Second Mortgage Foreclosure

Can the second mortgage holder foreclose if the first mortgage is still current?

Can they foreclose on your home if you are in default on your home equity loan but current on your primary mortgage?

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Bill's Answer
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Highlights


  • Review how the foreclosure process works.
  • Understand the difference between a recourse loan and a non-recourse loan.
  • Examine the alternatives to foreclosure.

Thank you for your excellent question about how a delinquency on a second mortgage affects your home and the chances that a foreclosure may result.

If you are current on your first mortgage and become delinquent on your home equity loan (which is a form of second mortgage), the second mortgage lender has the legal right to foreclose on your house and property. However, it may not do so because of economic reasons, which I will discuss below.

Here is the good news: Lenders do not like to foreclose on mortgages because foreclosure offers a poor economic return. Lenders foreclose only as a way of limiting losses on a defaulted loan.

Generally speaking, when homeowners get behind on mortgage payments, lenders will work with them to bring the loan current. 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 made consistent timely payments and had no serious defaults, the lender will be more receptive than if the person has a record of unexplained late payments. Homeowners falling behind in payments or who know they are likely to do so in the immediate future should contact the lender right away to discuss alternative payment arrangements.

Foreclosure Process, Briefly

Either the first or second mortgagee can initiate a foreclosure. The foreclosure process varies from state to state, but generally takes from two to 18 months. It all depends on the terms of the loan and local state laws. However, normally if mortgage payments are not received within 150 days, the bank can proceed with the foreclosure process. The second mortgage would be repaid after the first mortgage is paid in full.

Deficiency Balance

In fact, if the sale price is less than the value of the mortgages held against it, then in some states the homeowner could still owe an unsecured balance called a deficiency balance or deficiency judgment. The good news is that this new deficiency balance (if it exists and if your lenders pursue it) is an unsecured debt that may be enrolled into a debt settlement program.

Recourse Loan vs. Non-recourse loan

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

ach state legislature created unique foreclosure and anti-deficiency laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

Second Mortgage Foreclosure

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

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

As this is written in early 2010, it does not make economic sense for a junior mortgagee to redeem the first mortgage because property values in many areas are far lower than the mortgage balances on the attached properties. However, when property values recover the economics of this equation may reverse and we may see junior mortgagees exercise their right to redeem.

Alternatives to Foreclosure

An agreement between the homeowner and mortgagee to prevent the loss of a home is called a loan workout plan. It will have specific deadlines that must be met to avoid foreclosure, so it must be based on what the borrower really can do to get the loan up to date again. The nature of the plan will depend on the seriousness of the default, prospects for obtaining funds to cure the default, whether the financial problems are short term or long term and the current value of the property.

If the default is caused by a temporary condition likely to end within 60 days, the lender may consider granting "temporary indulgence." Those who have suffered a temporary loss of income but can demonstrate that the income has returned to its previous level may be able to structure a "repayment plan". This plan requires normal mortgage payments to be made as scheduled along with an additional amount that will end the delinquency in no more than 12 to 24 months. In some cases, the additional amount may be a lump sum due at a specific date in the future. Repayment plans are probably the most frequently used type of agreement.

Forbearance

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.

Making Home Affordable Refinance Program

If an Adjustable Rate Mortgage (ARM) reset or drop in income are causing the distress, the federal government home loan programs might be able to help. The Making Home Affordable Refinance Program (HARP) allows borrowers with mortgage debt of 80 percent to 125 percent of the home value to renegotiate the terms of their loan, in some cases without paying additional PMI. Editor’s note: On October 24, 2011, the FHFA announced changes to HARP that remove the 125% LTV restriction for fixed-rate loans. See the Bills.com resource HARP Mortgage to learn about the loosened requirements.

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.

Debt distressing you? The Bills.com Debt Coach is a no-cost online tool that will analyze your debts and show you the options available to resolve them and the costs and benefits of each.

You can find more information on the Bills.com foreclosure page. See also the HUD page Avoiding Foreclosure. To learn more about negotiating a debt, read the Bills.com article Debt Negotiation and Settlement Advice.

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

Best,

Bill

Bills.com

185 Comments

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  • 35x35
    Feb, 2013
    Connie
    I owned a California property that I purchased in 2007. The first mortgage was for around $360k and the second mortgage was for $80k. I stopped paying on both mortgages in 2009 and the first mortgage has reported this as a bad debt and later on as " charge off". The second mortgage company reported on the credit bureau that the credit grantor has reclaimed collateral to settle defaulted mortgage in March 2010.The property was sold as foreclosure in 2011 for 152 k! Just now, I received a notice that the second loan was sold to another loan servicing company and that the value of the loan is now up to $113k! Is this legal? Am i still liable for the second loan when obviously, they have actually sold the property? What steps do i need to take to clear this up with this new firm? I am afraid of calling this new firm because i might reset the clock again.
    0 Votes

    • 35x35
      Mar, 2013
      Bill
      I can't answer your question without knowing if either or both of your home loans were purchase-money loans. See the Bills.com article Is My HELOC a Recourse or Non-Recourse Loan in California? for an analysis of the issues you face. After reading the article I just mentioned, please ask any follow-up questions you may have on that page.
      0 Votes

  • 35x35
    Jan, 2013
    Raquel
    If I had a second mortgage, which was really my down payment for buying the house, and the house was foreclosed on in California. Can I dispute that the foreclosed date and charge off date to match? The first is showing 11/10 and the second is showing as 3/11.
    0 Votes

    • 35x35
      Jan, 2013
      Bill
      Foreclosure and charge-off are two separate events from both accounting and legal perspectives.

      Foreclosure occurs when the lender of a secured property loan exercises its right to seize a the property from a delinquent borrower. The property is auctioned, and any deficiency balance is collected from the borrower, if allowed by state law. If the borrower refuses to pay the deficiency balance, then the lender is required to move the debt from its accounts receivable ledger to the bad debt line on its general ledger. This action is called charging-off or writing-off a debt.

      Here, the foreclosure occurred in November, and the charge-off occurred 4 months later, which appears to be a correct timing for these two events.

      There is a twist to your question, however. You mentioned this is a California property and described the second mortgage as a purchase-money loan. In California, a home loan lender may not collect a deficiency balance on a purchase money loan. Your question implies the foreclosure and write-off date should be the same because California law prevents the lender from collecting the deficiency balance from the borrower. This is a compelling argument. However, I have not seen this tested in a California court. (Readers, please comment below if you know of any cases that have.) Your best bet is to dispute the debt. If this is not satisfactory, consult with a lawyer in California who has civil litigation experience, and discuss whether you have a cause of action against the lender and the consumer credit reporting agencies for libel.
      0 Votes

    • 35x35
      Jan, 2013
      Raquel
      So, would the clock start clicking from my foreclosure date or charge-off date to buy another home?
      0 Votes

    • 35x35
      Jan, 2013
      Bill
      In terms of meeting a lender's requirements for buying a home, the clock will start from the date of the foreclosure. How this will affect your next home purchase depends, in part, on what kind of loan you apply for. You have to wait for three years, post-foreclosure, to get an FHA loan, two years for a VA loan, and seven years for a loan backed by Fannie or Freddie (though there are exceptions that can reduce that time-frame to three years).

      See the Bills.com resource Mortgage After a Foreclosure to learn what steps to take to get yourself approved after a foreclosure, and the rules lenders follow.
      0 Votes

  • 35x35
    Oct, 2012
    Javier
    Hi, I purchased a home in 2006 with an 80/10. My first loan is with Wells Fargo for 306,000 and was modified in 2009. My second is with Suntrust for 38,000 at 9.25%. I live in California and the current home value is about 218,000. I have been working with suntrust to try to get the second modified because i could no longer afford my mortgage but they won't help. I am not behind yet but will be soon and I am wondering what my options are? I am also wondering if the modification turned my loan into a recourse loan on the first lien and if that would affect the second lien? Thank You!
    0 Votes

    • 35x35
      Oct, 2012
      Bill
      If you can't continue to make payments on your second mortgage, your options are to try to work on modifying the loan (as you've been doing) or default.

      I believe that modifying your loan did not turn your non-recourse loan into a recourse loan. I also believe that the second loan would remain a non-recourse loan, if it were originally one.

      Given the fact that the stakes are so large, the only prudent course is to speak with an attorney, have the attorney examine your modification, and give you an authoritative answer.
      0 Votes

  • 35x35
    Sep, 2012
    stacey
    Need advice.... I currently have two mortgages one for 85k and the second for 17k.. the first mortgage was modified and my payment dropped 100bucks however i became deliquint again and the first mortgage company is working with me. the second mortgage is current.. My home is a double wide and isnt worth but maybe 65k if i am lucky.. how can i keep my home and get away from that second mortgage? i cant afford both mortgage payments ...
    0 Votes

    • 35x35
      Sep, 2012
      Bill
      Consult with a lawyer in your state who has bankruptcy experience about a chapter 13 bankruptcy. In the circumstances you describe — the balance of the senior loan exceeding the market value of the property — a chapter 13 will "strip" the lien from the junior loan. A chapter 13 will also set your creditor payments for the duration of the bankruptcy plan at a level you can afford.

      Bankruptcy may turn out to be not your best option, but it is worth your consideration. To learn your other options, access the Bills.com Debt Coach for a no-cost, no-nonsense, online analysis of your debt resolution options.
      0 Votes

  • 35x35
    Sep, 2012
    Bobby
    I currently have 2 mortgages. 1st @ $80K, 2nd @ $171K. My question, is there any possibility of getting the second mortgage stripped in a Chpt. 13 as it is a higher amount that the first. My home is valued at around $200K. I filed a Chpt 7 back in 2010. Please help! We are falling behind on the second, but we are current on the first. Thanks!
    0 Votes

    • 35x35
      Sep, 2012
      Bill
      Bobby, I don't have enough facts to understand your situation and I can't give you legal advice.

      Are you saying that you did not include your 2nd mortgage in your Chapter 7 BK? I recommend that you speak with a bankruptcy attorney.
      0 Votes

    • 35x35
      Sep, 2012
      Bobby
      Hi again, just to clarify. The second mortgage was included in the chapter 7 bankruptcy; however in order for us to keep the property and avoid possible foreclosure we re-affirmed the second mortgage (and first as well). The second mortgage (held by Citimortgage) was also restructured to give us a lower payment, which is still unfortunately a large amount for us to pay every month. At this point I am wondering if I can file for a chapter 13 to have the second mortgage stripped or am I better off trying to get a refinance and consolidate both mortgages. Thanks!
      0 Votes

    • 35x35
      Sep, 2012
      Bill
      I am curious to learn if the mortgage lender(s) threatened to foreclose if you did not reaffirm the mortgages. In many cases, people who file a chapter 7 never reaffirm their mortgages and continue to pay the contracted amount without foreclosure.

      A chapter 7 followed by a chapter 13 is known informally as a "chapter 20" bankruptcy (7 + 13 = 20). A chapter 13 will, as you mentioned, strip the lien from junior mortgage(s). A chapter 13 gives a person extra time to pay-down any shortfall in your mortgage or vehicle loan that occurred during a chapter 7, or to pay-down debts not eligible for discharge under the Chapter 7, such as some types of tax debt. Consult with your bankruptcy lawyer to learn more about a chapter 13.
      0 Votes

  • 35x35
    Aug, 2012
    Mark
    I filed bankruptcy in 2008 that discharged my personal responsibility for both my first and second mortgage. I did not reinstate either and have been making my payments on time since never late. The value of my home went from $195K to about $85K today and my balance is for both loans is $165K, $138K on the first and $27K on the second. I am 55 years old and the value vs debt would stop me from selling for a very long time. The second is with BOA do will they negotiate a payoff at about $2,200 to close the loan and remove the lien? Do I have any other options beside foreclosure?
    0 Votes

    • 35x35
      Aug, 2012
      Bill
      Option 1: Talk to your bankruptcy lawyer about the possibility of a chapter 13. Your earlier chapter 7 followed by a chapter 13 is called by some a "chapter 20," which is intended to strip the lien on a junior mortgage or deed of trust.

