second because by not reaffirming the second you no longer have personal liability for it. The first thing to do is consult with your bankruptcy attorney to see how the second was handled in the bankruptcy. Was the lien stripped from the property? If so, Greentree has no legal claim to you or the property. If Greentree still has a legal right to foreclose, then open a negotiation with it to resolve the debt. Explain your financial situation and that you are considering walking away. Would Greentree rather see a small lump sum or zero? Explain that Greentree's reaction will dictate your action.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    If the second files for foreclosure the first mortgage holder will still have to be paid off through the foreclosure process. The first mortgage holder will not lose its place in the process, regardless of which lender starts the foreclosure process first. For more information please read Home Affordable Foreclosure Alternatives Program article.
    0 Votes

  • 35x35
    Sep, 2010
    Arizona
    If the second files for foreclosure before the first can the first still file afterwords before they lose their chance to recover what ever amount they can? House is up side down. 1st=$245,000;2nd=$57,000. House values at $156,000. Due to $17,000/year pay cut, I'm current with 1st but not with 2nd. Any suggestions to how to save my home? Thanks.
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    I am not aware of any laws on point in any jurisdiction. Readers, I welcome your input if you are aware of any -- I would love to be proven wrong here.
    0 Votes

  • 35x35
    Jun, 2010
    Mel
    I have a shortsale situation with the 1st giving an approval. However, the 2nd is playing hardball and will not give an approval unless they now get 11k even though 2k was previosly agreed. Are there any Ga state rules that would prevent them from allowing us to close even thou they have been alloted a resonavle amt based on the inital loan?
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    The second is under no obligation to subordinate, and the only way you can encourage it to subordinate is to give him or her an incentive to do so. Is bankruptcy an option for you? If so, explain this to the second and state that your giving the second $1,000 or whatever amount you can scrape together is more than he or she will get if declare bankruptcy. Regarding your second question, you are responsible for the deficiency.
    0 Votes

  • 35x35
    Jun, 2010
    Cathy
    This question is on an investment property in California. We have a first and a second (carry back from the seller). The property value is 2.2Million, the first loan is 3Million and the second is 180,000. We are current on the first (Chase) and trying to modify. We are not current with the second. We are barely making the first therefore need to modify. Chase says they will modify only if the second subordinates on the loan. They say that is necessary because it is almost like a new loan and if the second does not subordinate that makes the second first. Since we are not current on the second, he refuses to subordinate. Is there any way around this? Also the second has filed for a judicial sale and wants a court appointed receiver put in as soon as possible. There is a negative of $2,000 per month who is responsible for that if he gets the court appointed receiver. Are we still liable for the negative?
    0 Votes

  • 35x35
    May, 2010
    Bill
    Keep shopping, in particular with your local banks and credit unions. Get in front of a loan officer where you can present the financials of your business. Explain you are looking for a bank where you can take your personal and business's accounts that understands your needs, and want to grow with your business.
    0 Votes

  • 35x35
    May, 2010
    Dan
    I am current on my first but owe $75k on a 5 yr. LOC. Combined I still have a equity of 80k left in the house. Because of the LOC it has impacted my credit score because of high revolving credit. The LOC has a balloon payment and cannot find a bank to refinance because of low score and being self-employeed, even though my score would be considerably higher if I could move the LOC to a fixed pymt or refinanced 1st. Still have excellant credit w/no late pymts, but fear the whole picture will change if I can not refinance and the bank holding the LOC will not help. The LOC was used to start my business (which is doing well)but I failed to do my refinance before the whole banking situation went south. With 7 employees I can't believe the hurdle a LOC has become. I am showing growth each year of around $60-$70k but being classified as self-employeed makes my employee's income more credible than my stated income on my tax returns. Really sucks, Any suggestions?
    0 Votes

  • 35x35
    Apr, 2010
    Bill
    I do not know enough about your situation to comment meaningfully. Is your goal to stay in the property? Do you want the banks to renegotiate the terms of the loans? Are you trying to remove the second mortgage? The best person to answer your question is your attorney. He or she a) knows your entire financial situation including why you are filing for Chapter 7, b) understands your goals, c) has an awareness of your local real estate market.
    0 Votes

