Information about consequences of default on second mortgage

What happens if you are good with the payments on your first mortgage but default on your second mortgage?

What happens if a person has a first and a second mortgage on their home and a spouse loses a job and the new job he gets does not pay enough to pay the first and second mortgage? What happens if they decided to continue paying the first but let the second fall behind? Besides being a black mark on credit reports what can the second holder do? Can they foreclose on the home? The second is $100k and the first is $300k.

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Bill's Answer
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Highlights


  • If you default on your second mortgage, the mortgagee can foreclose.
  • Try to work out a forbearance plan.
  • Bills.com offers additional information for people in default on their second.

A lender has the option to foreclose when a borrower become delinquent on their mortgage, whether the mortgage is a first or a second. The foreclosure process varies from state to state, but generally takes from two to 18 months depending on the terms of the loan and the state where the property is situated. Generally speaking, if mortgage payments are not received within 150 days, the bank may proceed with the foreclosure process. Upon foreclosure, the second mortgage would be repaid after the first mortgage is paid in full.

If the sale price is less than the value of the mortgages held against it, then in some states the homeowner may still owe an unsecured balance called a . The good news is that this new deficiency balance (if it exists and if your lenders pursue it) is an unsecured debt that you could conceivably enroll into a debt settlement program. I will explain more about the consequences of being in default on a second mortgage in just a moment.

Concerned about what is appearing on your credit report now? Check your credit report today and get a .

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.

has serious repercussions, especially to a homeowner’s . If you can, avoid a foreclosure, perhaps by agreeing to a . 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.

See for a more complete discussion of this subject. You can find more about foreclosures on the Bills.com page.

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

Best,

Bill

222 Comments

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  • 35x35
    Dec, 2011
    Kimberly
    The goal is to lower the new mortgage amount to approximately $3000 below the house's current market value. The homeowners will have instant equity and a payment they can afford. We will help them start to rebuild their financial health. Banks call these homes toxic assets. We call them homeowners.
    0 Votes

  • 35x35
    Nov, 2011
    I filed chapter 7 bankruptcy and neither my first or second mortgage was reaffirmed. We are behind on first mortgage but current on second. What would happen if we stopped paying on the second? We owe more than what we can sell it for. Since we did not reaffirm, are we not responsible for either loan? Can either lender sue us or garnish wages?
    2 Votes

    • 35x35
      Nov, 2011
      Bill
      You answered your question yourself.
      1. You filed for chapter 7, and I will assume the mortgages were included in the discharge. If so, this removes your personal liability for the notes.
      2. You did not reaffirm either mortgage. By not reaffirming, you kept your non-liability for the notes.

      You have no personal liability for either mortgage. Should either lender pursue you for any deficiency balance, the pursuer will be in violation of federal law.

      Consult with your bankruptcy lawyer to verify what I wrote here.

      1 Votes

  • 35x35
    Nov, 2011
    Christine
    I currently own 2 homes. The 2nd home is an adjustable loan with a 2nd mortgage. If I were to foreclosed on this property due to financial difficulties, how will this hurt me when I am able to purchase another home in 5-6 yrs from now?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      You could very well be affected five to six years down the road, if you stop making payments on your second home mortgages now. First, it will take time before a foreclosure takes place. Then, you have to deal with not only the credit impact of the foreclosure but with the deficiency balance that results.

      Maybe you can get the lender to forgive part of the debt (which could cause you to owe taxes for debt forgiveness). Maybe it will end up with the lender suing you and getting a judgment against you that will preclude getting another loan without first paying or settling the judgment. There are too many possibilities to tell you exactly what will happen, but most of them are unfavorable.
      0 Votes

  • 35x35
    Nov, 2011
    ksenia
    Purchased a home in 2007 for 265k. 1st mortgage 30-y fixed 4.8% 210k never late payment with B of A previously Countrywide. Second mortgage 38k with different lender recently Green Tree 10.375% previously Countrywide, BofA now Green Tree. None of them is willing to put them together or refinance. I came to a point with my husband that we cant pay the second because of financial situation. Our house is now worth 215k but i want keep the house. What would happen if i stop paying the second? Will the Green Tree foreclose? should i get lawyer? We pay 12% more from our income according to the calculations. what would happen to my Credit cards, i know that my credit score suffer, but will they close my accounts?Please advise Thank you
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      If you stop making payments then the second mortgage lender will be able to foreclose, even if you are current on your first loan. If you decide to stop paying, then you should see a lawyer to help determine if the loan is a non-recourse or recourse loan, what kind of collections the bank is likely to pursue, and what your obligations will be if a deficiency balance results.

      Delinquent payments and foreclosure will damage your credit scores, but if you are making your mandatory payments on time then your accounts should not be closed. If you have a bank account or credit card account with the same bank where you have a delinquent mortgage, your bank and credit accounts could be affected.
      0 Votes

  • 35x35
    Oct, 2011
    Mike
    What are my options? I recently (1 yr.) moved into a new home and continued to pay for first house. First house is underwater owe 80k house worth 28k. I pay about $600 for 1st home and 1400 for 2nd home, I am not behind on any payments. I don't want to continue putting money into the first home knowing i will never get any return. What would you advise.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      I can't offer much advice, based on what you wrote. A lot depends on if your first house's loan is a recourse or non-recourse loan, as well as the anti-deficiency protections in your state.

      Other factors are how much of your income could be garnished, whether you can rent the home for what you are paying on your mortgage, what you project your future income to be, and the likelihood that the first house lender would to sue you if you walk away,
      0 Votes

  • 35x35
    Sep, 2011
    Lucky
    purchased new home 12-28-2005.. 1st mortgage 30-yr fixed Jumbo with 10-yr Interest Only; 2nd mortgage HELOC 10 yr interest only then 15 years. Never a late payment but am underwater from $230K (1st) & $45K (2nd) with current home value approx. $90K in Phoenix AZ. I lost my job two months ago and trying to make decisions based upon where I find work. If I must move, I would choose to walk away, give it back to the bank (both with BofA - previously KB home/CountryWide) Should I secure a rental home before missing payments? What are my liabilities? Please advise. Thank you.
    11 Votes

  • 35x35
    Sep, 2011
    Laura
    I filed Ch7 that was discharged in 2009 and my 1st mortgage was included in the Ch7 (only because the lender didn't get the reaffirmation papers to us in time). The 2nd mortgage, with a local credit union was reaffirmed. I think we had a terrible attorney that never should have allowed us to sign to reaffirm the 2nd if we hadn't signed on the 1st. I believe the value of the house is less than the first mortgage, so the CU would never see a penny if we foreclosed. We do not currently owe the first mortgage, though we continue to pay and live there. I wonder if it is worth my time to talk to the credit union about restructuring the 2nd mortgage so we can repay it (unsecured?), but get out of the house. The value of the 2nd is about $30K. We would like to be able to move to a different house in a better area, closer to my daughter's school. I assume we will only be able to rent, but should be able to rent something that is cheaper than we currently pay on the first mortgage. I hope you can give me some advise on this crazy situation.
    1 Votes

    • 35x35
      Sep, 2011
      Bill
      I am reluctant to weigh in with a thought regarding your situation without knowing more. If I understand you correctly, you filed for chapter 7, did not reaffirm the senior loan, but did reaffirm the junior. You want to know if it is possible to negotiate a lump-sum settlement with the junior. If my interpretation of your question is correct, then yes, you have no reason not to try to negotiate a lump-sum settlement for the junior. The servicer for the junior has an incentive to negotiate if, as you suggest, the value of the property is less than the balance of the senior.
      0 Votes

  • 35x35
    Sep, 2011
    Michelle
    I have a 1st mortgage of $265000.00 2nd of 40,000.00, and secured credit card (3rd) of 20,000.00. House is worth $224,000.00. Missed 1 payment of the first, and 1 payment of the second. Trying to work with lenders, not very helpful at all. What happens if i stop paying everything and walk away? I know they will foreclose, how long does it take? Can they attach my wages in nj?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      The foreclosure process varies by state, and each state legislature set a different timetable for the process to complete. New Jersey has one of the longer processes, and takes a minimum of nine months or so.