      Option 2a: Talk to your bankruptcy lawyer about strategically defaulting on the junior if the chapter 13 idea I just mentioned is not a possibility in your circumstances. This is a risky strategy, but if you explain to the servicer that you are willing to offer a small lump sum as an alternative to a foreclosure, it may accept your settlement offer.

      Option 2b: Allow a strategic default, then negotiate with the junior. If negotiations are not fruitful, negotiate a settlement with the collection agent the junior sells your collection account to.
      1 Votes

  • 35x35
    Jun, 2012
    Michael
    Hello I purchased a home in 2007 with a 80/20 loan from the same lender due to the economy my job was eliminated so we were forced to foreclose on the property and later had to file BK because I was getting collection notices for the second loan. We hired a lawyer to file our BK and our first concern was to make sure the second was named in the BK as it seems now it was not named, this lawyer has since gone out of business...my question is how does the foreclosure effect the second loan?
    1 Votes

    • 35x35
      Jun, 2012
      Bill
      I realize this may not be what you want to hear, but consult with another bankruptcy lawyer. He or she may be able to convince the court to accept an amended filing, making an argument your first filing was a result of ineffective counsel.

      I am not answering your question about your foreclosure because I really want you to consult with a lawyer about your defective bankruptcy filing before taking any other action.
      0 Votes

  • 35x35
    May, 2012
    Tom
    We bought our house is Northern California in 2007. I had 2 loans with BofA at 80/20. The house was foreclosed last Nov 2011. I got 1099A for the 1st and 2nd. The 2nd is HELOC. This was originally an 80/20 loan and the heloc was used to purchase the house. The 1099 for heloc says I am liable, while the 1099 for the first mortgage did not say anything. I trying to refinance my car through a credit union. They gave me an initial approval with a condition. They want me to secure a letter from BofA saying I am not liable to pay for the HELOC. Questions in my mind: 1. Am I still liable considering I used the 2nd mortgage to buy the house and not for improvement? These were all done at the time of closing. 2. Will BofA issue such a statement? 3. I have not heard from BofA regarding the HELOC. Credit report states the loan is a charge-off. If I contact BofA, I'm afraid they might re-open my case and seek payment.
    0 Votes

    • 35x35
      May, 2012
      Bill
      Whether you have liability for a California deed of trust or mortgage comes down to the question, "Was the loan purchase money?" For the HELOC, was it part of the closing when you purchased the property? And, were these your original loans or did you refinance at some point? If the HELOC was a purchase money loan, then the lender has no recourse to collect the deficiency balance. See the Bills.com resource Is My HELOC a Recourse or Non-Recourse Loan in California? to learn more about this issue.

      Regarding your questions, read the article I just mentioned to learn if Bank of America has the right to collect the deficiency balance. Based on the facts you provided, and assuming you never refinanced, then Bank of America may not pursue you for the deficiency balances of either loan. However, if you refinanced a loan, then you wiped out California's anti-deficiency protection for that loan. I cannot say whether you will find someone at Bank of America who would make such a statement. There is no harm in contacting its legal department to ask.
      1 Votes

  • 35x35
    May, 2012
    Greg
    We have a first mortgage of 138000. the second mortgage is 48000. House is worth 1 Z70000. A few years ago I filed chapter 7. I reaffirmed the first mortgage but not the second. What happens if I stop making the second mortgage payments? Do I have a strong case to force the 2nd mortgage to refinance the terms of the loan?
    0 Votes

    • 35x35
      May, 2012
      Bill
      I am unsure of the market value of your property, and will assume it is less than the value of your senior plus junior loans.

      A deed of trust or what we call a mortgage consists of two documents. The note is the personal promise the borrower makes to lender to repay the loan. The mortgage is the claim the lender files with the county recorder to the borrower's property. The mortgage gives the lender the right to foreclose. The note gives the lender the right to pursue the borrower personally if the borrower defaults.

      A chapter 7 bankruptcy strips liability for the note, but does not change the mortgage. A chapter 13 bankruptcy can strip liability for both the mortgage and the note on a junior loan. A reaffirmation of a debt discharged in bankruptcy reestablishes the personal liability for the debt.

      If you stop making the monthly payments on the second, also called a junior, this lender still has the right to foreclose. If the property is worth the same or less than the balance of the senior, the junior may be convinced it would make more sense to negotiate a lump-sum settlement instead of going to the expense of foreclosing, which will likely result in recovering nothing.

      A handful of progressive states require a home loan lender to negotiate with the borrower before foreclosing. Thank your lucky stars if you reside in one of them, which leads me to my conclusion. Consult with a lawyer in your state who has experience litigating mortgage issues and foreclosures. He or she will explain your state's anti-deficiency laws, which may give you another bargaining chip. He or she will also discuss a negotiating strategy to settle the junior, and discuss the risks of a foreclosure in your circumstances.
      0 Votes

  • 35x35
    Mar, 2012
    Heather
    Our 2nd mortgage was a 5 in 1 with a balloon payment that just came due in March. Both mortgages have always been current, just can't pay the 125k balloon payment on the 2nd (home is worth 430k & we owe 640k between both). WF says they'll refinance the 2nd at a ridiculous 12.3%. We told them that rate was unacceptable & they won't budge-they said we've shown the ability to pay. So b/c we pay our bills, they're trying to get us to make up for other folks. We told WF that we won't pay that rate & they're threatening to fore close in 90 days. Is this scare tactics or will the 2nd really jump the 1st mortgage, which is also held by private investors within WF. We live in VA. Isn't it in their best interest just to offer us a fair interest rate so we can move on? That's all we want. Thanks!
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      From a legal perspective, a foreclosure is possible. However, from a financial perspective, it does not make any sense. A quick review of the facts you shared:
      • $430,000 market value
      • $515,000 senior (implied from your message)
      • $125,000 junior
      • $230,000 negative equity or 148% LTV

      As you pointed out, it does not make financial sense for the junior to foreclose because the senior will almost certainly foreclose to be first in line for the foreclosure auction. If that happens, the junior would net nothing because the balance of the first is about $100,000 greater than your market value.

      I cannot predict how the servicer for the junior will behave. Your negotiator states the junior's legal rights accurately. However, a foreclosure does not make sense financially.

      My advice? Consult with a lawyer who has bankruptcy experience. I am not suggesting your only course of action is to file bankruptcy. However, should the junior pull the trigger on a foreclosure, a chapter 13 may be a viable strategy on your part.

      0 Votes

  • 35x35
    Feb, 2012
    Ross
    Dear Bill, I would appreciate your thoughts on my situation. In 2008 I made a 5 year interest only balloon second mortgage on a "friend's" investment property. Subsequently he got married and ran into financial difficulties. The property in question was foreclosed and he transferred the security to another property on a new note with identical terms. He made one payment and has not made any since. The new next property is in foreclosure as he has been using the rental income for personal expenses and has not kept up the first or second mortgage. He refuses to make any payments. His wife stands to inherit a large quantity of money. Do I have any rights to go after the money as recourse? In the original loan the money was not used for the purchase of the property at its purchase? Thank you Ross
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      You have every right to sue him, but that may or may not help you collect. For instance, he could discharge your debt in a bankruptcy, if he qualifies. In every jurisdiction with which I am familiar, if his wife inherits money and does not mingle it in a jointly held account, that money will not be a source from which you can recover the money owed to you.

      I recommend you speak with a lawyer to discuss the remedies available to you.
      0 Votes

  • 35x35
    Feb, 2012
    Kenzu
    Hi Bill, My house was foreclosed two years ago. Bank of America bought Countrywide who was my lender for both 1st and 2nd mortgages. Both loans were used to finance the primary residence in California. BofA auctioned the house in 2009. I received tax documents from BofA stating the cancellation of my debts. I thought it is both for the two mortgages. But last year I received a mail form BofA debt collection agency informing me of my 2nd mortgage I owe plus interest. As far as I know, there is no deficiency judgement in California and there is "ONE ACT RULE" in the state. Should I confront my lender and ask the collection agency to stop intimidating me. Legally, do I still owe BoA of my 2nd mortgage? Or BofA is using this to continue to report my defaults to credit bureau? I am thinking of sending a letter to BofA, then send a copy to my state senator, to my state Attorney General and to local news.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      If both loans were purchase money loans, then under California law the borrower has no personal liability if there is a foreclosure or short sale resulting in a deficiency balance. Call me cynical, but contacting the media or politicians about Bank of America violating the rights of another homeowner will not change your situation. You are one of many, so the I doubt the media will be interested, nor have politicians shown any willingness to confront the big banks. Your best option is to consult with a lawyer who has litigation experience and is willing to take your case on a contingency basis.
      0 Votes

  • 35x35
    Jan, 2012
    Lorrie
    I have a 1st & second mortgage that are/were both through BOA in Maryland. My 1st is modified with them in the Making Home Affordable program and payments are going well. During the 1st mortgage modification process my 2nd (which was very delinquent) went to a collection company called Compass Resolution Services, LLC. I spoke with them once last year and they didn't offer to help at all with paying them back as to reducing payment amount etc. They did say that I could call them back with an 'offer' to pay off this loan, but also before hanging up he advised me not call back with a $1000 offer either. Financially I do not have the means to pay the second mortgage.

    Months went by and I never spoke (or answered) any of their calls feeling I had nothing to work with at this point. A week ago I received a letter from them stating that they NEED TO HEAR FROM ME and need to obtain a resolution on my account or a field inspection will be ordered at my expense. Have no clue what that is. They NOW also added that they want to 'help' me get this resolved and here are some options:
    1. Full settlement at a reduced balance
    2. Repayment plans: Principal and Interest
    3. Repayment plan on negotiated full settlements
    4. Interest Rate Reduction

    They did NOT offer me ANY rate reductions offer when we first (originally) spoke that one time. In fact, the man was very affirmative after I spoke of my first mortgage being in the MHA program, that they DO NOT do such rate reductions, etc. It's either 'get caught up on payments' or 'make an offer' to settle the balance. I do not wish to call them and get swindled into an argument due to them telling me the same thing once they get me on the phone.

    This has been very upsetting and nerve wracking to me. So, I went and spoke the Manager at my local BOA branch who she herself made a few phone calls to the Foreclosure dept at BOA and even called Compass Resolution Services in which they did not even want to tell her much either. After speaking with the Forc Dept at BOA, they advised me that my 2nd mortgage is 'charged-off' with them and this Compass company is a debt collector. The BOA manager asked if they could advise me as to the collection company being able to foreclose on me, they didn't know if they could and advised me to speak with an attorney to see how far they could go, if any.

    Do you have any legal advice for me as to Compass being a debt collector and not a bank, if they are able to foreclose on my property? I found out this company is based out of California, not that that makes any difference I'm sure.

    0 Votes

    • 35x35
      Jan, 2012
      Bill
      The debt collector retains the rights to enforce the terms of the contract, so I believe it could foreclose. However, if there is not enough equity to pay off the first mortgage, then a foreclosure will not lead to the collection agency getting any money, which is a big disincentive for it to take the time and expense of foreclosing on you.