    • 35x35
      Feb, 2011
      renee
      I am current on my 1st with bofa for 173k. Haven't paid my second with chase for over a year which is. 160k. House worth 310k. I claimed bk in june 09 but want to stay in house. Can I settle with second without foreclosing on house? Btw I do have an attorney he is just mia for months.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      You can attempt to settle with the second mortgage holder by negotiating with them. However, they could proceed with a foreclosure. If they can force you from the home and the home would sell for $310,000, there would be a lot of money that would go the second mortgage holder, after the first mortgage holder is paid off. I think that would make them reluctant to settle the debt for any amount that you can afford, as they will get more if the house is sold.

      I am concerned when you state that your attorney is MIA for a few months. That is unacceptable. Find another attorney to meet with. Consider reporting the attorney who is not returning your calls to the bar association in your state.

      Lastly, did you do your bankruptcy yourself or with an attorney? If with an attorney, speak with him or her about how the bankruptcy affected the second mortgage.
      0 Votes

    • 35x35
      Feb, 2011
      barb
      did chapter 13 two years ago. Have is first for $93 and 2nd for $133 frist is current 2nd 9 months behind. Home value $124. Want to keep my home my attorney told me to surender. Can 2nd mortgage foreclose and do they have to pay off my first and if they don't and i get a judment against me will that be for the balance or the balance plus interest. don't know what to do.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      What I tried to convey in my original answer above is that in a market where a property's value is less than the balance of its mortgages / deeds of trust, a lender has the legal right to foreclose if the borrower defaults. It may not make economic sense to foreclose, but the right to foreclose is not suspended because the property is worth less than the loans.

      You mentioned Chapter 13 bankruptcy, and that fact gives me pause. Are you still in the Chapter 13 plan? You also mentioned speaking to your lawyer, and that he or she advised you to quit the property. Go back to your attorney and ask about your options if you want to stay. Ask if you have the option of trying to reach a settlement on the second.
      0 Votes

  • 35x35
    Apr, 2010
    Bill
    Because the senior mortgage holder slept on its rights, the holder of the junior mortgage now owns the property. After it retires its loan it must send the remaining proceeds to the senior mortgage holder. If your description of events is accurate, I do not see how the holder of the senior mortgage can foreclose -- the horse is out of the barn and the junior mortgage's stable. Whether you can stay in the property is up to the junior mortgage holder. Out of curiosity, which banks are the junior and senior mortgage holders?
    0 Votes

  • 35x35
    Apr, 2010
    Robert
    I have a situation where the second mortgage foreclosed and held a sale where they won the auction with no other bidders. They did not name the first mortgage holder in the foreclosure. The first mortgage holder is also foreclosing and a sale is scheduled soon. What happens if I work out a deal to bring the first mortgage current with the first mortgage holder prior to the second auction? Does the first mortgage holder have to accept a payoff from the second mortgage holder? Can I stay in my house?
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Denise: If you are contemplating bankruptcy, I want you to take your questions to your bankruptcy attorney. He or she will have all of your financial history available and will be able to ask follow-up questions. Regarding your question about buying debt, yes, there is a market for debt. The kindly third-party would need to buy the mortgage before the foreclosure takes place, which is unlikely. The kindly third-party would buy the right to collect on the deficiency balance, and not the mortgage itself.
    0 Votes

  • 35x35
    Mar, 2010
    Denise
    Florida- I heard that a third party can buy, for pennies on the dollar, 2nd mortgages and Lines of Credit that are delinquent. Is this true? If so, can they specifically buy a particular one, like for a family member or friend to avoid foreclosure?
    0 Votes