      See the Bills.com resource Collection Laws & Exemptions by State to learn more about each state's collection laws.
      0 Votes

  • 35x35
    Sep, 2011
    Victor
    In 2004 my dad did not qulify for a home loan. I purchased the home only on my name and right after the close of escrow trasfered the title on my dad's name. After several months he pulled out home equity line of credit only on his name. For all these years he paid the 1st and 2nd loans. Now, the 1st is about 200k and 2nd 50k and the home will sell for about 150k. He told me that he is not going to pay the 2nd mortgage any more. What can happend in this situation? I live in another home, where I got some equity. thanks.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      The risk in not paying a home loan as contracted is foreclosure. I surmise you are still the borrower on the senior loan. If so, and if there is a foreclosure, the risk is that you will be liable for any deficiency balance, assuming the property sells at auction for less than the balance of the senior.
      0 Votes

  • 35x35
    Aug, 2011
    Julie
    My husband and I filed chapter 13 bankruptcy last year. I got laid off and our income was cut by 60%. We have 2 mortgages 1st is 180k second is 48k. House would be valued around 160k. The attorney did not do the "stripping" at the bankruptcy. We are trying to get the interest rate on the second lowered from 7.98% and they are not working with us at all. What if we just stopped paying on the second but kept up with the first, could/would they foreclose? First is Wells Fargo, second is TCF.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      The second mortgage holder can choose to foreclose on you, if you default on your loan. Because it won't get any money in a foreclosure, as the first mortgage lender is in line to get all the proceeds available, it is not clear that the second mortgage lender will choose to foreclose, but it has the right to do so.
      0 Votes

  • 35x35
    Jul, 2011
    April
    My husband had a foreclosure before we met. We married a few weeks ago and are looking at purchasing a home in my name only in Washington state. He had an 80/20 loan. Can the 2nd mortgage he defaulted on (unsecured debt) attach a lien to the home that is in my name only? Washington is a community property state.
    1 Votes

    • 35x35
      Jul, 2011
      Bill
      The issue of pre-marital debt in a community property state is a tricky one, and each state answers that question slightly differently. Consult with a lawyer in your state who has family law experience. He or she will analyze your situation, and give you a precise answer.
      0 Votes

  • 35x35
    Jun, 2011
    dave
    Bill - I have a 1st and 2nd in Oregon. Neither bank is willing to work with me. I am thinking about just paying the the 1st is 125K @ 6.1% (my place is worth 119-125K) my 2nd is 58K @ 9.975. What cons is there to stop paying on the 2nd, wait until the bank wants to settle? Big credit hit? And stay current on all other bills, ie car payment, credit cards etc. Thanks! -Dave-
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Your credit score will suffer the moment you become delinquent in your mortgage.

      You risk a foreclosure if you cease payments to a mortgagee. The second may not foreclose because it makes no financial sense, but it has the legal right to do so. You need to do a risk-reward analysis.
      3 Votes

  • 35x35
    May, 2011
    Lee
    I live in Nevada I've tried working with bank on a Modification "turned down", HAFA short sale under review. Bank say's they sold 2nd to someone else and don't know who it was. Question is if I short sale the home which has an 80/20 can the 2nd Morg. Holder come after me for the 20 in Nevada?
    0 Votes

    • 35x35
      May, 2011
      Bill
      You have personal liability for the second mortgage (or junior deed of trust) regardless if the second sold the account to another mortgage servicer, a collection agent, or the man on the moon.
      0 Votes

  • 35x35
    May, 2011
    Zoey
    Hi. I need your help and I know this sounds complicated so I apologize. We have a home worth about 200K. We have a first which is about 48K and a second also about 48K. (both current) Back in the 90's we took out what was a loan with a finance company, we were young and stupid then and what we were signing I have been told later was a second mortgage. The company came out to the house and closed the loan it was one of those 125% deals, they took a while to actually get us the loan and then they filed bankrupty ) the loan was sold to antoher conpany.. and then sold again... we made some payments but the balance kept going up and up, we asked them to prove this loan was not absorbed in the second mortgage when we took it (this is the one we are paying on right now and was obtained AFTER the loan they say we owe., which also means it never turned up on the title search. (The second mortgage company is also bankrupt but sold this loan to a legitimate bank. Make a long story short I keep getting delinquet notices, this is not on the credit report and after checking at the courthouse they also never filed any paperwork of any kind. We also never recieved any paperwork from this loan as we were told we would. We have not paid on it in three years.. Recently they stopped sending the notices. I am wondering.. I know what they can do if they have an actual deed (We have no idea what we signed at the time) but what is realistic (they say we owe 60K on it now with late fees since 2003.) They also claimed it is a second mortgage but in NC (where I live) its the "who gets to the courthouse first" I don't want to contact them. But I don't want to stress about it either.. as I said we got notices but no info anywhere else.. what is your take on all of this?? In short what is realistic about what they WILL do (I know you can't predict I just need and intelligent answer) I am so sorry for all the confusion but I am wondering if this is one we need to worry about or its just in some crazy abyss.. thank you for any help
    0 Votes

    • 35x35
      May, 2011
      Bill
      It is impossible for me to comment on the loan. If you do not have the documentation to describe what it is, then I cannot even begin to guess if it is a mortgage or a signature loan. Take whatever documentation you have regarding the loan to a lawyer in your state who has real estate experience. He or she may be able to decipher the nature of this mystery loan.

      If and when you are contacted again regarding the debt, validate the debt immediately, and take whatever documentation the collection agent provides to a lawyer. If, as you implied, the loan documents are in disarray, you may not have liability for this loan.
      0 Votes

    • 35x35
      Jun, 2011
      Zoey
      Hello again.. I wanted to see what you thought about this ongoing saga. I recieved a letter today from the holder (who is not a bank) above telling me the mortgage is maturing on August 1 and to please forward 44,000 to them before that date. It was a form letter not a threat of any kind. The last bill they sent me said I had 89 payments past due since March of 2003 to the tune of 60K. I DID contact a lawyer and it was determined they have filed nothing.. I don't have any paperwork but they do claim to have a deed. Again worst case scenerio.. IF they have a deed (I am not ready to shake that tree if they are only ssending me forms at this point) I know in NC they have to file which means the first and second need to be paid off first. (confusing details above.. LOL) I guess I need to know worst case I am looking at... I can't imagine as a third they would foreclose but I have heard stranger things, I also wonder if it is more likely they will sell it to a third party collector. I know the SOL in NC is three years on unsecured debt and 10 on secured which I have not reached if it is indeed secured. I know you can't read minds I just would like to know what paths are likey if they DO have the correct documents.. I just want to assume the worst so I am prepared.. thanks again.. this forum has been fantastic to read.
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      Ask your lawyer to do a title search to learn what encumbrances are filed on your property. If this mystery loan is not filed, then you are part-way home to an answer. If the mystery loan is not filed, then ask your lawyer about filing a quiet title action. With a quiet title judgment in your hand, you can wield this against the mystery lender and stop it from claiming you owe it for a third mortgage.