      Consult with a bankruptcy attorney. If you qualify for a Chapter 7 or the attorney tells you that even a Chapter 13 could remove your obligation to repay the second, then call the collection agency back and make a very low offer to settle in full. Explain that you will discharge the entire debt via a bankruptcy (again, if you qualify to do so) and they will get zip, zero, nada, unless they accept your offer.
      0 Votes

  • 35x35
    Jan, 2012
    BCG
    I am currently 3 years in a Chapter 13. Both my trustee and 1st mortgage are current. However my second mortgage (currently at 7.25%) is significantly behind. Reason being I was attempting to modify the first mortgage because I am in an ARM and in addition i wanted to attempt to modify the second because of the rate. But with rates as low as they are (I am currently at 3% owing 24 more years), the modification had me at 5% over 46 years and this just didn't make financial sense for us. Now that we have declined the modification on the first, we can't have the second modified. Are there other options out there to bring my second mortgage current and reduce the interest rate. I am in constant communication with my mortgage company but it's very difficult to get information being in a Chapter 13.
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      What is the present market value of your property? What is the balance of the senior loan? The junior loan?

      I ask these questions because if you are upside-down, and the junior would get zero if there was a foreclosure today, then the lien for the junior may be stripped upon completion of a chapter 13, assuming the market value does not rise anytime soon. Talk to your bankruptcy lawyer about lien stripping and if it applies to you.

      It does not surprise me that the mortgage servicers are reluctant to negotiate with, given that you are in the midst of a chapter 13. Ask your bankruptcy lawyer to get involved in the negotiations.
      0 Votes

  • 35x35
    Dec, 2011
    Samoeun
    Hi Bills, I'm in California, owning a residence home now worth about $440K. My 1st loan with Chase is $390K and a 2nd loan with other bank $ 140K. Both loan payments are current but we are having financial difficulty about a year ago. It's very hard to pay our 2nd loan because higher interest higher payment. We really want to keep the home and will pay only the 1st loan, and stop paying the 2nd loan. Can the 2nd lender foreclose our home? Or can we negotiate for settlement?
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      If you decide to stop paying your 2nd mortgage, then YES, the 2nd lender can initiate any legal remedies available to it, including suing you to obtain a court judgement that could lead to actions against you (wage garnishments, bank levies, personal liens) and your home (foreclosure).

      It is possible to negotiate with the lender, however you may find it very difficult to raise the type of capital the lender would demand, seeing that your home has at least $50K in value, after the first mortgage is paid.

      You could look into refinancing your first home through the HARP Program. However, since your are a California resident, you will need to consider the possibility that your first mortgage may be a non-recourse loan, and by refinancing, you may endanger that status.
      0 Votes

    • 35x35
      Jan, 2012
      Joe
      But even if the 1st loan is refinanced through HARP, isn't the 2nd loan still non-recourse since only the 1st has been refinanced? Or does modifying the 1st loan automatically change the status of the 2nd loan as well?
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      I assume you are asking about a property in California. If so, I know of no cases where a court decided that because a property owner refinanced one purchase money loan — thus removing California's anti-deficiency protection — other purchase money loans had their anti-deficiency protection stripped from them.
      0 Votes

  • 35x35
    Nov, 2011
    Genene
    I have a first and second on my home. the first is 170K and the second is 293K. The second was used for my small business. I also had a small business loan from the same lender as my 2nd mortgage. Same lender called my business loan in and closed my business down in 2010. After trying to hang on and pay both mortgages for over a year, we stopped at the advice of our lawyer. We stopped making payments in June of 2011. We are now set for Trustees Sale at the end of December with the first mortgage. I am wondering if I could find someone to come in and pay off my 1st mortgage what would happen? Would the lender of the second buy out the first in hopes to get some of their money? I am wondering if it is worth taking a chance in hopes that they would not want to throw anymore money at this house. My home was appraised by my first lender at around 380K. We are most likely going to have to file for bankruptcy as well. I really don't want to lose my home, but don't know what to do. I am just trying to think of anything to save my home.
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      If the house is going to be auctioned off, at the time of the sale the proceeds will be used to pay off the first mortgage holder, and then the second mortgage holder. Based on the scenario you provided, there will not be enough money to cover the second mortgage holder's position, and it will most certainly attempt to recover any deficiency balance, as well as any other outstanding unsecured debt. You can certainly speak to the second mortgage lender and attempt to negotiate a settlement, although it seems highly unlikely that the lender will buy out the first mortgage position. If you remain with substantial unsecured debts, then bankruptcy is a viable option. Continue to consult with your lawyer.
      0 Votes

  • 35x35
    Nov, 2011
    Stephanie
    I own a home loan and as a junior loan on the house I opened up a business which went under.Do I automatically lose my house because i cant pay this business loan? I am already getting papers saying they are in process of taking everything if I don't pay full balance of house and business note. Just wondering if there is anyway I can keep my home...
    1 Votes

    • 35x35
      Nov, 2011
      Bill
      Your options depend in part on the equity you have in your home. If you have enough equity that money will come to the second mortgage holder, if they foreclose on you, the risks of foreclosure are much higher than if the sale proceeds would all go to the first mortgage holder and nothing remains for the second.

      Try to work out a payment plan or settlement with the second mortgage holder. Consult with an attorney if you feel you have no means to pay a settlement or payment plan. Speak with a bankruptcy attorney, too, about how filing bankruptcy may be able to help you stay in your home.
      0 Votes

    • 35x35
      Nov, 2011
      Stephanie
      I have had a couple apts with bankruptcy attorney and I see him again Monday, but he seems to tell me there aren't any other ways rather than file and start clean! This makes me sad, as I thought my kids would get to stay in this home til they moved out! We owe 200,000 on our home and its been appraised at 265,000 however I have foreclosures sitting on both sides of me and with the economy not sure its really worth that right now. Our business loan is for 108,000 so it would put us upside down. I heard from other people I can ask the judge to take this junior mortgage off, have u ever heard of that? (I understand u r not an attorney, just need an opinion) Bottom line I think I would do anything to save this house just wish I knew where to go, maybe new attorney?? Should I contact Fannie May in this situation? I see they are always on t.v wanting to help but could they in my situation? Thanks for such a quick response!! :)
      0 Votes

    • 35x35
      Nov, 2011
      Bill
      I think it worthwhile to speak with another bankruptcy attorney, to get a second opinion. Speak with the second attorney about using a Chapter 13 to strip the second. That could be a way to stay in your house.
      0 Votes

    • 35x35
      Feb, 2012
      Lani
      You could go to NACA.com I am not sure where you're located but they hold events all over the United States; they just finished 1 event in San Diego & Los Angeles (California). Since you have a Fannie Mae Loan (they are at these events by the way Fannie Mae & Freddie Mac)they have the ability to do things at these events they cannot do anywhere else. The lowest fannie mae will be able to go is 3% fixed for the rest of the life of the loan. NACA is also successful at stopping "sale dates". If there is not an event close to where you live, you can begin the process online and begin a web-file. call to speak with a counselor to get a solution and get your file submitted to your servicer. If you are able to attend an event, your chances of walking away with paperwork being done is much more successful. They stopped my foreclosure !! If you would like to speak with me or e-mail me directly you can. Lani from San Diego
      0 Votes

  • 35x35
    Nov, 2011
    Sandra
    We have two homes.. One that we live in now and has all payments current, and a house in PA that we moved from two years ago when m husband lost his job and took one in another state. We had a renter in the PA house which allowed us to make the mortgage payments, now that renter has moved out. We are two months behind on the first mortgage for that house, two months behind on the HELOC for it, and current on payments in our new house. There is a mold problem in the PA house which we do not have the money to remediate, and which prevnts us from finding another tenant. We do not want to keep the PA house.. Really there is no way we can afford to do so, as we have extenuating circumstances which include two childrem with severe psychiatric issues which require residential treatment out of our home. We filed for "Homeowner Assistance" with the mortgage company two months ago with no response from them beyond an automated letter stating that we are in default. We could afford to make the monthly HELOC payment if we had to, but are not sure it makes sense to do so if we are going to let the house go. How will defaulting on these loans affect our current mortgage? (or will they?)
    0 Votes

  • 35x35
    Sep, 2011
    eileen
    We had a mortgage in NY State where the first mortgagee foreclosed on us. We also had a second mortgage on the property. The holders of second mortgage were informed of the foreclosure and the sale of the property. The property was sold for less than half the appraised value. The current appraised value would more than covered both mortgages. The second mortgagee was not at the sale and therefore did not protect their interest. They are now demanding payment from us. Are we legelally liable for payment since they ignored the sale and the property was worth more than the total mortgages due?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      I can't give you legal advice, as only an attorney can do so, but I will share a few thoughts with you.

      I don't understand the facts you presented. What was the home worth at the time of foreclosure and sale? If it was worth more than what you owed, it was an error to not sell it yourself and pay off your loans. If it is worth more now, but was not worth more then, that seems immaterial to me.

      I don't believe that the second mortgage holder had to be present at the sale to protect its interest, but you need to speak with an attorney to find out if you are liable or not. I suspect that you are.
      0 Votes

  • 35x35
    Sep, 2011
    Bob
    I live in VA. I have a 1st ($532) and a HELOC 2nd ($200) on my home. I am current on the first and 5 mos in arrears on the 2nd. Same bank holds both notes (mortgage division and retail division.) Is it possible (or likely) for the retail devision to get the mortgage division, which I suspect is a separate legal entity, to subordinate the 1st so they can foreclose on the 2nd. NOTE: the value, at best case, is below $500K and certainly no more than that. They are making a lot of noise and threats, but I suspect the 1st won't subordinate because of their shareholders (and take a loss on a current loan?) and/or because it there is simply no incentive for them to do so - however they are the same bank - so one can never be sure. My question is simple: does it make any sense, legally or logically, for the 1st to subordinate their interest to the second so they can BOTH take a loss? I'm just trying to figure the odds and time frames, etc. Thanks for any detailed advice you can offer.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Your thinking is on the right track, and allow me to express what you wrote more precisely. The mortgage servicers for the senior and junior loan share the same company name. However, the servicer has two fiduciary responsibilities. The first is to the investors in the senior loan. The second is to the investors in the junior loan. In some instances, the investors are the same, which make the servicer's job really easy. But usually, the investors are different. The servicer must treat both sets of investors equally. If it favors one over the other, it breeches the fiduciary trust of the one disfavored. In my experience, the organization servicing senior loans will be in City A, and the servicer will headquarter all junior loan servicing in City B. They do not have to be in separate cities, but the effect is the same — the two servicers might as well be on different planets, even though they fly the same company flag.