  • 35x35
    Mar, 2010
    Denise
    We live in Florida and own a home that is worth about $65,000-70,000 in the current market. We have a 1st mortgage (Chase) for $55,000, a 2nd for $50,000 (Wachovia) and a Line Of Credit for $30,000 (Wachovia). My husband has been out of work for months now, & we are getting ready to file bankruptcy. We are current on our 1st mortage, but 2nd and LOC are 4-6 monhts behind. 1) Is the 2nd and LOC likely to settle for a lesser amount in the bankruptcy? 2) Should we wait to file bankrupcty for a few more months to see if the second charges off the amount and then gets a judgement against us- before filing for bankruptcy? 3) Are we running a high risk of second trying to force foreclosure due to equity in home over what is owed to first? Please Help :(
    0 Votes

  • 35x35
    Apr, 2010
    Xena
    My husband and I are filing in June for CH 7. Per our lawyer, we qualify. Here's our situation. We bought our home 3 years ago for 263K. Currently, we owe 203K (1st Mortgage with 7.125%) and 53K (HELOC with variable rate; total mortgage = 256K. The current value of our home is 220K so it looks we have quity on the 1st but when 1st Mortgage is paid off, we will still owe 36k on the 2nd. Both mortgage is with the same bank and we are current on payments. We stop paying our CC in March. Here are my questions: We do not want to reaffirm both 1st and 2nd to try to negotiate with the bank after the BK. My plan is to stop paying both after the BK for 3 months so that they will negotiate. Or should I extend that to 6 months? I heard that bank will not negotiate with the debtor if they are current on their mortgage. Do you think this will be a wise move considering I am only underwater for 36K? Do you think I have a chance in negotiating with them? I would like to lower the interest and payment on the first and possibly settle on the 2nd. Or do you think they will just foreclose on us? Please advise.
    0 Votes

  • 35x35
    Mar, 2010
    Rose
    my ex and i borrowed money from my parents and at that time signed a document named a straight note for installment payments back to them. After my ex and i split he stopped making payments to them and i couldn't so needless to say the house is up for auction at the end of the month. is there anything i could do to help my parents get even a portion of there money back in this foreclosure. thank you rose
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    If your interpretation of the facts you discovered is correct, then I deduce that you refinanced the first, which never bothered to ask the second to subrogate. You should double-check to make sure there was no subrogation. If not, then the second moved into the first's position, and that is the party with which to discuss a short sale. I caution you to consult with an attorney who will double-check your detective work.
    0 Votes

  • 35x35
    Mar, 2010
    Bryan
    I anticipate going into foreclosure due to medical issues. Upon doing a doc search I find that based upon that dates I have a HELOC $167,000 that has become the first lien holder and a mortgage 210,000 that is in 2nd position. Home value is around $185,000. My mortgage got sold to Fannie. I imagine that Fannie thought she was buying a 1st lien not a second lien. I wanted to offer my 2nd lien holder a buyout to simplify the short sale process and hopefully secure a letter of intent not to pursue defeciency. Who should I contact? Both
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Michael: Every circumstance is different, so I urge you to consult with a California attorney who has experience in real estate or bankruptcy law who can review your circumstances in person in their entirety. I do not see California's anti-deficiency statute protecting you. See the Bills resource Is My HELOC a Recourse or Non-Recourse Loan in California? for a much more complete analysis of the relevant California statutes.
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    J: 1) Yes. 2) Yes. In "normal" market conditions, the junior and senior will agree that one will buy the other's interest. These are not normal market conditions, so predicting the behavior of mortgage holders is difficult. From an economic perspective it makes no sense for the junior or senior to buy the other's interest.
    0 Votes

  • 35x35
    Feb, 2010
    Michael
    Question regarding a foreclosure by the second in CA. I have a first for $800K and a 2nd(HELOC) for $700K with the house valued at about $950K - neither is purchase money as the 1st was refinanced a couple of years ago. I am current on the first but 4 months behind on the 2nd which has filed a NOD via trustee sale on Jan 20, 2010. I offered a lump sum settlement to the 2nd but they say they are not interested. Not sure if they(2nd) will be more interested as we get closer to foreclosure date which should be 90 days out from NOD. The 2nd says they may consider short sale but I would still owe them the deficiency which makes no financial sense to do. If I allow the foreclosure to proceed I have been told that since CA is a "One Action State", even a 2nd foreclosing via trustee sale could not pursue a deficiency judgement. Only thru a judicial foreclosure could they also attempt to obtain a deficiency judgement though in CA this is very unlikely. Is this true, and would it make more sense to just allow the foreclosure since the 2nd wants to have right to claim a deficiency in a short sale situation? Your thoughts would be appreciated. Thanks.
    0 Votes