      Let us say for the sake of argument, you and the mystery lender signed a contract for a personal loan, which is now delinquent. Let us say it sues you, you do not raise a statute of limitations defense or a defense of any other kind, and it wins a judgment. You mentioned you reside in North Carolina. See the Bills.com resource North Carolina Collection Laws to learn your rights and liabilities as a judgment-debtor.
      0 Votes

  • 35x35
    Apr, 2011
    Natalie
    20% underwater in California and looking at foreclosure. Never re-financed, 1st $500k, 2nd $100k. Both were purchase money loans. The current value of my property is just below the value of the 1st mortgage. I am confused about the possibility of my 2nd being recourse if it does not foreclose. If I stop paying on my 2nd, and it does not foreclose, can they still come after me or sell my balance to creditors, even in California? I have read conflicting stories and examples.
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      I would be fascinated to learn under what circumstances you would have personal liability for the second, if, as you state, the second is a purchase money loan.

      Consult with a California lawyer who has experience in foreclosure. If, after he or she studies your facts personally, he or she says you have do not have liability, then there is a more definitive answer than you are getting online from authors who may or may not be California lawyers.
      0 Votes

  • 35x35
    Apr, 2011
    Shally
    We have a 1st and 2nd. Both far exceed what the home is worth in current market value, making a short sale impossible. Back story is same as you've heard by many and we are behind on payments and no longer can afford our home with current mortage payments. Obvisously the house will result in foreclosure if the path continues as is. Question is, assuming the house does not sheriff sale for enough to pay off debts on both loans, can we have our wages garnished for remaining balance on 2nd? We have a power of sale clause in our doc's and I believe that makes it a non-judicial situation in which case we are safe from garnishment, unless sued by lendor and court ordered. Is this correct for the state of Oregon?
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      Oregon is a non-recourse state, which means that if the lender forecloses non-judicially, it may not collect a deficiency balance for a first mortgage. See Oregon Chapter 88 — Foreclosure of Mortgages and Other Liens for details. I do not know how Oregon law applies to second mortgages. Consult with a Oregon lawyer who has experience in real estate law to discuss the particular details in your case and how Oregon law applies.
      0 Votes

    • 35x35
      Apr, 2011
      Ben
      After reading all previous comments I think I know the answer. However, I'm writing to see if I missed anything. I live in California. Bought condo for $670 in 2006. Worth $550 today. Two mortgages. First is for $540. 2nd is $130. Both for purchase only. Years ago we got a temporary mortgage adjustment for the 2nd, but got the run-a-round from the 1st. Apparently this was a mistake as 1st mortgage usually needs to adjust 1st. Never got permanent adjust on the 2nd and after 6 months were told we were in default (every 2 months of temp adjust counts as 1 month default, who knew?). 2nd went to collection agency who offered reasonable monthly payments ($250). After 12 months of this, they offered us $33,000 payoff for the 2nd or continue another year of monthlies ($250). We stayed with monthlies. After 2 more months, found out another collection agent had purchased our 2nd. And two weeks later we found out that we'd finally been approved for a modification of our 1st mortgage (reasonable terms, although temporary for 3 months - we're 8 months delinquent). I'm inclined to accept the modification on the 1st, but I'm concerned about the collection agent on 2nd. After reading this page, I suspect the best course of action is to take the modification, which will get us up to date on our 1st. And negotiate with the collection agent on the 2nd for lump payout (starting at 10 cents on the dollar). If we don't take the mod, the 1st will foreclose and the 2nd will get nothing. If we don't settle on the 2nd, they're only recourse is court and we'll file bankruptcy and they'll get nothing. So we have some leverage on the 2nd, I think. If they paid 5 cents on the dollar for the debt, then 10 cents on the dollar is a pretty good deal for them. Am I missing anything here? Any other options I should consider? Thanks for all your advice. Very helpful.
      0 Votes

    • 35x35
      Apr, 2011
      Bill
      I disagree with only one part of your analysis: If both the first and second are purchase-money loans, and were never refinanced, and there is a foreclosure, both loans are non-recourse. Offering the latest collection agent 5 or 10 cents on the dollar is a good starting place to begin negotiations.
      0 Votes

    • 35x35
      Apr, 2011
      Ben
      Thanks for the advice. I think I understand. So, because I never refinanced, both loans are non-recourse, which means that I can't be forced to pay the difference between the auction price of the house and the amount of money I owe. So then it sounds like the 2nd mortgage has no incentive to foreclose. If they did, then they get nothing. That said, here's an update... I spoke with the collection agency today. They asked me to pay $93,400 (original loan was $133). I countered with 5 cents on the dollar ($6500.00). We went back and forth and I stopped at $15,000. Collection Agency stopped at $44,000 (40 cents/dollar). I told them I'd reached my max and that the next step would have to be foreclosure and we have a large 1st mortgage. Col. Agent said she'd make a note in the account and we hung up. If their next option is either take the $15,000 or pay their lawyers to foreclose only to get nothing in the end, then why wouldn't they take the money? What leverage do they have? And, by the way, they offered me monthly payments of $250, but I can't see how that helps me other than delaying another negotiation for 6 months, during which time I'd be paying on the 1st mortgage to get up to date and becoming more financially invested in a condo that the 2nd could always foreclose on. I appreciate any further comment or advice. For the benefit of others I'll update when next moves happen. Thanks again.
      0 Votes

    • 35x35
      Apr, 2011
      Bill
      Were I in the collection agency business today, I would not buy collection accounts rooted in second mortgages, especially if the property was in California, Nevada, Arizona, or Florida. The chances of seeing a return are infinitesimal because the default rate is so high and there is zero economic incentive for foreclosure. If I were forced to buy these collection accounts, I would do so at pennies on the dollar, and move quickly to negotiate settlement deals with homeowners still occupying the property.

      I am not in the collection agency business, so I do not understand the collection agent's reluctance to move closer to a deal. Maybe this agent bought your collection account for 20 or 30 cents on the dollar. Who knows?

      Please keep us updated as events transpire.
      0 Votes

    • 35x35
      May, 2011
      Ben
      Thanks again for you advice so far. Here's an update on my situation (full details in posts above). So, I've spent the last month receiving phone calls from the collection agent. I've been passed from one representative to the next. Each has a different style. All try to scare me with foreclosure talk, which makes no financial sense for them, but they still threaten. All ask for payment plan, which makes no sense for me. I asked the most recent guy to give me one reason why I should give them any money. He replied, "because you owe it." I tried to explain that California is a non-recourse state, etc and he said, "the bank doesn't care what state you live in." I tried to explain that the bank will get nothing in a foreclosure and he countered with "the bank doesn't care." He claimed to be trying to "help me," and added "I get paid either way." None of this made any sense to me so I stopped arguing. The bank is in business to make money, nothing he said made sense. And then he said he might be able to get the bank to accept $22,000 to settle the $133,000 loan. That seemed pretty good, so I threw him a bone and raised my offer to $16,000. He said the bank wouldn't accept that. And then called back the next day to say the same thing. I write all this to help others in my situation. But my question for you is this... If the collection agency is saying they need to go to the bank to get approval on a settlement offer, is that true? They claim to be working on behalf of the bank. Could that be true? And isn't the bank just working on behalf of whomever invested in my loan in the first place? And one last thing. My credit report lists the loan as "closed." It shows a balance of 0. Does any of this information make it clear whether the collection agent is working for itself or really needs to go back to the bank to approve a settlement offer. Thanks for any advice. I'm just trying to understand the entire situation as I enter the final negotiations. I'm sure they'll be calling again. They always do.
      0 Votes

    • 35x35
      May, 2011
      Bill
      Thank you for your update: Each reader who responds with follow-up information increases other readers' knowledge of how the mortgage servicers and collection agents operate.