      None of what I have written above should be news to you. What will be helpful to your cause is to learn the names of the investors in your senior and junior loans. If they are the same, then you might see the two loans merge in some manner if there is a foreclosure. However, if the two investors are different, then you should expect the mortgage servicer to try to represent the two investors zealously. The senior does not want to get a haircut on your loan, and the junior wants to get whatever it can.
      0 Votes

    • 35x35
      Nov, 2011
      Ed
      I have a similar situation here in California.Due to my fathers passing (borrower)in 2009, My family completed Loan Modification on 1st. However, the 2nd (different investor) was not modified as they wanted us to just start making payments. As of this date, 2nd is now close to 30 months in arrears. My question is do you know of any Claims the 2nd Mortgage investors can make with the Government (TARP funds or otherwise), where the Investors would say - Lets foreclose, we will get paid back by the Government anyways? I ask this because the BofA representative mentioned that the above was a possibility. Lastly if it makes any difference both loans are conventional.
      1 Votes

    • 35x35
      Nov, 2011
      Bill
      I confess the TARP comment by the Bank of America representative mystifies me. Additionally, I think it was in really poor taste to name-drop TARP in a modification negotiation.
      0 Votes

  • 35x35
    Sep, 2011
    George
    2yrs after of completing my loan modification(80% & 20%) and my small loan(20%) was supposed to be forgiven by my lender, my lender sent it to collections. They gave me no notice and I've have not missed a payment. My credit report has not reflected anything delinquent at all for the past 2 yrs! Can lenders do this? who do we turn to to police up the lenders mistakes?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      In the situation you described, your only recourse is to hire a lawyer and file a breech of contract lawsuit against the mortgage servicer for it promising you one thing, and then taking a contrary action.
      0 Votes

  • 35x35
    Sep, 2011
    Stacey
    I live in Indiana. My first mortgage lender cancelled our debt in 2010 and said the house is ours now. Now a collection agency has picked up our 2nd mortgage that is also in default. Can the collection agency/mortgage servicer foreclose on the house now? If so..is it likely they will?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      The short answer to your first question is, "yes." The answer to your second question is unknowable by someone outside of your mortgage servicer.
      0 Votes

  • 35x35
    Aug, 2011
    Martin
    Hello, here's a similar one that I could use some high-level guidance on. I am in Colorado, which to my understanding is a non-judicial and non-recourse state. The first mortgage is current, however the second mortgage (through GMAC)has not been paid since the beginning of 2009. It has since been purchased by a "collections agency," but from what I can find about this organization, it looks like a two-man operation in San Diego who have operated under a couple of different business names. They are threatening foreclosure, but are offering to reduce the outstanding balance on the loan from 36k to 25k, and an interest reduction from 10% to 5%. I don't really trust these guys. They have virtually zero online presence, and it's scary to enter into a contract with a 'company' that's so hard to vet out properly. My divorce was final on July 22 of this year, I have custody and the home -- however the decree was that the second mortgage would be split down the middle and that we had 90 days to get the best settlement we could get. The foreclosure threat literally came the week after the judgement. From a financial standpoint - the house's tax value is showing at about 8k more than the first mortgage balance; however the home needs LOTS of work in order to bring it to market (20-40k). The second mortgage holder mentioned that if they foreclosed, they'd just pay off the first mortgage and rent the house out until they sold it. I'm not sure how they would think that this makes financial sense to them, unless they think the house is in better condition than it is. Right now I'm communicating with them to get an extension of time before their August 30 foreclosure threat. They said they paid 25k for my 36k loan - that doesn't even make sense to me. My question is just that I'd love to hear your insights as to the practices of a company like this, and any advice you may have about how best to settle. GMAC had originally offered us a 3K settlement over a year ago that I wish we had taken, but it took a court order to get my ex to participate at all. Any thoughts you have are appreciated!
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I agree that this whole situation smells fishy for all the reasons that you listed:
      1. Purchasing a $36K debt for $25K,
      2. Willingness to buy out the first mortgage with such a small potential gain (and even a loss unless the work you say needs to be done is completed),
      3. The lack of information about this firm.

      I would not pay these people a penny without speaking with an attorney. I also think you and your ex should, ideally, be on the same page. I understand that may not be possible, but would she really want to be on the hook for half of such a large debt?

      The tax value and the fair-market value can be vastly different, especially if prices have fallen in the area. I think you should impress on the collectors that fact, if you can verify it, along with the fact that the house needs some serious and expensive work. If they compel foreclosure, they may get more than they bargained for.

      If you want to stay in the home, I recommend that you speak with an attorney, who can counsel you and advise you how best to meet your goals. Please report back with an update. I am very interested to learn if the collectors are legit or not.

      0 Votes

  • 35x35
    Aug, 2011
    Jason
    I am in a similar situation and baiting the 2nd to foreclose, but we both know they won't because the house upside down. In the alternative, however, they filed a personal Judgment action seeking to make me personally liable for the entire HELOC. I have answered and filed a counter-claim, but the real issue is "What constitutes a personal guarantee". Here are the facts:
    1. I signed the HELOC
    2. The "Collateral" listed is the property
    3. The remedies under default state nothing regarding to in addition to, or in lieu of, the Collateral they may seek a personal Judgment

    Do you know of any situations where the homeowner has challenged the second and stated that there was not PG? In my past personal and business experience, when a lender or creditor requires additional cushion such as a PG it is a separate agreement and/or contract. Is it the same way in lending?

    Any information or relevant cases are appreciated.

    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I would not serve you well be offering any legal advice. First, I have not read your HELOC agreement. Most HELOC contracts contain a promissory note that places liability on the signer to pay the loan, and a mortgage that establishes the lender's right to foreclose. However, because I have not read your HELOC contract, it would be foolhardy for me to weigh in with a thought about your liability under the contract. Second, I assume you hired a lawyer to help you respond to the lawsuit. Consult with your lawyer about the legal theory and practice behind your defense and lawsuit.
      0 Votes

    • 35x35
      Aug, 2011
      Jason
      Bill, Thanks for the reply. No, I am Pro Se and not looking for legal advice, rather, any cases or references you may know off the top of your head regarding what legally constitutes a personal guarantee, specifically when relating to a HELOC. The HELOC does not contain any language regarding a Promissory Note or Personal Guarantee. There are no addededeums or additional documents executed at closing outside of the HELOC. I have filed a Motion to Dismiss based on discovery as they have failed to produce anything that constitutes I agreed to personally pledge assets in addition to, or in lieu of, the Collateral. My question is I want to try and find some case(s) that cover a similar situation. Generally, a personal guarantee is a separate contract. I know the attorney and their client do not want to exercise their only legal remedy which is foreclosure, and then seeking a Deficiency Judgment. It just violates any economic sense. They did not count on an educated person to dispute the collection action and I have an Affidavit signed from the loan officer stating there was no personal guarantee in the HELOC (he no longer works at that bank). But for a slam dunk if I can provide some cases (there are no statutes on point in this Circuit) where it has been clearly established in order to have a PG, it must be clearly state it within the four corners of the contract. Perhaps it must be a separate contract or maybe even a certain font or subsection. But a PG cannot be implied I feel quite confident and just need to find a case that confirms. If you have any relevant cases I would greatly appreciate it. Jason
      1 Votes

    • 35x35
      Aug, 2011
      Bill
      I do not have any cases you seek at hand. Visit your local law library and ask if it has Shepard's Citations, or something similar that you can use to research a contracts-related issue.
      0 Votes

  • 35x35
    Jul, 2011
    Jesse
    Looking for some advice ... here's my situation. I live in AZ and purchased a home with a 80/20 loan both originaly conv 30yr fixed, 130,000 and 50,000 respectively. 5 Years ago I refinanced the 2nd loan and pulled out 45,000 so that loan is now a 95,000 15 year Ballon. That brings me to today .. last checked my property is worth roughly 100,000. I am looking for options on what I can do now as I will not be able to pay the baloon payment in 10 year when it is due and there is a looming date quickly approaching on being able to take advantage of the Debt Forgiveness Act. I have a meeting today for a free consultation with a lawyer but would like to also hear from you. My initial thouths are thas I have options .. oh and I dont want to persue a short sale. 1) persue a DIL and rent a home 2) get approved for a new home purchase and DIL on current residence 3) persue a foreclosure and rent 4) get approved for a new home purchase and foreclose on current residence 5) get approved for a new home purchase and try to work on a modification on current residence to change out of the baloon payment. What are your thoughts? If I choose to get a new home loan is there a chance that I could be facing mortgage fraud for anything? I've been reading that this is called a buy and bail and that this is not necessarrily fraud but the terms of the loan with the new lender could be the fradulent part.
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      My guess is a loan officer will look at your present debt-to-income ratio and say you do not qualify for a new-home loan. Therefore, I believe pursuing a short sale (I realize you want to rule that out), deed-in-lieu-of-foreclosure, or short-refinance are your most viable options. If you cannot find a short-refinance lender, or if the mortgage servicer(s) offer you a bad deal for a short sale or deed-in-lieu, then foreclosure is your only option.
      0 Votes

  • 35x35
    Jul, 2011
    Jim
    I live in the State of Washington. My house is under water ($200k market value vs. $170k 1st and $107k 2nd) and I'm behind on payments. The house is scheduled to go to auction Aug 1st, which was initiated by the 1st mortgage holder. I could potentially come current with it, but can't afford the 2nd. I haven't paid the 2nd 20 months so they could initiate foreclosure, but it doesn't make sense since it's unlikely they'd get anything. So, my question is, at what point, if ever, does the 2nd mortgage holder lose its rights to foreclosure? I'd hate to come current with the 1st and have the 2nd resurface years down the road.
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      In legal terms, what you are asking is what, if any, length of time Washington statute or case law uses for mortgage lenders to sit on their right to foreclose before they lose their right to foreclose. In law, this is known as laches. Consult with a Washington lawyer who has real property or civil litigation experience to learn if and how laches intersects with foreclosure law.
      0 Votes

  • 35x35
    Jun, 2011
    Peter
    Hi, great blog. We went through Chapter 7 two years ago, kept the house, but did not reaffirm the first or second mortgage. We are back in the hole again, still current with the morts, but will soon be unable to pay them. Since they were personally discharged, it's my understanding that the only recourse the banks have is to foreclose and take the house. Due to the bankruptcy, we are no longer personally liable for any deficincy, but can the banks issue a 1099 for any deficiency? I'm thinking no, but would like to be sure. Thanks.
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      You answered your own question: If you did not reaffirm, you have no personal liability for any deficiency balance.
      0 Votes

  • 35x35
    May, 2011
    robert
    have a second loan that's 10 mos. behind and has gone to charge off co.(145,000) First is current(220,000)Home value around 290,000 (Cal. prop) and all other personal debts are current as well. Never been late on first(b of a) Back to work but income very limited. want to catch up on second. How should I negotiate with Citi which has charged off the debt? If they are now out of the picture because they charged off the loan what do you suggest I do in regards to possibly getting a more favorable pay off (payment wise, don't have lump sum monies) with new company, since they probably bought the loan at a substancial discount? Any estimate of discount the buyer of the loan got?
    0 Votes

    • 35x35
      May, 2011
      Bill
      A creditor charging-off an account is not necessarily synonymous with selling or assigning the rights to your collection account to a collection agent. In other words, the mortgage servicer could write-off your account and then assign it to an internal loss-mitigation call center.

      See the Bills.com resource Debt Negotiation Advice for tips and tactics on settling a debt.

      Regarding specific advice, if, as you say, you have nothing to offer the other side then negotiations are going to be brief and not fruitful. Start saving all that you can so that you can offer the other side something.

      Regarding the going rate for mortgage collection accounts and deficiency balances, that is unknown to me. I have reviewed the big banks' financials, and it appears some are selling collection accounts for 40 cents on the dollar, but that does not square with what Bills.com readers tell me they are settling these account for, which is much less. Short answer: I do not know at this time. Start at 10 or 15 cents on the dollar and work up from there.
      0 Votes

  • 35x35
    May, 2011
    Ilene
    I'm on the board of my HOA in California. One of the owners fell so far behind on their fees, that the HOA recently foreclosed on their property. We now have discovered that their is an existing 2nd mortgage (with one bank) and a first mortgage (with another bank). How do we get title for this property so that we can either charge rent to the non-owner renters or evict them so we can sell the unit? Will we be responsible for the 1st and 2nd mortgages?
    0 Votes

    • 35x35
      May, 2011
      Bill
      As a lienholder, the HOA stands in line behind the first and second mortgagees. In theory, it is possible for a lienholder to foreclose and take possession of the property, but the property is still subject to the first and second. As a practical matter, when the first and second get wind of the HOA's foreclosure, they too will foreclose.