  • 35x35
    Feb, 2010
    J
    Two questions: 1) Can a second lienholder initiate foreclosure due to default on the first? and 2) If a second lienholder DOES initiate foreclosure (due to default on either the 1st or the 2nd), can't they just contact the first and agree to keep the first current while foreclosing on the second, rather than having to completely pay off the first?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Even if the second mortgagee bought the loan for 58 cents on the dollar, I do not see an economic incentive for it foreclosing given the market value of your property today. You are really asking me to speak for the second mortgagee or predict its behavior. Obviously, I cannot do the first, and my predictive powers are limited. I cannot fathom some of the actions banks are taking today from either a legal or economic perspective.
    0 Votes

  • 35x35
    Feb, 2010
    Tonia
    I have a 70/30 mortgage in Las Vegas. My first is with ASC and my second is with Indymac Bank. I bought the home in 2005 for $273.000, and today it worth $143,000. My first mortgage with ASC was approved for a modification that took my adjustable rate into a fixed 30 yrs, which kept my payment the same. However, the second is at 10.75% and its $836 a month, WAY TO HIGH. I am prepared to walk away because of the loss of equity, and although I have consulted an attorney, I have not retained one yet. My goal is to get rid of the second or negotiate a reasonable deal, and although the thread has mentioned bank would not want to foreclose because it costs too much, I have read that the OBAMA plan has made it possible for INDYMAC now One West Bank to purchase my mortgage for 58% of the actual balance. This means that the $82,000 that I owe them, the bank only purchased for half the cost. If they can profit to sell the house at an auction, wouldn't they just do that? I am a 720 FICO, and have options so that I will be ok, even after the BK 7. Do you think if I keep current on the first, and default the second they will FINALLY worth with me? I am prepared to file to have them lose it all anyway. What do you think?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    HSBC may have sold the second mortgage to a collection agent. If so, it probably sold the debt for pennies on the dollar. You would be wise to reach a settlement agreement with the collection agent. Start negotiations at 10 cents on the dollar.
    0 Votes

  • 35x35
    Feb, 2010
    Bob
    Ok I have a question about 2nd mortgage and HSBC. I was out of work for 9 months due to a lay off and fell about 6 months behind on both first and second mortgages. Well BOA has been working with me on a modification and HSBC, my 2nd mortgage holder, although saying they would send me the paper work never did. I called several times still no paper work, than I get a letter from a collection agency and they offer a 25 cents on the dollar pay off which I thought was a scam, never heard of a 2nd mortgage going to a collection agency. Anyway now HSBC is saying they will not work with me. I have retained a BK attorney and will be filing within the next 45 days, as soon as I pay the balance of the retainer and filing fee, should I just ignore HSBC and thier threats now and just let my attorney deal with them, I dont want to lose the house but I find HSBC to be nothing but ignorant.
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    I cannot explain HSBC's behavior. Did HSBC enter those amounts as a matter of policy? If so, how were those values chosen, and why not use the customer's actual values? I look forward to the exposés written by bank employees working in loan modification departments when the mortgage crisis ends to learn what is really happening behind the scenes. Today, a bankruptcy attorney had better be well-versed in real estate law. Therefore, an attorney working in either field will be able to help you effectively.
    0 Votes