      I have several observations:
      1. I could tell you in a telephone conversation the Moon is made of cheese, but we all know that is simply untrue. Just because a customer service representative pooh-poohs California's anti-deficiency laws does not make the laws go away or somehow not apply to you if the laws clearly do.
      2. A collection agent may own a collection account (which is often the case for small debts) or it may be working on the original creditor's behalf. You latest credit report may offer a clue to the identity of the owner. If the creditor is still listed as the original creditor, then there is your answer. If the collection agent is listed as the creditor, then it probably purchased the collection account from the original creditor.
      3. The collection agent stating that it needs to get the approval of the original creditor might be 100% honest and accurate. It could also be the old car salesman's trick of saying he needs the manager's approval to make a deal, which of course is a ruse to get the hapless consumer to up their offer.

      Get any settlement in writing, and remember that you have what they want.

      0 Votes

    • 35x35
      May, 2011
      Ben
      Thanks again for the help so far. My saga continues (see above posts for details)... after a couple more weeks of phone calls from the collection agent. They often call, hang up, don't leave a message, don't call back right away. Today they called, quickly got disconnected (this happens a lot), but this time they called right back. Same guy on phone as last couple negotiations. Now he says he'll take my last offer ($16,000) to the bank, but he's not sure they'll accept. Last time we spoke there was "no way they'll accept it." (whatever!) He says they need me to send them three months bank statements, last two years tax returns, hardship letter and copy of foreclosure notice. Then he started asking about where we were with our first mortgage. I pretended I had to take another call and said I'd have to think about whether or not I was comfortable sharing that kind of information with a stranger. Told him I'd call back and hung up. I didn't think it was smart to share that kind of information with someone I'm negotiating with. Is it standard practice to share personal financial information when negotiating a settlement? Does it weaken my negotiating position if they know exactly how much money I have? Would you recommend that I supply the information? Thanks again for all the help. This process is crazy.
      0 Votes

    • 35x35
      May, 2011
      Bill
      You have no legal obligation to make a full financial disclosure. However, the creditor has no legal obligation to negotiate a settlement with you for less than 100% of the balance owed, either.

      Other Bills.com readers I have spoken to have reported that mortgage servicer negotiators have asked for financial disclosures of the type you described. Look at the situation from their perspective. The investor (in this case) is about to kiss ~80 cents on the dollar goodbye. If the homeowner is Bill Gates or Warren Buffett, it seems only fair that Bill or Warren should pay more than Joe or Jane Middleamerica, who are far less wealthy. If $16,000 is really all you can afford, then you do not disadvantage yourself by disclosing that fact.
      0 Votes

    • 35x35
      May, 2011
      Ben
      Thanks, as always, for your quick response. I don't mean to be difficult, I'm just confused on something... if the collection agent (and bank) foreclose, they will get nothing. If they settle, they will get $16,000. This is a business deal. Why would fairness have anything to do with it? Why would they care whether or not I have a million dollars in the bank? Legally they have no claim on my million dollars, only a claim on the value of the house, which is worthless to them as of now. So why would they need my financial records? As far as I can tell, their only leverage is this... the longer I make payments on the 1st mortgage, the closer they come to making money on a foreclosure (as I pay down the 1st). If the value of the house goes up and I pay down the 1st mortgage before the 4 year statute of limitations is up, then they can make money on a foreclosure. That's their only hope of making money, aside from a settlement. However, during those 4 years, they have to continue paying the collection agent's fees and the loan stays on their books. So isn't it in my best interest to make them think that I'm on the verge of economic collapse and could be foreclosed on at any time? If I show them that I'm making payments on the 1st mortgage mod and that I have some money in the bank and an income, then wouldn't that lead them to play the waiting game? No reason to foreclose now if they know I become more financially invested in the house every month. What am I missing here?
      0 Votes

    • 35x35
      May, 2011
      Bill
      You are not missing anything, in my opinion. I am offering my observation on how negotiations to resolve second mortgages occur, according to my discussions with Bills.com readers who went through the process. This mortgage servicer negotiator behavior is also consistent with my experience in buying a short sale property.
      0 Votes

  • 35x35
    Mar, 2011
    Flex
    I have a first and second morgage with two different banks. First is $500,000 and second is $189,000. The house is worth apprx. $650,000-$700,000. I am up todate with my first morgage. I have been late in paying my second and they have now charged off the loan to a third party and has ask me for $34,000 to settle in two weeks. I don't have $34,000 nor can I raise that type of cash and they won't accept a payment plan. What are the next steps, and will the house going into forclosure? Do I need an attorney? Any advice would be helpful.
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      If you think you need an advocate and counselor who knows your state's laws, you almost certainly do. Therefore, my answer to readers who ask, "Do I need an attorney?" is always "Yes."

      The collection agent demanding $34,000 in two weeks are arbitrary numbers and dates meant to spur you to action, and guess what, the demand worked and caused you to write a comment here. I have three additional thoughts regarding the demand:
      2 Votes

    • 35x35
      Mar, 2011
      Flex
      Thanks, this is helpful. Any idea on what to expect from my first morgage? will they pursue in the same line as my second morgage? I am up todate with them on a $500,000 loan. Note the collection agent is a third party of the same bank (Chase)
      0 Votes

    • 35x35
      Mar, 2011
      Bill
      As long as you stay current on the first mortgage, the first will not care what you do with the second.
      0 Votes

    • 35x35
      Mar, 2011
      Flex
      This is like a breath of freash air and give me hope. Since I can't make the lump sum payment and they have told me that they would not accept a payment plan, if they decide to forclose would the first moragae allow them to proceed since they has a bigger stake?
      0 Votes

    • 35x35
      Mar, 2011
      Bill
      Your question concerns two parallel universes that intersect at your home. In the financial universe, it makes no sense for a second mortgagee to foreclose on an upside-down property because they will see no return on their expense of foreclosing, unless the mortgagee sees it will lose even more money by waiting. In the legal universe, any mortgagee (first, second, third, and so on) has the right to foreclose if payments are delinquent.

      Your question, therefore is complicated to answer. The second has the legal right to foreclose if you are delinquent and do not work out a settlement deal it likes. However, it may not make financial sense for it to foreclose given that the property is worth less than the balance of the mortgages. No one can predict the future, and it would be ridiculous for me to even try here given that the mortgage servicers have acted erratically and contrary to logic since 2008. I am not trying to alarm you, but it is safe to say the mortgage servicers are overwhelmed, understaffed, poorly managed, and are cutting corners in a manner that harms mortgage investors and homeowners. How your second will respond if you cannot reach a settlement agreement is anyone's guess.
      0 Votes

    • 35x35
      Aug, 2011
      Keith
      I have a first mortgage of 450k at 6.5 percent. I have a second mortgage of 430k at 4.5 percent adjustable. The house was appraised 3 years ago for 1.1 million. I don't know what it will appraise today but i. Assuming it will appraise for 900k. I can not afford both payments. I cant refinance the first. I'm concerned the second will go up in a few years. Any advice? As of today, i, not late on any bills. Is it worth ruining my credit to possibly settle on the second?
      0 Votes

    • 35x35
      Sep, 2011
      Bill
      A good first step is to try and determine the fair-market value of your home. If you have equity in your home, your credit is good, and you could find another, cheaper house, it is worth considering selling the home now. The second mortgage holder has less incentive to settle if it knows you can make the payment and if there is equity in the home.