      Consult with a California lawyer who has experience in real estate law to learn more about the HOA's rights.
      0 Votes

  • 35x35
    May, 2011
    Lupie
    I have a question. My second loan was 30k with a private investor. First was 177k. He foreclosed after 4 non payments. He bought the loan back at the trustee sale. My question is, wasn't he suppose to payoff the first? And if so, he didn't instead he modified the loan under our name and he tried to reinstate home insurance policy i had cancelled. I had a lawyer but, he sat on the case and now no one wants to help us. In this situation, what can we do? It's been very stressfull. And now the mortgage statements are coming to my new address. I know he's renting the house and paying the mortgage. But, what would be our new step. To top it off, we called the lender to get copies of the financials that he used to modify and copies of the actual contract of the modification but we get the run arounds. We were able to get the payment schedule with the forged signature. But, that is all. Next step is a civil complaint to the courts. But i hope this is enough to win. Any other suggestions i could get would be appreciated. Thanks..
    0 Votes

    • 35x35
      May, 2011
      Bill
      Consult with two lawyers:
      1. Consult with a lawyer who has experience in real estate law or contracts law to learn what your rights and liabilities are for the property and the first mortgage.
      2. Consult with a lawyer who has experience in legal malpractice cases. If, as you suggest, your first lawyer was incompetent, then you have a cause of action against him or her and can recover your damages from his or her malpractice insurance carrier. Some malpractice lawyers work on a contingency basis, so there will be no out-of-pocket costs for you if you file a malpractice lawsuit.

      A property can be bought and sold subject to a mortgage.

      0 Votes

    • 35x35
      May, 2011
      Lupie
      Hello again, I've seen different lawyers but still don't get any answers. It seems no one wants to help. And the one that will, want upfront. I lost everything job my home and my kids had to live with my family. I'm taking the private investor to court and also, the lender. I had sent the lender a letter stating that the 2nd had foreclosed so they were aware of the situation. Never responded. I figure they would take care of it but they didn't. So i cancelled the insurance policy and anything under our name. Luckily i did if not i would have not known that the private investor tried to reinstate the policy. And something just clicked. We called the lender and we found out that a modification was indeed done. He didn't even wait for me to leave the house and he had done it. After that i went to different lawyers and they said that they would look into it, but never signed a contract and i would call once every week but, he never responded. Switched again to another lawyer and nothing there. By this time a year went by and nothing had been done. My worry now is the statue of limitation. It got to the point where i was thinking that the lawyers were bought out. Finally, i just filed a complaint at the court house. Lender responded to the complaint and i will be seeing them in court next week. And next month i will be in court again with the private investor for fraud. Can you tell me where i can find the California laws for 2nd foreclosures? And also, if he was required to payoff the 1st. After struggling with the lawyers, i decided to go pro per. No one would give me a straight answer and just said to go to civil court and get him on fraud. But, his lawyer is stating i have nothing. So here i am again. Any suggestions?
      0 Votes

    • 35x35
      May, 2011
      Bill
      The opposition's lawyer is duty-bound to represent his or her client zealously, and has no duty to assist a pro per opponent in preparing their case. I really want you to keep trying to find a lawyer to help you with your case. Regarding your question, see the Bills.com resource California Mortgage Foreclosure Process for an overview of the rules for a non-judicial foreclosure. The link I just mentioned contains hyperlinks to relevant California statutes.
      0 Votes

  • 35x35
    Apr, 2011
    Tom
    Hi Bill. I have a first mortgage in California 177K and a second with a different bank for 155K I was in a mortgage modification with the first mortgage for one year as a trial. I was never late making a payment including prior to the modification. 3 months ago they informed me I don't qualify for the modification. Now they want over 14K due now and stopped accepting any payment short of that amount. They are pursuing fore closer and have a sale date of May 10 the value of the house is around 300K . My second is current and they would like to modify the loan after the first is modified. The reason the first refused to make the modification permanent is due to not enough income. So I rented out a room and have been reapplying. With the notice of a sle date it appears they don't think it will happen. When they auction it off will the sale price be just the amount of the first? Thanks for your help.
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      Bills.com receives many messages from readers in situations similar to yours, and it is frustrating because it appears the mortgage servicers are not making honest attempts to modify mortgages, but I digress.

      If the first forecloses and let us say the auction price is $300,000. In your situation, the first will receive its $177,000 plus costs, leaving the remainder for the second.
      0 Votes

  • 35x35
    Apr, 2011
    sobar
    Home is in CA. I have a 2nd loan (HELOC) with a lender who is also lender for my first loan. I am 7 months behind both my mortgages and first loan lender issued a "notice of default" and foreclosure date may be around end of june. Mean while, my 2nd loan lender agreed to "settle" the loan for less than owed and send a 1099. This may take a month. If I get my 2nd loan settled with a 1099, can I work with my first loan lender to avoid foreclosure by making some minimum payments. I can afford my first loan ( but not 2nd) and trying to save home. If I bring back my first loan to good standing now, can I save my house assuming that I'll make regular payments from now or will the 2nd loan lender come after me? Can you please share your insights? Thx
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      The servicer on your first mortgage really does not want to foreclose. It would love for you to get back on track with your payment. Call your first mortgage servicer immediately and repeat what you wrote above. Keep careful notes of all of your conversations, including the names, dates, and what was discussed in each conversation. I would be stunned if the mortgage servicer does not welcome your news with open arms.
      0 Votes

  • 35x35
    Feb, 2011
    Holly
    I am renting my father's house and he is letting the 1st mortgage go into foreclosure. He told me that he has to pay the 2nd mortgage (Mortgages are from separate banks). Is it true that my father has to pay the 2nd mortgage or does the 1st mortgage buy out the 2nd mortgage?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      Your father must pay both mortgages or risk foreclosure. Your father should consult with a lawyer in the state in which the property is located to get advice on how to quit the property with a minimum of damage to his credit score and pocket book. I am curious as to why he has not considered a short sale or deed in lieu of foreclosure. He should discuss these options with a lawyer.
      0 Votes

  • 35x35
    Feb, 2011
    emanuel
    I have a Rental Quad in georgia, it has a 1 st mortgage of $ 68K with HSBC and a second mortgage of $143K,with BOA I have not paid the second for 2 months, the property has been revalued by the county for 180K , i want to know if second mortg. is likely to forclose on the first and buy it out, or will they just play hardball with me for a while till they start negotiating with me for a lump sum?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      The county tax assessor's property valuation is, from my experience, useless as an accurate estimation of a property's fair market value. Ignore it, and make your own guess of the property's value based on recent comparable sales in your area. Regarding the future behavior of the first and second, who knows? Because the mortgage servicers are acting so erratically, it would be folly for me to guess how they will respond to your default.
      0 Votes

  • 35x35
    Feb, 2011
    Angela
    Just received a Notice of default and intention to foreclose letter (not certified) from an attorney of the second mortgage company. All total with 1st and 2nd mortgage my house is worth what I paid for it 7 years ago. I have tried refinancing, tried selling but the house is no longer worth anywhere near what I own plus houses are not selling in this area ( if a seller is lucky and have the time, houses sell in 2 years with great mark downs)I have been paying the 1st mortgage only; I have lost 70% of my income. I have spoken with 2nd mortgage and stated EVERYTHING about my income changes, there is no more money coming in, I have borrowed from everyone I know including employer. I have had excellent credit and only stopped paying them 4 months ago. I live in Illinois. I am lost on what to do, There is no money to pay an attorney. 1st mortgage is 220,000 2nd is 39,000.
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      You are in a tough spot with limited options if you have exhausted all of your funds. If you can still scrape together a lump sum, consider the strategy discussed in the Bills.com resource Negotiate Mortgage Settlement to resolve your second mortgage. Otherwise, talk to your mortgage servicer about a short sale.
      0 Votes

    • 35x35
      Feb, 2011
      Serg
      Hi Bill.com. I am in my later 30th. I have bought a condo in SoCal for 505K with two loans from Countrywide 404K and 101K (both are Fanie Mae). I have never been late or short on payment and have nearly perfect credit score. I have also a new vehicle loan $550/m, in case if that is relevant. Bank of America (current loan owner) has just "sold" 101K loan to a different company that is part of BAC I think. The property value at this point is 370K or so. A few month ago I have enquired about possible Loan Mod by calling Bank of America directly. Is them selling my secong loan to a different company some kind of scheme to prevent me from Loan Modification or other possible negotiations? My current plan is to stop paying both mortgages and wait for lenders to contact me. At this point I am interested in Short Sale, Deed in Lieu, or possibly Foreclosure. How the three options will affect my credit score and ability to buy another property? Will there be a problem doing short sale in situation where the two loans owned by different lenders? I am under impression that short sale will not affect my credit score by as much that is why I am asking this. Will making payments on 101K mortgage and NOT paying 404K mortgage will delay foreclosure in any way? Will partial payment to both lenders slow down their action for foreclosure or short-sale negotiations? This question might be a bit unethical, but I do not see that what BAC does is entirely ethical either so... If I request for 6 to 18 month of delay on payments (so I do not have to pay anything for that period of time) then still not pay, can I negotiate a short sale or it is a foreclosure only moment? Why do I ask this... If I do sufficient upgrades to my condo it can sell for over 400K an amount sufficient enough to pay off the first loan and make the property sellable in a short period of time (the area is pretty hot, but many choices are available). Not paying first mortgage for 6+ month will provide me with enough cash to do necessary upgrades and pay of some other small debt that I have in credit cards 3K or so. Obviously that would matter only if I can retain my current credit score which is in 800 range at this point. Are any of the above actions will result in plummeting my credit score to below 700. I know that above sounding a bit hectic, but basically, since my wife and I had a "surprise" baby daughter just in last September, our financial situation has changed somewhat and the size of condo will no longer be adequate for the family within next few years anyway. By the way, my wife is not on this mortgage and her credit score should not be affected by any of the above... or would it? If not, perhaps she can purchase our next home since my credit might end-up being less than desirable :) Thank you, I am pretty desperate and would not want to delay inevitable. I appreciate any advise on my situation.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      You asked nine questions, which are answered below:
      1. Mortgage servicers sell mortgage loans they do not find profitable. If, however, you were delinquent in paying the $101,000 second mortgage, it is possible that Bank of America transferred your mortgage to a remediation department. I can only speculate why your second mortgage moved from one group at Bank of America to another.
      2. Regarding your credit score, it is not the short sale or deed in lieu of foreclosure that harms a consumer's credit score, it is the delinquent payments. If you can find a way to qualify for either without becoming delinquent, your credit score will not decrease significantly. However, if you are delinquent on your mortgages, expect to see a significant drop in your credit score if, as you mentioned, your credit score is in the high 700s. A foreclosure is quite harmful to a credit score. Read Mortgage Foreclosure in California to understand your options to foreclosure.
      3. Short sales are complicated even if the mortgages are serviced by the same company. Why? Each negotiator represents a different investor. You mentioned your two mortgages are Fannie Mae, which may make negotiations less complex.
      4. One tactic that some Bills.com correspondents have reported successful is ceasing payments to get the mortgage servicer's attention. Make the monthly payments to a separate savings account. When you begin negotiations, show the negotiators your bank statement showing you are saving the payments, and are willing to catch up if the servicer forgives the interest and penalties.
      5. Partial payment is the same a non-payment, legally speaking. I see no advantage to making a partial payment. I do see a huge advantage to, as I mentioned above, saving the payments and using the balance of that separate savings account as leverage in your good-faith negotiating.
      6. The mortgagee has the legal right to initiate the foreclosure process the moment you become delinquent. I cannot say if the mortgage servicer will be sympathetic if you ask to live in your home without making payments, or use the funds to remodel the property. Read California Mortgage Foreclosure Process to understand the mechanics and timeline of a California Foreclosure.
      7. As I mentioned, delinquency is the enemy of a high credit score.
      8. If your spouse is not a co-signer on the mortgage, then whatever you decide to do with the mortgage will have no impact on your spouse's credit score.
      9. If your spouse has a high credit score, a two-year work history, a low debt-to-income ratio, and a down payment, then your spouse will qualify for a mortgage.