  • 35x35
    Feb, 2010
    Mike
    My wife and I have two mortgages on our house, with a market value of $319,000. The first mortgage's (Whilshire) balance is $306,000, the second mortgage's (HSBC) balance is 76,000. My 64 yr old spouse lost her job several months ago and has not been able to find another. We have completed the 3 month trial period for a loan modification on the Whilshire mortgage. I have requested a loan modification for the HSBC second mortgage and they denied the request saying we make to much money. I asked to go over income and expenses items submitted to them because I calculated a negative cash flow. As we went through the items I found they limited several expense item amounts they used. Examples: Gas limited to $50/mo., medical expenses limited to $20/mo. I explained to them that my wife's unemployment runs out 3/10/2010 and we would not be able to make payments. They suggested I call NACA or HUD to see if I can get help. Whilshire wants me to sign and return the permant modification document by 2/28/2010 since we completed the trial modification period. I don't understand HSBC's position. I plan to contact them to let them know we are'nt able to make the HSBC payment April 1, 2010. I am looking for a real estate attorney or should I seek a BK attorney? Any suggestions on how or if I should continue to try and work with HSBC?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Work with your mortgage company on finding a solution to your late payments. Honest communications with your mortgage company is always better than putting the company in a position to guess what your intentions and plans may be. Therefore, call your mortgage company now and explain your situation, and work out a payment plan to bring your payments current.
    0 Votes

  • 35x35
    Feb, 2010
    tom
    I have a quick question,i have reg mrtg for 36k,my house,also i took a loan that is secured.i hade problems paying 3 yrs ago on 2nd one,filed bankruptcy but didnt on house so i still had 2nd one to,got caught up with everything,and things happen to me again the 2nd is 4 mths behind i get no letters or calls bout it.1st mrtg i have been keeping up with but its due on 1st and the last 2 mnths i had 2 wait til 19th of the month to pay will either of them start forclosure.last time this happened with mrtg i just couldnt make 2 n the preveuos 3 were in late.please help!
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    "Charge-off" or "write-off" means the account is no longer current and, for accounting purposes, cannot be included as a current asset by the creditor. An account being charged-off has no legal significance to a debtor. The fact an account is charged-off does not mean the debt is forgiven, disappears, or is no longer collectable. I do not understand your second question. Could you clarify it, please?
    1 Votes

  • 35x35
    Jan, 2010
    barb
    I am very confused on this as I read it.We have a 80/20 loan. We live in florida The first balance being 174,000 the 2nd being 43,000. We are in a modification with the first Bank of america, the 2 nd citi mortg refused to do anything. We just made our first modification trial payment. The 2nd we are now 90 days behind and have recieved a demand letter. The house is worth 80,000. We were told that even though they are sending us letters and stating forclosure they will not do anything but do a write off in 6 mos. I am very confused on all of this. my 2nd question is why they would do a modification with us .
    0 Votes

  • 35x35
    Oct, 2009
    Mark
    I am sorry for the confusion I see I created in my earlier comments. I should have made it clear that my comments to Karen were in context of another message thread where she was asking about negotiating with the first and second mortgage companies while she was in the middle of a bankruptcy. While in a bankruptcy, it is essential the debtor's attorney be kept informed of any and all communications the debtor has with his or her creditors. If you are not in a bankruptcy, then you may communicate all you want with your creditors. Please reread the article above with the understanding that unless you are in the middle of a bankruptcy, direct negotiation with your mortgage companies is A Good Thing. Generally speaking, mortgage companies hate foreclosures as much as homeowners do. Again, generally speaking, if a homeowner can't afford to pay both the first and second mortgages, pay the first mortgage and open negotiations with the second about making a lump-sum settlement. However, as the above Ask Bill answer states, any mortgage or lien holder has the legal right to foreclose, but may not do so if it does not make sense financially. In your case where the mortgages are $90K greater than the value of the property, it does not make sense financially for second mortgage company to foreclose and therefore may be motivated to negotiate a lump-sum settlement. See an attorney in your state to learn more about your rights.
    0 Votes

  • 35x35
    Oct, 2009
    Phil
    I am 120 days behind on my second mortgage and 60 days behind on my first. When i contacted the second mortgage holder, they simply told me to catch up on the first mortgage in order to put me on a reduced payment plan. my first mortgage holder stated that I could catch up on my own without assistance. I'm concerned about the second because they threatend to foreclose. in a nutshell, is this considered making contact with the lendors? It seemed so simple and non formal. Also, if the second mortgage foreclosed but not the first, can i get put out of my home if i'm current on my first mortgage? If i can stay in my home, what takes place with the second mortgage? will they just hang around or be willing to negotiate a settlement? By the way. My home is listed at 320K but the combined mortgages equal 411K. Thanks
    0 Votes