      If you choose to go delinquent in order to reach a settlement, then you could end up ruining your credit, not getting a favorable settlement, and unable to buy another home.
      0 Votes

  • 35x35
    Nov, 2010
    We have a home we have been in for 16 years saleable for approx. $1.3m with a first at $800k and a second at $190k. We inherited a second home worth $1.2m and no balance. If we default on the first and second mortgage can the banks come after the inherited property?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      I am curious why you do not sell the house for $1.3 million, pay off the junior and senior mortgage, and pocket ~$300,000 in profit. Allowing foreclosure will result in an auction sale, where the house will sell for far less than the fair market value. In that scenario, the auction sale might be more or less than the balances of the mortgages. Assuming you take the passive route and you walk away from your home, if there is a deficiency balance following the auction, then the creditor will attempt to collect that from you. If you refuse to pay, it can sue you in court, and will win if you do not mount a defense. If it wins a judgment, it can place a lien on your property, or if state law allows, get a garnishment order.
      0 Votes

  • 35x35
    Oct, 2010
    Sam
    I have 3 loans on my home in Florida. Bal. on first is 75K. Home value is 135K. 2nd heloc bal. is 101 K. third HeLoc is 199K. 1. 3rd was supoosed to payoff and get closed 2nd heloc. they did not paid off 2nd since 2006. Any case with such experience, what will happen, when i start short sale process. third one thinks it is 2nd. Again, i am 3 month behind now on all of them. Will 2nd and 3rd will consider debt settlement in order to approve short sale ? our family income is 9,000 approx.
    0 Votes

    • 35x35
      Oct, 2010
      Bill
      You have a loan-to-value of 277, which is daunting. What gives me pause is your statement regarding the third who never paid the second to move into the second's position. Something is wrong there, and what that something is not an issue I can address without learning more. You need the help of an attorney who has experience in real estate law to sort out the mess concerning the second and third. You mentioned you have a family income of $9,000, which I assume you mean is an annual income. If so, debt settlement is not a viable option for you because you do not have enough income to create a settlement fund to resolve a $270,000 debt. Consult with an attorney experienced in bankruptcy law to learn if bankruptcy is your best option. If you cannot afford an attorney, call your county bar association to learn the name of the organization in your area that helps people with low or no income.
      0 Votes

  • 35x35
    Oct, 2010
    Bill
    The first thing to do is contact your Habitat for Humanity local affiliate that built your home. The affiliate may have an assistance plan available for you. Affiliate contact information can be found by entering your zip code on the Habitat for Humanity Find Local Affiliates, Volunteer Opportunities, News, Events page. As a grassroots organization, Habitat for Humanity affiliates have a great deal of local control and are responsible for all home construction, homeowner applications, and fund raising. You can also contact the Habitat for Humanity International affiliate support center at (877) 434-4435.

    To understand the basics of your rights and liabilities, see the Bills.com resource Iowa Collection Laws. See also the Bills.com resource Prevent Foreclosure. Please ask any follow-up questions you may have on the appropriate pages.
    0 Votes

  • 35x35
    Sep, 2010
    Deanne
    Well here we are in a mess. We live in Iowa, and bought a Habitat for Humanity house in 2004, we have never missed or even been late on a payment. The house is valued at 69,000, and we still owe 35,900. In March of 2007 we took out our second mortgage with Beneficial for 25,000 with payments of 480.00 a month. My husband has now lost all of his prior mandatory overtime, and even took a cut in pay. We are devastated. We have had a loan modification on the Beneficial loan three time now, each one lasting six months at paying half the regular payment. Beneficial is beating around the bush now, and we are over 1000.00 behind to them. Can you please tell me a best and worst case scenario? Do we have any advantages because we are buying a Habitat house? Can they foreclose on us in a Habitat house? Any help is much appreciated.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    Read the Bills.com resource "Can a Second Mortgage Holder Foreclose if the First Mortgage is Current?," which outlines some of your options and liabilities. The best observation I can make is to communicate to the mortgagees that you are newly disabled, are applying for SSD, which when approved will provide enough income to pay the mortgages.

    The one bit of good news for you in your situation is if you are foreclosed upon, you have no personal liability for the deficiency balance because you never reaffirmed the mortgages. On the other hand, because you never reaffirmed your mortgage payments from that point forward did not appear on your credit report.
    0 Votes

  • 35x35
    Sep, 2010
    Crystal
    We have a 1st and 2nd mortgage. We're in Michigan. The value of our home has dropped significantly, it is worth far less than what our 1st mortgage is for. A few years ago my husband was laid off, found a new job but took a huge pay cut. I've been out of work for two years, first due to being laid off, now because I'm dealing with major heart problems that keep me from working. We filed bankruptcy in 2006, both mortgages were included in the bankruptcy and were not reaffirmed. We continued to make payments so they didn't foreclose. We got the 2nd mortgage to work with us and they did a modification. We stayed current on the 2nd, but fell behind on the 1st mortgage payments. 1st mortgage won't really work with us, they've started foreclosure, but now said they will lower our payment by a little over $100/month. We needed the 1st to lower payments more to be able to afford both payments. We've been told that we should just pay the new payment amount on the 1st and not pay the 2nd. The counselor told us that because our home is worth so much less than what we owe on the 1st mortgage and because both mortgages were included in the bankruptcy that the 2nd wouldn't foreclose, because they wouldn't get anything from the foreclosure. I'm filing for Social Security disability but it could take a while to get approved. Once I get approved we would be able to afford both payments. Not sure what to do. Should we just not pay the 2nd for now and hope it doesn't take too long for the disability to be approved.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    A good first step is to contact both your mortgage holders and speak to them about a loan modification. If you qualify, a loan modification would lower your monthly mortgage payment, freeing up some money for other uses. I suggest you read about home loan modifications. Regarding the $60,000 debt you have, you did not say whom you owe. I recommend that you seek a free consultation with one of Bills.com's pre-screened debt consolidation providers. Just follow this link: Debt Relief Savings Quote I also recommend that you read about the options presented to someone who owes $52,000 in credit card debt. I am confident that you will find the information there helpful.
    0 Votes

  • 35x35
    Aug, 2010
    freddie
    we owe 90k on 1st mortgage to lender A and 120k on 2nd mortgage to lender B .we can pay 1,000./mo on the 1st mortgage but will have difficulty paying 1,200./mo on the 2nd mortg. hard times catch up on us but me and my wife still have a job, but we also owe about 60k in several credit cards on a high interest rate.what will i tell 2nd mort.lender to allow me to delayed or reduced mo.payment and pay my high interest cc. i dont want to walk away from my obligation or just walk away from the house. i live in florida and the combine mortgage loan is higher than the value of the house.
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    First, read "Can a Second Mortgage Holder Foreclose if the First Mortgage is Current?," which outlines some of your options and liabilities. Second, talk to your first and explain the situation. Learn what terms they will accept a short sale. If the terms cause the second to be wiped out, then you have some leverage. Third, understand you are at the start of a negotiation with the second. Explain that if you default and allow foreclosure they will be wiped out. Tell them exactly what the first told you -- a short sale will likely wipe them out. Ask for a refinance and that you are willing to continue to pay, but cannot come up with the entire amount at this time. Explain that their decision will dictate your action. Explain that if they have two choices: Deal now or get wiped out later if you default on both mortgages and then file for Chapter 7 bankruptcy.