      Read California Collection Laws to understand your rights and liabilities as a California resident should you chose foreclosure.

      0 Votes

    • 35x35
      Feb, 2011
      Serg
      Thanks for a quick response. I am not delinquent on the 101K mortgage. As I said before. I have never missed or was ever late with paying the mortgage payments. The reason why BAC is transferring my 101K loan elsewhere is unknown. Reading over your response I have only two questions. You are saying that foreclosure is not what affects the score, but delinquent payments do. Does it mean that if I "request" foreclosure and pay mortgage until it is time to vacate property, I will retain the high credit score? The second question, If I do not pay the mortgage payments for a couple of month and use the money on improvements which will guarantee sale and at a higher value. Put it on the market for short sale AND RESUME mortgage payments. In case of acceptable to BAC short sale will my credit score suffer significantly since I have missed say 6-8 payments and is incapable to repay that back (since I have spent the money on improvements and expenses associated with sale of the property)? Will my credit score be affected just as much if I do not pay for 5-6 month and then just foreclose without repaying anything? And thank you again for clearing up some of the points from my original post.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      A foreclosure in and of itself will damage a credit score. The loftier your credit score the more harm a foreclosure will cause. In most foreclosures, the harm comes in a one-two punch of a) delinquent payments followed by, b) the foreclosure.

      I realize the economic argument you make for diverting your mortgage payments into a property that will, potentially, fetch more in the market if remodeled. The problem is convincing your mortgage servicer to go along with your plan. It is worth proposing your idea, but if I had to guess at its chances for success, I would say they are low.
      0 Votes

    • 35x35
      Feb, 2011
      Serg
      I am amazed how fast you guys respond it is almost a live chat. I can not stress enough how thankful I am. Basically, I am not looking for "permission" from lender to go with "the plan", but just go along with it. Granted that I will loose in credit score for being late on the payment in either case of Foreclosure or short-sale. I understand now that Foreclosure will further lower my credit score after it was already lowered by the missed payments. Will a successful short sale after the missed payments, further lower my credit score just as a foreclosure would or the damage will be significantly less? On the other note, when applying for a home loan, is the overall household income that is considered or just the income of the applicant. For example if my credit is "ruined", but my wife's credit is good, will my wife be qualified for a home loan because the combined household income as per W2 is higher than required, or will she NOT qualify because her own paycheck would be pretty low for the loan amount. As the last question, how long does it take to recover from late payment+foreclosure credit mark if all other credit "ventures" are top notch, paid on time, etc? P.S. I promise this is my last couple of questions. Thank you again.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      In regards to your credit score, the negative credit impact of a short sale is generally significantly less than that of a foreclosure. A short sale will not appear as a foreclosure on your credit report, and therefore only the previous delinquency on your mortgage will appear.

      Although the delinquencies and change of status on your mortgage loan will certainly lower your credit rating, from my experience, the negative impact is usually much less than the negative credit implications of an actual foreclosure. If you must choose between a short sale and allowing your home to go into foreclosure, from a credit perspective, a short sale is probably the wiser choice.

      Prospective mortgage lenders are concerned with the income, debts, credit rating, assets, work history, and loan-to-value ONLY of the applicant. If your credit rating will prevent you from qualifying for a mortgage, then your income will NOT be used in determining if your wife can afford to make the mortgage payments.

      There is no definitive answer on how fast your credit rating will bounce back, from the time that you started implementing pristine credit practices. A lot depends on the number of accounts that show in good standing, the type of accounts that you have, and the length of time that have had the accounts. A person who has a car payment, a student loan payment, three credit cards, and an installment loan for furniture will see his or her credit improve more rapidly than a person who has only two credit card accounts, even if those accounts are maintained meticulously. I advise trying to have a variety of account types, if possible. No matter how severe the damage to your credit score, if you move forward taking the right steps, you can have excellent credit again within two years.
      0 Votes

    • 35x35
      Feb, 2011
      Serg
      This is a good notion. I have a few credit cards with relatively low balances that I pay on time and above minimum payment. Car loan that I will have to pay for next couple of years. And a Gold Amex that i put a couple of grand on and repay every month. From reading you response, it looks like I have a pretty good chance of getting back to my credit score pretty fast. I most likely will go ahead with my short-sale plan, and see what pans out after the actual mitigation will take place. I will most certainly will come back here with the results of my ordeal. Thank you Bills.com
      0 Votes

  • 35x35
    Feb, 2011
    Greg
    I have a first mortgage for $211,600 and second mortgage $118,500 on a house whose value is $210,000. Both are owned by Wells Fargo. We ran into trouble paying the mortgages in late 2009 due to job loss. We worked out a temporary modification with the first and with the second. IT appears that it took too long to work out the second, as it now shows as "Charged off as bad debt" on my credit report. On another credit agency it's listed as "charged off - speciall circumstance call leender". The thing is we have been paying WF since we finalized the work out. I guess my question is if the loan was charged off and my credit has already taken the hit, why should I continue to pay the second when the house is so far under water? Should I stop paying and wait for a debt collector to call then try to settle the debt? I am confused about whether WF still actually has the 2nd mortgage since it shows as written off??
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      What is tripping you up here is the term charge off. To paraphrase one of my favorite movie characters, "You keep using that term. I do not think it means what you think it means."

      Charge-off, also called write-off means the creditor moved the account from the current accounts ledger up to the general ledger's bad debts line. Charge-off does not mean the following:
      0 Votes

    • 35x35
      Feb, 2011
      Greg
      Thanks for your reply. Yes, I completely undestand that "charge-off" is an accounting term and that the debt is still valid and that they could technically foreclose on the property if it made financial sense. Sorry for my lack of clarity. Thanks for pointing out that the entity listed on the credit report is who owns the debt. I guess in stressful situations you sometimes can't see the obvious. The debt is still listed under Wells Fargo but the location says HEQ Credit Bureau, which is different than it is on old credit reports or for the 1st mortgage. This appears to be their internal loss-mitigation department. If I continue to pay on the 2nd, which I am seriously contemplating not doing, will the credit report every change from "charge off-bad debt" back to "pays as agreed"? or will it always show as a charged off debt? Since my credit has already taken the hit for the "charge-off", if I stop paying now will that affect the score further or is the damage already done? I will do as the linked article suggests and seek out an attorney. Any suggestions for trusty attorney's (oxymoron?)in our area (Tampa Bay area) would be appreciated. Thank-you!
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      There is no consistent manner that creditors handle reporting the aftermath of a charge-off to the consumer credit reporting agencies. If the collection account stays internal, it is possible for you to negotiate a change to the notation. If the creditor assigns (i.e., sells) the collection account to a collection agent, then the damage is done. Regarding your question about continuing to pay the second, most of the damage to your credit score has already occurred. However, your credit score should not play into your decision of whether to default on your second. The stakes are much higher than your credit score, and involve the possibility of filing bankruptcy and risking foreclosure.

      Most lawyers are honest, hard-working people who endure three years of law school and the madness of bar exams to earn the privilege of helping people and organizations solve tough problems. Some lawyers turn out bad, and unfortunately those are the ones the press covers and we remember. There are many lawyers, but you need one with skills and experience to meet your needs. See the Bills.com resource Find a Lawyer to pick the right person for your requirements.
      0 Votes

  • 35x35
    Jan, 2011
    Gary
    My wife and I had 2 mortgages on our home. We went through a divorce and she was living in the house while we attempted to sell it. She then moved out and stopped paying both and then filed for bankruptcy. The 1st mortgage foreclosed on the house and "purchased" the house themselves at sheriff's sale for $317K. 1st mortgage principle balance was $272K. 2nd mortgage was at $100K. I received a 1099-A for the 1st mortgage and nothing so far for the 2nd. My credit report shows the 1st mortgage closed and the 2nd mortgage debt as canceled. If I recieve a 1099-C for the 2nd mortgage to I claim 50% of the debt cancelation since I am a co-borrower with my ex? Could the 2nd mortgage company have sold our debt to collections and could they pursue me for some amount since my ex filed bankruptcy?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      Consult with a lawyer in your state who has experience in bankruptcy law. The answers to your questions can be found in your state's statutes and the bankruptcy discharge. For example, if you are in a non-recourse state, then you have no liability for the mortgages if they qualify. Also, you may not have personal liability for the mortgages depending on how the discharge was worded.
      0 Votes

    • 35x35
      Feb, 2011
      Sal
      I am glad that I came upon this website. I like many have the same problem. My first and second mortgage are with the same bank. 268,000 owed on the first and 31,000 on the second. Second mortgage is killing me due to divorce. Can't refinance because my house recently appraised at 214,00 after a high of 468,000 before the real estate meltdown. My first mortgage is interest only and the payments are low. I was denied a modification due to this. I am 5 years into my second mortgage. I am in the process of getting a modification on my second mortgage. If this is denied I am seriously considering to stop making the payments only on the second mortgage as I will no longer be able to afford them with the loss of my wife's income. My wife is willing to sign an quit deed but realizes that she is still financially responsible for the loan. I want the second mortgage modification so that I can reorganize finances to hopefully refinance within two years. I am also considering a short sale in the event that the second mortgage modification is not approved. Haven't decided what to do yet. I am doing everything I can to save my home. You have already answered most of what I need to know about second mortgages and foreclosure. I am in constant contact with my bank. Just don't know what the best course is for my current situation. Thanks.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      Like others in situations similar to yours, you want to stay in your house, but your finances are working against you. Go back to the beginning when you were looking to buy a house. You sat down and did the math. What can you afford? The rule of thumb is spend 30% of your gross income on your mortgage(s). Where are you today when you do the same calculation? If the numbers are against you, they are simply against you. You will be able to survive for a while, but when the inevitable big expense comes along, you will be swamped.

      I am not trying to discourage you. I am trying to encourage you to look at your finances dispassionately. If changes to your life make it so that you can no longer afford your property, sell it as soon as you can, and rent or buy a property where the payments are in line with what you can afford now.
      0 Votes

  • 35x35
    Jan, 2011
    Paul
    I have the following situation: i had 2 mortgages, one for $115k and another one for $200k for a property with market value of $175k. i left the property and the second mortgage filed for foreclosure and sold the property for $122k. Now the first mortgage is initiating the foreclosure... 5 months after the sale... acording to my lawyer the buyer made a terrible mistake because he/she will need to afford the first mortgage? my attorney says that the buyer in reality paid $237k for the apartment ($122 in cash and the debt on the first mortgage of $115k) is this correct? how this could happen?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      The buyer purchased the property subject to the first mortgage. He or she either did not do due diligence when purchasing the property, or bought it knowing the mortgage was in place.
      1 Votes

    • 35x35
      Jan, 2011
      qiana
      So what if the second foreclosed and never paid the first and also never sold the house, who is the owner? The first is calling trying to work something out with me when i lost the house 2 years ago.
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      A mortgage/deed of trust is actually two documents: A promissory note and a mortgage. The note is your personal promise to repay the loan. The mortgage is the right of the lender to foreclose on the property if you do not repay the loan. The fact that the second foreclosed does not remove the rights of the first lender to a) compel you to repay the loan, or b) foreclose on the present owner of the property.