  • 35x35
    Sep, 2009
    Mark
    Generally speaking, creditors dislike foreclosures because they lose money in the process. Given the choice of losing a little money by negotiating with a willing homeowner and keeping them in the property vs. losing a large amount of money in a foreclosure, only the most evil, obstinate, or short-sighted creditor will foreclose on a property. In a market where home prices are falling, second-mortgage creditors are in an especially tenuous position. Foreclosing where the property value is equal to the amount of the first mortgage leaves second-mortgage holders with zero security. As a response to this, some second mortgage holders have adopted almost belligerent, hard-nosed negotiating tactics in an attempt to bully the homeowners into making their regular payments as long as possible. Pushed, however, and the second mortgage holders negotiate. Some readers have stated to Bills.com that they have made cash settlements for a small fraction of the loan balance.
    0 Votes

  • 35x35
    Sep, 2009
    karen
    SO if the second mortgage files foreclosure on us for not paying them the first and them would work at a deal. The first would pay the second say 5% of the loan amount and then they would continue to collect our monthly mortgage payment from them?? or they kick us out of the house and foreclose as well. The house values are below the first mortgages value I still dont understand the motivation for either of them to foreclose. WHY wont the second just take a settlement from us they would make some money instead of no money in a foreclosure. Have you seen settlements for the second mortgage and at what rate of the balance
    0 Votes

  • 35x35
    Sep, 2009
    Mark
    First, listen to your attorney's advice. Do not negotiate with your creditors or make payments to them without consulting with your attorney first. You risk harming yourself in the long run by taking action on your own that is contrary to your attorney's advice and your long-term best interest. Second, I agree with your attorney's tactics. Third, regarding the second mortgage holder foreclosing, if the first ignored the second's foreclosure, the property could be sold in a sheriff's sale resulting in the second mortgage holder being paid, leaving the first with the remainder. The first mortgage holder would be foolish to allow the second to act in this manner. My point is that either mortgage holder -- or anyone with a lien on the property for that matter -- can foreclose on a property. Finally, I urge you to stay in communications with your bankruptcy attorney throughout the process, and voice your concerns as they arise.
    0 Votes

  • 35x35
    Sep, 2009
    karen
    In regards to the question about the chase and greentree mortgages you stated that the second could forclose and then the first would follow. I am confused I thought if the first was current they would not foreclose. The only way that would happen is if the second bought out the first. Now why would they do that.... if the value of the first is more then the value of the house. Since we have filed chapter 7 on monday we have not payed our august or september second mortgage payment. The lawyer is saying not to because once the account goes over to the bk department they will negotiate with us. I want to make the august payment so that we are not 60 days behind but only 30 days behind. What do you think we should do?? lawyer says not to waste our money. But you say they could force the first into foreclosure. We want to KEEP the house and filed that as our intentions on the bk papers. WHAT SHOULD WE DO???
    0 Votes

    • 35x35
      Jun, 2011
      dave
      I have the same situation, however my BK 7 is dis-charged fully and then received a modification (not a reaffirmation of 1st mortgage)however I am current on first mortgage but being out of work I can not afford 2nd mortgage which is 1/3 the amount of the first mortgage, I am receiving threats from 2nd mortgager about how long they may allow us to stay in our home if we don't pay, I can not imagine 2nd mortgage paying 135k to collect 40k. and since legally I have not reaffirmed debt with first mortgage company but they are fine with me now since modification is complete and I am struggling to at least make that 1st mortgage payment I would think it would not be in the best interest of a separate 2nd mortgage holder to try to foreclose, especially since the property is now worth right at or less than 1st mortgage, how should I handle 2nd mortgage holder?
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      Continue to negotiate and leave the lines of communication open. You have a case of economic reality clashing with the second's legal right to foreclose. If you continue to explain the situation, and that you plan to resume payments when you are financially able, you may prevent the foreclosure.
      0 Votes