    If this is your separate property, then your husband's credit report and credit score will be untouched if you default and file for bankruptcy.
    0 Votes

  • 35x35
    Aug, 2010
    Michelle
    I purchased a home 10 yrs ago for $180,000 I owe $130,000 on my first and $16,000.00 on my second. Never been late on either. I received a letter from the second mortgage company yesterday the are draw period is due to expire in three months. At this time the full 16,000 is due. This was a big surprise to me. I was completely unaware this was only a 10yr equity line. We do not have that lump sum to pay them. This is our rental property. I called the bank and explained this. Asked for an extension they said no. They said our only option would be to refi or a short sale. We don't have enough equity to refi and because it's a rental property we don't qualify for the mortgage modification. The bank does not want to work with us at all. We are current and have the ability to keep paying on time. What can we do? Really don't want to do a short sale and mess up my good credit. I cant believe the bank would rather us do a short sale and get paid nothing. Then have us work out another plan and continue to pay them? What can we do? Will they be able to foreclose for only $16,000.? We are in Michigan, what would you suggest we do? Also I purchase this home before I was married and remain the only one on the mortgage and title. Will this also effect my husbands credit or our primary residence.
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    If the junior deed of trust was purchase-money, then it is subject to Arizona's anti-deficiency rule. You mentioned the junior was used to pay for an improvement to the property (adding a pool). This is not a purchase money loan, and if my reading of Arizona's anti-deficiency rule is correct, then you are personally liable for any deficiency balance relating to this loan. See Arizona Section 33-814.
    0 Votes

  • 35x35
    Jun, 2010
    Dan
    Walking away from a house in AZ. First is $350k and second is $45k. House will sell for around $230k at auction. I'm not worried about any recourse on the first other than the destroyed credit rating. The second was taken for a pool and is a Deed of Trust. Reading through the loan docs it shows as their remedy for Acceleration is to force the sale. Chase owns the first and is already foreclosing. Wondering if we'll be on the hook for the other $45k due to the deed of trust and AZ being a non-deficiency state.
    0 Votes

  • 35x35
    Apr, 2010
    Don
    Your site shows the statue of limitations as 4 years for the state(s) that apply to my situation. This time period begins with the last payment made. Is this the period the creditor has to file a civil complaint ? What if hearing date is set AFTER the 4 yr. limit of actions ? Thank you !
    0 Votes

  • 35x35
    Apr, 2010
    Bill
    The statute of limitations starts at the date of the last payment, customarily. Check the laws in your state to make sure your state follows the general rule. The date of the service of process is the significant date, and not the date of the hearing.
    0 Votes

  • 35x35
    Apr, 2010
    glenn
    I HAVE A RENTAL PROPERTY ( BECAUSE I COULD NOT SELL IT). I OWE 130K ON THE MORTGAGE AND OWE 158K ON EQUITY LOAN. I'M LOSING OVER 1K A MONTH WHICH I CAN NOT AFFORD ANYMORE AFTER ALMOST TWO YEARS. I HAVE WELLS FARGO FOR MORTGAGE AND HAD WACHOVIA FOR EQUITY BUT NOW WELLS FARGO TOOK OVER WELLS FARGO. I WAS LOOKING TO FIND OUT THE BEST COARSE OF ACTION TO GET OUT OF MY LOANS. STOP PAYING BUT KEEP COLLECTING RENT? GO INTO FORECLOSURE OR TURN IN DEED OR SHORT SALE. WHAT DO YOU THINK THE BEST DIRECTION I CAN TAKE. THANK YOU, GLENN (FLORIDA)
    1 Votes

  • 35x35
    Apr, 2010
    Bill
    You do not mention the market value of your property, which would have been helpful in analyzing your situation. Read "Can a Second Mortgage Holder Foreclose if the First Mortgage is Current?," which outlines some of your options. Then read "Home Affordable Foreclosure Alternatives Program" to learn more about a federal program to streamline deeds in lieu of foreclosure and short sales. Either a deed in lieu of foreclosure are probably your best best, but without knowing more about your situation I cannot say more. Do what you can to avoid a foreclosure.

    Readers, please do not follow Glenn's example where he used all-caps when typing his comments. Instead, use lower-case letters and your shift key when a capital letter is needed. Thank you!
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    The fact that the collection agent that is pestering you represents either a bank or insurance company is irrelevant to the question of what rights the holder of the second mortgage/deed of trust may have. Contact an attorney in your state who has experience in probate or real property law to research the status and ownership of the junior mortgage, and the rights that owner holds. I realize this is not the direct, easy answer you want, but the answer to your question is very fact-dependent and can only be revealed by inspecting the titles or deeds of trust on your property.
    0 Votes

  • 35x35
    Mar, 2010
    Jim
    I have a complicated question for you regarding my mortgage. I have 2 mortgages, a first and a second. Both were with Bank of America. When I fell on hard times, they initiated foreclosure proceedings. My loan was modified, and now I am good on it. However, the second one was taken over by United Guaranty, a mortgage insurance company. I called them yesterday to see if I could get a statement, and they couldn’t comply. So, here are my thoughts. 1) they insured the loan for BOFA. 2) Once I fell into default, they had to pay BOFA off. 3) They are doing what they can to collect from me, but since it is not really a mortgage any longer, it is an unsecured debt. 4) Since it is unsecured, it could fall under a bankruptcy. Am I off base? They aren’t a mortgage company, but an insurance company, so it would seem that my 20% loan is being handled as if they were a collection agency. Thanks
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    If you do not want to lose the house, then it may be advisable to look for ways to lower your overall monthly payments on your unsecured debt. There are various options available to consolidate your unsecured debt. I encourage you to read an article I wrote, What Are My Debt Consolidation Options?
    0 Votes

  • 35x35
    Feb, 2010
    Jen
    My husband an & I live in NJ. Our 1st Mortgage is 135k..interest only ARM that will expire in 2 years 2nd mrtg 50k which is 15 year fixed. We had previously refi'd a few times which I believe makes the loans we have recourse loans. Combined we owe more than house is worth. Current values in our area 150k-160k. Mortgages are held by same bank. When I was working the mortgage company discussed a short refi to bring down the loan amounts to 80% ltv. Now that I'm not working, they will not. We are over our head not just with the mortgages but our credit cards as well. We do qualify for bankruptcy but cannot include the 2nd mrtg; We cannot afford to even file bky on credit cards & continue to pay both mortgages. We do not make enough money. We don't want to lose the house either. Any suggestions?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    My first reaction is that if your spouse defaults on the Florida property, your New Jersey property is untouchable. However, it would be wise for you to review the loan contract carefully to see if the bank reserved any special right of offset for this type of situation. You did not mention if you and your spouse are co-signatories on the mortgages. That may be significant. You also did not mention if you bought the properties separately before or during marriage. For your peace of mind, I suggest you consult with an attorney in either state experienced in property law.
    0 Votes

  • 35x35
    Jan, 2010
    Susan
    My husband and I own a home in NJ and a home in Florida. We have lived separately for 3 years. NJ is my primary residence and Fl is his. The home in Florida is underwater for approx. 70k. The home in NJ has approx 50k in equity. The mortgages are with the same lender. What can happen to my home in NJ if he defaults on the home in Florida?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    The junior mortgagee has the right to foreclose in the situation you describe, but it is not in its economic interest to do so given the market value of your property today. See Can a Second Mortgage Holder Foreclose if the First Mortgage is Current? for a more complete discussion of this subject.
    0 Votes