      In the situation you described, the second became the owner when it foreclosed and forced you to quit the property.
      0 Votes

    • 35x35
      Jan, 2011
      qiana
      The first mortgage is saying that I am still the owner. The second mortgage was from a hard money lender and he has not sold the property and has not paid off the first mortgage in two years. He rents out the property and also has not paid the first mortgage in 2 years either.
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      Your county clerk may have a Web site where you can enter the street address of your property to learn who the recorded owner is of the property. If you name is still recorded, then consult with an attorney immediately about your situation.
      0 Votes

  • 35x35
    Jan, 2011
    Craig
    Last September we finished our five year Chapter 13. Since then all kinds of debts have come to us...all medical. Also our second mortgage is giving us a lot of grief. When we were in our 13 anytime we got behind on our first Mortgage they would notify our Attorney and we would resolve the back payments. We were never notified by the second mortgage that we were behind...the second was sold and we didn't find out until after the 13 was discharged...I feel like I need a 7 or 13 to save our home....????
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      For a second Chapter 13 to be discharged, two years must pass from a prior Chapter 13 discharge. If the previous bankruptcy was a Chapter 7, 11, or 12 case, then the debtor must wait four years. (Eight years must pass between Chapter 7 discharges.)

      I think it unlikely that a judge would allow you to file for a Chapter 7 or Chapter 13 five months after your Chapter 13 was discharged unless there are some extraordinary (and I choose that word carefully) circumstances that warranted an exception. Consult with your bankruptcy attorney to learn if a Chapter 7 or 13 are available to you. Discuss your options for handling the second mortgage with him or her, too.

      Consider debt settlement (also called debt negotiation and debt consolidation) as an alternative to bankruptcy. Debt settlement would likely be an effective strategy for handling the medical bills that are causing you distress.
      0 Votes

    • 35x35
      Jan, 2011
      Craig
      There are so many debt settlement businesses...who can you trust?
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      Excellent question, Craig. The most important suggestion I can offer you is for you to find a debt settlement company that is fully compliant with the rules set forth by the Federal Trade Commission. The debt settlement industry is now required to follow a set of new rules issued by the Federal Trade Commission that went into effect in October, 2010. These rules were created to protect the consumer. For instance, anyone now enrolling in a debt settlement program is not required to pay a service fee to the settlement firm until his or her account has been settled. This makes settlement an even more attractive option for the consumer. I suggest you apply for a free quote from one of bills.com's approved debt settlement providers.
      0 Votes

    • 35x35
      Jan, 2011
      Craig
      I talked to the person who is helping us with the second mortgage. The first time I talked to them they told me that if I could come up with three payments they would reinstate the loan...today he said he would need double that amount...is he just playing with we...is just trying to see what he can get out of me??
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      It is certainly possible you are negotiating with a cruel person who enjoys tormenting people in financial distress. Call me naive, but given the disorganized nature of mortgage servicers today, I think it is more likely you are negotiating with an overworked and overwhelmed person who is responding to changing goals, shifting priorities, and a quota he or she must make to earn a bonus. Keep negotiating. In my discussions with people who have negotiated settlements to second mortgages, the keys to success are
      1. Researching your option of filing for bankruptcy
      2. Using that knowledge as leverage in your negotiations
      3. Persistence
      4. Removing your emotion from the situation: This is just business to the person on the other end of the phone
      5. Remember that the other person is a person and respect and honesty begets respect and honesty
      6. Look to the last week of the month when the negotiator may be willing to give a little to close a deal

      If you sense that you are dealing with a dishonest, disrespectful person, ask if you can have your account reassigned to a different negotiator.

      0 Votes

    • 35x35
      Jan, 2011
      Craig
      I know the man that is working with me that I'm not to talk to anyone that calls from the mortgage company...hmmmm.
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      This is extremely suspicious. Call your mortgage company and learn if the person you are speaking to is their representative. If not, then your next call should be to the local police.
      0 Votes

  • 35x35
    Jan, 2011
    Tamara
    I have written to you before back in December. We finished our chapter 13 in Sept of 2010. During the five years of the bankruptcy our second mortgage sold our loan and didn't notify us. We had no idea where to make payments. Thought maybe they wrote it off. Now that we are finished with the bankruptcy they have stated that they want to foreclose on us. They would like to help us to reinstate our loan but are asking a huge amount of money to do this. Is is possible to file another ch 13 to save our home. We are current on our first mortgage. We have only medical debt...what can we do. We do not want loose our home. My husband and I are both handicapped and the home was built for that purpose. What can we do to save our home?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      Consult with a lawyer in your state who specializes in bankruptcy or quiet title litigation. He or she will review the facts of your case in person, and will be able to discuss your options, the odd of success for each, and so on.
      0 Votes

  • 35x35
    Jan, 2011
    Jerry
    2nd mrtg for $68,800 was discharged in chapter 7 Bankruptcy in 2008 and did not reaffirmed. Citimortgage also charged off the loan a few months later and they sent it to their recovery department. I have not made a payment in over a year- i've tried sooo hard to settle this debt with no success, they say their recovery departmnt doesn't do settlements for less than 50%. Citi has never threaten to foreclose, whew!. About a year ago i discovered that citi failed to record the mortgage, records at the county show only the 1st to whom i owe approx $244,000 same as property value. 1. Is Citi able to record now even though debt has been discharged? 2. If citi does record now will they violate the discharge injunction? 3. Is there a valid reason to record the mortgage or am i entitled to damages for a willful violation of the discharge injunction if they do try to record? 4. Would it be in my best interest to file a quite title suit? 5. Since their only way to foreclose is through judicial mean, doesn't that entail a law suit? Remember.. they can't touch me personally. 6. Or are they out of luck? 7. Or am i out of luck? P.S. Im passed the moral issue at this point, so don't go there!!:)
    0 Votes

    • 35x35
      Jan, 2011
      Bill

      You ask fascinating questions about a series of facts that were not covered in either my real property or bankruptcy classes. Consequently you should consider my thoughts as speculation. You need the help of a lawyer in your state who has extensive experience in real property law. I might also suggest you consult with a real property professor at your local law school. I cannot resist offering my guesses to your questions.

      A mortgage consists of two documents: a promissory note (or bond); and the mortgage itself. The note is the buyer’s personal promise to make the repayments. If there is a foreclosure against the property and the foreclosure sale does not yield enough to cover the outstanding mortgage debt, the note serves as the basis for a deficiency judgment against the borrower for the balance still due. The mortgage itself is a document that gives the lender the right to have the property sold to repay the loan if the borrower defaults. Since the mortgage in effect gives the mortgagee (the lender) an interest in the land, the mortgage is recorded at the county clerk's office. The mortgage runs with the property, not the borrower.

      In chapter 7 bankruptcy, the borrower may discharge his or her individual liability under the promissory note. This does not mean the borrower no longer needs to pay the mortgage. If the borrower fails to pay, the lender may foreclose and take the house because the mortgage is not altered in the bankruptcy.

      1. The promissory note may (or may not depending on your final bankruptcy order) have stripped the liability from you personally in the bankruptcy. The question becomes, "May an unrecorded mortgage be recorded following a mortgagor's bankruptcy?" My guess — note my word choice — is the bankruptcy goes to the promissory note and has no impact on the mortgagee's right to record the mortgage. Were I your attorney, I would study the exact language of the bankruptcy discharge to see what the court ordered. Next, I would study my state's laws on this matter to learn what the state courts have decided on this issue. I would also look to federal appellate opinion to see if this has been decided.
      2. Again, whether the mortgagee can record the mortgage may be answered by the bankruptcy order or state law.
      3. I confess I do not know what a discharge injunction is. Whether you have a cause of action if the mortgagee files is a question I would answer after conducting more research. My guess is no, because there is a genuine question of law regarding the status of the mortgage.
      4. A quiet title action would almost certainly answer all of your questions here.
      5. If you have a deed of trust, then the mortgagee has the option to foreclose non-judicially. If you do not have a deed of trust, then the only means to foreclose is judicially — in other words the court system.
      6. Without doing more research, I would not say the mortgagee lacks recourse. If it can record, it has a means to reach the land. If it cannot, then it is left with no recourse.
      7. Again, I cannot say whether the mortgagee lost the right to record the mortgage.

      As I mentioned at the beginning of my reply, you need more in-depth legal help than I can provide. Please keep me informed as your case progresses

      1 Votes

    • 35x35
      Feb, 2011
      jerry
      Hi Bill, In regards to my case, i have come to a conclusion... I have decided to let sleeping dogs lie, the reason i have come to this conclusion is because Citi has an unrecorded mortgage that has been discharged through chapter 7 BK. They have never threaten to foreclose, property value is just not there to make it worth their while. At this point i'm able to refi or sell the property without them knowing about it, but my plan is to stay here for at least another 15 years. Hopefully i get to sell before they try and foreclose. They cant foreclose non-judicially because the mortgage is not recorded, and i believe they will be walking on egg shells if they file a lis penden or a NOD due to discharged. I'm just not going to worry about it at this time, i'm happy with my first and i'm happy with my second, for now! I'm 31 right now, will sell when i'm 45 in 2025 for a profit. What do you think of my long term stragedy? Your opinion is welcome. Thanks.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      Who really knows if your strategy is viable in the long term. The mortgage servicers continue to not spend enough money to upgrade their systems to handle the foreclosures and modifications. We continue to see servicers take contradictory actions like foreclosing on customers who are in the middle of loan modifications. We continue to see evidence of the servicers cutting corners in basic tasks like reading and signing legal documents. What caused your second to not be recorded? Was the mortgage misfiled and never to be found? Sent to the trash mistakenly? In your file and simply overlooked? Who knows.

      I would be remiss if I did not recommend you spend an hour with a California lawyer who has experience litigating property law. Perhaps doing nothing is the wisest plan for now, but I think it wise to put a contingency plan in your pocket in case a couple of years down the road someone at your servicer wakes up and discovers the unfiled mortgage and decides it is a good idea to file it.
      0 Votes

  • 35x35
    Jan, 2011
    Bob
    I've got a similar scenario: I live in California and my house isn't worth the amount I owe. I have 3 mortgages on the property, and all 3 are with different lenders. I received a loan modification on the first mortgage and the third (which I can barely afford) but the second mortgage did not follow suit and modify. I cannot afford to pay the second mortgage and haven't for 12 months now. The second went into "charge off" and is now owned by United Guaranty (a residential insurance company). United Guaranty sends me monthly statements (that I do not pay) in the same amount of the original loan. My question is: what happens next? Can the owner of the second mortgage debt force a foreclosure? Keep in mind that the current property value is less than the amount owed on the first mortgage and there is negative equity in the property. My next question is this: Should I be paying my third mortgage? Before the 3rd mortgage holder modified my loan(which is interest only for 2 years, then it returns to the original payment amount) they threatened with "charge off"...not "foreclosure". The third mortgage is a secured debt and was taken out to improve the property. What are my options in dealing with the debt holder of my second mortgage amount (United Guaranty)? Bankruptcy? If bankruptcy is the option, would it be wise to try and include the 3rd mortgage in that process?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      Any mortgagee (first, second, third, and so on) has the legal right to foreclose. As discussed in the original answer above, if the mortgagee has a negative financial incentive to foreclose, it will not unless it thinks it will lose even more money by waiting. Regarding foreclosures, we as a nation are so far into uncharted territory mortgage servicers are making up the internal rules and policies as they go along. Exactly when each of your mortgagees will foreclose is anyone's guess, and I would be a fool to give you a timetable. For example, several blocks from my home is a house that sat vacant and with the owner making no payments for three years before Bank of America finally foreclosed. Am I saying that if one of your lenders is B of A that it will take three years of non-payment before foreclosure? No, but really, who knows?