  • 35x35
    Jan, 2010
    Toni
    I live in WI and I have a 1st $107K and 2nd mtg 25k used to purchase the home. Well I lost my job. Went into forclosure got it out of forclosure and got with this program that helped me do a loan restructure because it was unaffordable considering my income and budget. The 1st mortgage company received the documentation and agreed to the modified plan. The 2nd mortgage is with a different lender. They did work with me in the past but I just can't afford this payment. The program that helped only works with 1st mortgages and told me I'm on my own with the 2nd. Well the loan is upside down. The house might be worth $100K if that in this market. I've been current with the 1st since getting in this program last year and I struggle to make the 2nd mtg payment. I'm currently 3 pymts behind. I want to file bankruptcy to get rid of all the other unsecured debt that I have so I can start fresh with this new program I'm in. As of right now their isn't any equity in this house. Can the 2nd mtg come and forclose on me?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    Minnesota is not a community property state, so therefore one spouse's debts are not a liability for the other. Regarding the foreclosure process in Minnesota, see the University of Minnesota Extension document "Mortgage Foreclosures."
    0 Votes

  • 35x35
    Jan, 2010
    Daren
    Lost our home over a year ago. Lost job Etc I live in Minnesota. The morgage was in my name but wife on title, had heloc in my name only. Was foreclosed on and heloc became a unsecured loan house was worth more than 1st morgage and enough to almost pay 2nd. GMAC threatening to sue me. My question can they sue me and wife or just Me?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    Do not lie to a creditor (or anyone else for that matter). On the other hand, you are not required to volunteer information your creditor does not ask for. I am uncertain if you are referring to making a payment to the first mortgage holder or the second. If you are renegotiating the first mortgage, whatever you can do to facilitate that process is A Good Thing. Regarding the second mortgage, consider opening a negotiation for a lump-sum settlement of the entire balance due. Start with 10 cents on the dollar and work up from there.
    0 Votes

  • 35x35
    Jan, 2010
    Dave
    We walked away from a 362K first and a $35K second with a bank in Aug 09. I have had an application in to Saxon for 2 1/2 months with no action. I have leased the home for 6 months. US bank has been threating foreclosure, The value would break even after selling cost. They are asking me to pay something. If I pay them one month, is that a good idea? I figure that it is good to get someone in the house. Is it safe to tell Saxon that it is being rented and we have moved? I don't want to lie to them.
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    I do not like to offer advice to readers who are already working with an attorney because 1) the attorney has all of the reader's information at hand (which I never do), and 2) the attorney is licensed in the reader's state and should be aware of all of the relevant case law affecting the reader's situation (which I may not). Therefore, I urge you to take these questions to your attorney. Regarding your second question, really who knows? We have read reports from homeowners where banks have offered and then rescinded modification deals with homeowners. Will BofA stand behind the deal it offered you? I cannot answer that.
    0 Votes

  • 35x35
    Jan, 2010
    Faith
    I have a 1st mtg of $225K and a second of $15K. The first mtg is "in foreclosure process" acc to BoA (I received Notice as well as correspondence from atty, but no Complaint). After hardship application filed, I am in a 3 month "trial period" for modification (with BOA fka Countrywide). The amount per month dropped $500/mo. Its been 4 months, yet BoA rep directs me to continue to pay at the reduced monthly payment even though BoA hasn't sent approval of this modification permanently. In the meantime, my past due is steadily increasing!!! Its up to 11K now! The hardship was only temp. I can now pay the original monthly mtg pmts on both. But of course I'd prefer to get the approval for the reduced interest rate. [making home affordable]. I am eligible to file for Ch7, which I want for discharge of 50K in credit card debt. Bk atty says wait until mod is permanent. Ques#1-is there another way to get current with my past due amt owed to BoA so I can file Ch. 7? Ques#2-is this "mod plan" by BoA legitimate?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    If your health is being affected by your debt, then your credit rating is the least of your concerns. Before you sell the property, open a negotiation with the second mortgage holder and explain that you would like to negotiate a lump-sum settlement on the second note. Explain your situation and that one of your options is bankruptcy. To answer your question, if you sell the property and there a deficiency balance on the second mortgage, your failure to repay it immediately will lower your credit rating.
    0 Votes

  • 35x35
    Jan, 2010
    Cathy
    I currently have a 1st mortgage of 237K and a 2nd of 60K. My home is worth about 250K. Is it possible to sell the home and pay off the first and carry the second as unsecured debt? Would this negatively affect our credit rating? I am currently working 2-3 jobs to keep up and can't do it much longer, as my health is being affected. I would ultimately like to purchase a much lower priced condo so we can pay off this debt and credit card debt. I live in Missouri. Thanks.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    Hindsight is 20-20, so we can play the what-if game about any decision we make. You are not the first to point out that many second mortgage creditors are not taking actions that do not make sense from a financial or legal perspective. If the collection agent is working on behalf of the mortgage company, then you can work with the mortgage company relatively easily. If the collection agent bought the debt then negotiating with the original creditor is a waste of time. Ask the original creditor if the collection agent bought the debt, and work accordingly.
    0 Votes

  • 35x35
    Dec, 2009
    Jean
    Regarding query #135. Property has lost 50% of it's value. There is no equity. In hindsight, should we have remained current on 2nd? Would the 2nd typically have been easier to deal with after short sale or been willing to accept less than a collection agency? Why would they have turned this to collection if a short sale was in progress? None of what the banks are doing is logical. If the 2nd would have negotiated with us, they would have received more money from us than they would have if the property goes to foreclosure or short sale. None of this makes any sense at all!!! Have you ever heard of the 2nd taking back the loan from a collection agency?
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    As I mentioned to Sue above, no outsider can predict with certainty what a creditor will do. It would be fair to say that holders of second mortgage have not fared well in this recession. I will assume that the collection agent will purchase your second mortgage, and not just work on the bank's behalf. Traditionally, collection agents pay 5 to 50 cents on the dollar for accounts, and it would be my expectation that a collection agent buying a second mortgage today will spend near the low end of the scale. When the collection agent calls, give them a lump-sum settlement offer of 10 cents on the dollar and see how they react.
    0 Votes

  • 35x35
    Dec, 2009
    Jean
    We own a second home in Arizona,a Non-deficincey state.1st Mort is $235, 2nd is $55 K at 10% interest! both on ARMs due to reset in 2012. Income we were using to make the payments turned out to be a Ponzi scheme. We have tried every option, modification, principle reduction etc, etc and have been denied for all of them. The stated reason given was we "Don't Qualify" . We tried negotiating a settlement with the 2nd - they totally refused,so we stopped paying the 2nd but are current on the 1st. We now have a short sale offer, but the 2nd turned our account over to a collection agency anyway. WHAT CAN WE EXPECT FROM THE COLLECTION AGENCY IF THE 1st ACCEPTS THE SHORT SALE? We are 3-5 years away from retirement, but will be moving overseas for the next several years.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    I recommend you read "Can a Second Mortgage Holder Foreclose if the First Mortgage is Current?," which outlines the issues to analyze in your situation. No outsider can predict the behavior of a creditor, especially in these interesting times. For example, I am aware of a property where the homeowners have not made mortgage payments in two years and the bank (Bank of America) has still not foreclosed. However, this is not evidence or a suggestion that all banks in all situations have ceased foreclosures. Read the article I just mentioned, and work with the team handling the second mortgage on working out a plan where you pay it off in a lump-sum for 10 cents or so on the dollar.
    0 Votes

  • 35x35
    Dec, 2009
    Sue
    We have a first and second with the same mortgage lender. We are currently trying go modify the loan and are behind almost 5 months on payments. First is for 410,000; second is 90,000. If we can't pay the 2nd how likely is it that the bank will foreclose? House is worth about 450,000.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    I realize hindsight is 20/20, but you took a tremendous risk by tapping into your home equity to purchase the raw land. The risk appears to be not paying off. If you default on the second mortgage the creditor can foreclose on your home. I suggest you contact the creditor of the second mortgage and determine if you can settle the second mortgage in a lump sum for less than the balance. If so, sell the raw land in a fire sale and use the proceeds to settle the second mortgage.
    0 Votes

  • 35x35
    Dec, 2009
    seth
    i need your advice please. i live in florida. i have a 1st mortgage of $140,000 and a line of credit for $86,000 both with bank of america. i just refinanced my 1st mortgage to a 4.8% 30 year fixed rate because i had an arm. my 2nd is interest only and variable. with the line of credit i bought a piece of raw land with 2 other partners that we are upside down in. i don't want this property any more because it is costing me interest only payments, homeowners fee, and taxes. i am throwing my money away every month. i have always made my payments on time and have perfect credit. what are my options and what will happen if i stop paying on the line of credit. i don't want to lose my home. it doesn't make sense to keep paying on this line of credit. are there any programs out there to help me. my main mortgage is worth $170,000. please help me with advice.
    0 Votes

  • 35x35
    Nov, 2009
    Rene
    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?
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    Apparently, your attorney practices in a narrow range of law. Ask your attorney for a referral to an attorney with experience in consumer law.
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2009
    Jancee
    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?
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2009
    Aaron
    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?
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2009
    Anita
    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
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2009
    Guadalupe
    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?
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2009
    Stephanie
    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.
    0 Votes

  • 35x35
    Sep, 2009
    joy
    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??
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2009
    Norma
    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?
    0 Votes

  • 35x35
    Aug, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Aug, 2009
    bruce
    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.
    0 Votes

  • 35x35
    Aug, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Aug, 2009
    Jack
    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 ?
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jul, 2009
    Ricky
    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
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jul, 2009
    Ricky
    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
    0 Votes

  • 35x35
    Jun, 2009
    Pat
    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?
    0 Votes

  • 35x35
    Jun, 2009
    Kriss
    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?
    0 Votes

  • 35x35
    Jun, 2009
    Sam
    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.
    0 Votes

  • 35x35
    Jun, 2009
    Dave
    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?
    0 Votes

  • 35x35
    May, 2009
    Nate
    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.
    0 Votes

  • 35x35
    May, 2009
    DAVID
    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?
    0 Votes

  • 35x35
    May, 2009
    Diane
    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.
    0 Votes

  • 35x35
    May, 2009
    Frank
    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.
    0 Votes

  • 35x35
    May, 2009
    lily
    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.
    0 Votes

  • 35x35
    May, 2009
    Bill
    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.
    0 Votes

  • 35x35
    May, 2009
    mary
    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.
    0 Votes

  • 35x35
    May, 2009
    mary
    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.
    0 Votes

  • 35x35
    May, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Apr, 2009
    Bill
    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
    0 Votes

  • 35x35
    Apr, 2009
    Steve
    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
    0 Votes

  • 35x35
    Apr, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Apr, 2009
    Jason
    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.
    0 Votes

  • 35x35
    Apr, 2009
    Bill
    If your name is on the primary mortgage and the home gets foreclosed on, then your credit will be affected too.
    0 Votes

  • 35x35
    Apr, 2009
    Mary
    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?
    0 Votes

  • 35x35
    Mar, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Mar, 2009
    Scared
    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.
    0 Votes

  • 35x35
    Mar, 2009
    Bill
    In a chapter 7 bankruptcy, that is usually the case, but I would confirm that with your bankruptcy attorney.
    0 Votes

  • 35x35
    Mar, 2009
    Kathy
    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?
    0 Votes

  • 35x35
    Mar, 2009
    Sam
    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!
    0 Votes

  • 35x35
    Mar, 2009
    Sam
    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!
    0 Votes

  • 35x35
    Mar, 2009
    Robert
    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?
    0 Votes

  • 35x35
    Mar, 2009
    Steve
    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
    0 Votes

  • 35x35
    Mar, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Mar, 2009
    Jeff
    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
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    John
    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!
    0 Votes

  • 35x35
    Feb, 2009
    Christina
    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?
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    Michael
    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?
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    Mike
    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?
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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/the-hope-for-homeowners-program/.
    0 Votes

  • 35x35
    Feb, 2009
    Gerald
    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?
    0 Votes

  • 35x35
    Feb, 2009
    sher
    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
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2009
    Keith
    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?
    0 Votes

  • 35x35
    Jan, 2009
    Nithin
    pay the past due payments and get current on the loan.
    0 Votes

  • 35x35
    Jan, 2009
    Tapper
    okay what if the second will not neogiate with me? what should i do?
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Tapper
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jan, 2009
    curtis
    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
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Marie
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Sam
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Elaine
    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?
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Jav
    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?
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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.
    0 Votes

  • 35x35
    Jan, 2009
    susan
    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.
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    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/.
    0 Votes

  • 35x35
    Jan, 2009
    Kevin
    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?
    0 Votes

  • 35x35
    Dec, 2008
    Tamara
    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.
    1 Votes

  • 35x35
    Dec, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Dec, 2008
    David
    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
    0 Votes

  • 35x35
    Dec, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Dec, 2008
    Tammy
    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?
    0 Votes

  • 35x35
    Nov, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Nov, 2008
    Kyle
    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?
    0 Votes

  • 35x35
    Nov, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Nov, 2008
    lila
    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?
    0 Votes

  • 35x35
    Nov, 2008
    Bill
    If it gets a you reduction in the interest rate and a the monthly payment, why not, go for it.
    0 Votes

  • 35x35
    Nov, 2008
    jim
    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
    0 Votes

  • 35x35
    Nov, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Nov, 2008
    Frank
    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?
    0 Votes

  • 35x35
    Nov, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Nov, 2008
    Mary
    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.
    0 Votes

  • 35x35
    Nov, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Nov, 2008
    Kris
    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.
    0 Votes

  • 35x35
    Oct, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2008
    Steven
    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.
    0 Votes

  • 35x35
    Oct, 2008
    Sam
    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!
    0 Votes

  • 35x35
    Oct, 2008
    Christina
    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?
    0 Votes

  • 35x35
    Oct, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Oct, 2008
    Susan
    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
    0 Votes

  • 35x35
    Oct, 2008
    Sarah
    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.
    0 Votes

  • 35x35
    Sep, 2008
    Bill
    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).
    0 Votes

  • 35x35
    Sep, 2008
    WILLIE
    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.
    0 Votes

  • 35x35
    Sep, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2008
    raul
    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.
    0 Votes

  • 35x35
    Sep, 2008
    Kim
    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?
    0 Votes

  • 35x35
    Sep, 2008
    Noah
    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.
    0 Votes

  • 35x35
    Sep, 2008
    mike
    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
    0 Votes

  • 35x35
    Sep, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2008
    Abby
    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?
    0 Votes

  • 35x35
    Sep, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Sep, 2008
    BARB
    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?
    0 Votes

  • 35x35
    Aug, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Aug, 2008
    Jessica
    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.
    0 Votes

  • 35x35
    Jun, 2008
    Bill
    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.
    0 Votes

  • 35x35
    Feb, 2008
    Dawn
    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
    6 Votes

  • 35x35
    Feb, 2008
    Nithin
    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.
    0 Votes

  • 35x35
    May, 2008
    kathy
    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???
    0 Votes

  • 35x35
    May, 2008
    Nithin
    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.
    0 Votes

  • 35x35
    Jun, 2008
    Ashley
    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.
    0 Votes