      Regarding United Guaranty, it owns either the second deed of trust or the rights to the collection account. Consult with a California attorney who has experience in bankruptcy about how a Chapter 7 or 13 will affect the mortgages.
      0 Votes

    • 35x35
      Jan, 2011
      Bob
      Thanks for the quick reply Is it possible to go through bankruptcy and retain debts such as a first mortgage, vehicle loans, credit cards, but also dissolve other debts such as second and third mortgages? I'm not looking for a free pass in my situation, I'd love to settle on a reasonable amount with my second and third mortgage holders, but I just can't afford the monthly payment amounts on those debts anymore due to the current economy. Thank you in advance
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      You should speak to an experienced bankruptcy attorney, so you get authoritative answers to your questions about what can be excluded from a bankruptcy filing. A separate, small suggestion is for you to attempt to negotiate a reduced pay-off on your second and third mortgage holders. If you do not have enough equity in your home for a foreclosure to result in the home being sold at high enough a price for the second and third mortgage holders to recoup what you owe them, they may be amenable to settling your debt.
      0 Votes

    • 35x35
      Jan, 2011
      Bob
      Thanks again for the response... Do you have any tips or advice when attempting to settle with mortgage holders on a reduced payoff amount? Anything I should be sure to get in writing? I am going to attempt this prior to exploring the bankruptcy route. I sure hope they (the debt holders) will work with me in my situation. Thank you again
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      The key terms and conditions should include the amount(s) you promise to pay and when, and a clear explanation that the settlement satisfies the debt. In law, this is called an "accord and satisfaction," and you may want to use that phrase in your contract. I foresee three potential trouble areas in a settlement agreement:
      1. Does the contract make it clear the debt is satisfied, and any remaining balance in canceled by the creditor?
      2. Does the potential contract cover the 1099-C and cancellation of debt income issue? If you are dealing with a collection agent and negotiate a settlement, it need not issue a 1099-C.
      3. How will the creditor report the debt on your credit report? If possible, negotiate for a pay for delete.

      See the Bills.com resource negotiate debt to learn a few tips and techniques when negotiating debt.

      0 Votes

    • 35x35
      Jan, 2011
      Jim
      I have a first and second mortgage that I wrote off in a chapter 7. My home is upsidedown by about 100,000.00 My second morgtgage is around 60k and the original price paid for the home was 315,000. My question is that if I am current with the first mortgage and stop paying on the second, because I really cannot afford it, would the private investor for the second mortgage try and forclose? It would not make much sense to me that they would, right?
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      Jim, I think how your second mortgage holder reacts depends on a lot of factors. It may not make a lot of financial sense for the second mortgage holder to pursue a foreclosure, because a sale of your home at today's value will leave them without any of the sale proceeds, as they will all go to the first mortgage holder. Still, starting a foreclosure process may be the only way the second mortgage holder has of pressuring you into finding a way to pay. Have you tried working on a loan modification with either of your lenders? If the second mortgage holder does not have a full financial statement from you that demonstrates that you lack the income or any asset that would allow you to pay them, they may want to pursue the foreclosure. Aside from your financial situation, other factors that affect whether or not they pursue a foreclosure is how they expect property values in your area to perform in the future and what their loan portfolio looks like.
      0 Votes

  • 35x35
    Dec, 2010
    Susan
    Like others, we're struggling to make the payments on our second mortgage. Currently we owe $75k on the 2nd mortgage and we're 3 years into a 15-year finance. I'm not looking for a free pass on what we owe, but rather a lower payment plan that we allow us to successfully pay off the lender. The lender holds our 1st and 2nd - they don't seem interested in a lower payment plan unless I suddenly stop paying the 2nd mortgage. There's got to be better way - do you have any suggestions?
    0 Votes

    • 35x35
      Dec, 2010
      Bill
      It is unfortunate that some loan servicers require the homeowner to be delinquent on payments before allowing them to enter into their loss prevention programs, which may offer some payment flexibility. The customer service representative is reading from a script on a computer screen, and his or her call center is tasked with encouraging customers to make their monthly payments only. Call the loan servicer again and learn what you can about the requirements for entering the remediation or loss prevention program.

      Alternatively, consult with an attorney in your state who has experience in bankruptcy. Ask him or her if Chapter 13 will accomplish your goal of retaining your home at payments you can afford. There are downsides to a Chapter 13, and make sure to discuss those, too.
      0 Votes

    • 35x35
      Jan, 2011
      Steve
      Hi, I purchased my California home in 1996 as a single man. I married later that same year and in 2005 created a living trust. My wife recorded a quit claim deed in 2005 transferring whatever interest she may have had into the trust. I only created a non witnessed Certificate of Trust and never signed nor had witnessed or notarized a Declaration of trust. In 2007 I took out a $1,000,000 Heloc on my home. No other lien exists in front of this Heloc loan. The bank was given copies of the quit claim deed and Certificate of Trust and issued the loan in the trusts name. A direction was signed giving the loan proceeds to me personally. Now I am behind 75 days on the Heloc after having been denied two attempts at modification. I have a become extremely aggressive with the bank by sending out by certified mail a QWR/VOD letter as well as filing a formal complaint with the OCC for predatory lending and appraisal fraud allegations. The bank is not happy, and has indicated that they will honor my do not call request, even though I stated that I wanted written correspondence or face to face meetings only with them. I want to keep my home, but fight the legal fight! Questions; 1. Can the bank foreclose by non-judicial means, or must they only foreclose by judicial means. I was told that given that I only have a Heloc, the bank is required to use only a judicial foreclosure. I;m in California, but I'm told that the Heloc is regulated differently. 2. The long form deed of trust does have a default provision which states that the bank has the power to sell. Does this provision allow the bank to foreclose by non-judicial means? 3. If the bank Charges off the loan, does that prevent my rights to cure the default and try to get back on track with the loan? 4. Can the bank Charge Off the loan, and still foreclose, or does that Charge off prevent foreclosure. 5. My wife is suggesting that she sue me in probate court by challenging the validity of the 2005 living trust given that I did not sign nor have witnessed the Declaration of Trust. She believes that if the probate court rules that the trust was invalid, that would destroy the banks security interest in the home. Is that possible? 6. If the security interest is destroyed, the bank can still sue me personally for the $1,000,000. Can they place a lien on the home of they get a judgment? 7. Can that lien cause the forced liquidation of the home. It is still worth $1,3,00,000, or can a bankruptcy extinguish that judgment if the home is worth enough to cover the judgment? Please try to answer each question individually. Thanks, Happy New Year!
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      Consult with a California attorney who has experience in real property law. He or she will be able to review your HELOC contract and titles in person to give you more precise answers than the general observations I am about to offer.
      1. Whether the HELOC lender can foreclose judicially or privately depends entirely on the contract you two signed. I am not aware of any California law that requires HELOCs be traditional mortgages, or may not be deeds of trust. Because of what you write later in your message, I suspect your HELOC is a deed of trust, but I am speculating and that is not enough on which to base a solid answer.
      2. You mentioned deed of trust in your second question, which leads me to concluded you have a deed of trust (common in California and most other western states) and not a traditional mortgage (common in eastern states). If your HELOC is a deed of trust, then the lender has the right, almost certainly, to foreclose non-judicially. Again, an attorney who reviews your deed of trust documents will give you a precise answer in a few minutes.
      3. Charge-off means almost nothing to the debtor from a legal perspective. Charge-off is an accounting action where the creditor moves the account from the current accounts book to the non-current accounts book. This move does not change the legal rights of either party.
      4. Charge-off does not prevent a creditor of a secured debt from foreclosing on the property (in the case of real property) or repossessing the property (in the case of personal property, such as a vehicle).
      5. I lack the imagination to understand how your failure to follow the execution rules in placing the property in a living trust would destroy the bank's security interest. I can see how not following the rules would make the trust defective, but a defective living trust would not have any impact on the creditor's rights. Again, I urge you to consult with an attorney who can study this issue first-hand.
      6. Assuming the bank has no interest in the property, your deed of trust almost certainly has language in it that gives you personal liability for the loan. Regarding a lien, yes, California law allows judgment-creditors (assuming the bank asks for and receives a judgment against you for the debt) to place a lien on a judgment-debtor's real property.
      7. California's homestead law does not prevent the forced sale by a lienholder, but does exempt up to $150,000 of equity in a home depending on the homeowner's age.

      As I mentioned at the beginning of my message, I urge you to consult with a California attorney regarding your situation.

      0 Votes

    • 35x35
      Jan, 2011
      Steve
      Thanks for your reply. 1. How many times in California, can the borrower satisfy a Notice to Cure Default request? 2. Is the bank obligated to keep issuing a Notice to Cure Default each and every time you satisfy the one before. I have already covered one Notice to cure many months ago and now I'm over 75 days late once again. 3. Also, how many times can a borrower redeem after a Notice of Default is recorded? Is the bank obligated to allow a borrower to keep falling in and out of arrears? 5. Can a validly served QWR/NOD letter slow down the Notice to Cure or Notice of Default if the bank is working on complying with the QWR/VOD request. 6. What is the most immediate remedy for the borrower if the bank does not timely comply with the QWR/VOD request? Thanks.
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      Before I attempt to answer your questions, allow me to define several terms introduced in your comments. Some of what is discussed below is unique to California, and some is federal law.

      In California, a Notice of Default (NOD) is recorded in the county in which the property is located after a homeowner defaults on a mortgage. California law does not specify how long a lender must wait before it may file a NOD. A NOD must be filed 90 days before foreclosure. (California Civil Code 2924)

      A Notice of Trustee's Sale, which is usually an auction, must be given at least 20 days before the date of sale in one public place and posted on the property. (California Civil Code 2924 f) The auction can be postponed for up to a year. (CC 2924 g)

      A Trustee's Deed transfers property to winning bidder. The winner is the lender if no bid higher than the lender's opening bid is received. (CC 2924 h)

      Notice to Cure is not a written notice found in California statutes. The borrower has a minimum of 90 days after receiving the Notice of Default to cure the loan. "Curing" is legal jargon that means, in this context, the borrower makes their payments current.

      The Real Estate Settlement Procedures Act (RESPA) is a federal law Congress enacted to prevent lenders from imposing excessive or abusive settlement charges on borrowers upon closure of any federally related mortgage loan. The purpose of RESPA is to ensure lenders disclose all costs and fees associated with the loan. (12 U.S.C. 2602)

      A Qualified Written Request (QWR) is a general-purpose written communication to a lender regarding an issue with a mortgage or deed of trust. Under RESPA, the lender must acknowledge the request within 20 business days and must try to resolve the issue within 60 business days. If the lender fails to take action that causes damage to the borrower, the borrower can recover these damages under RESPA's Section 6. Typically in foreclosure situations, a QWR is used as a form of discovery tool to learn if the lender possesses all of the documents necessary to foreclose, including trust documents, title, note, mortgage, and so on. If the borrower was attempting to modify the mortgage, a QWR can be used to discover the lender's actions regarding the modification.

      Regarding your questions:
      1. California law is clear on the number of NODs that can be filed when a leaseholder is behind on their payments for apartments, mobile homes, and houseboats, but it is silent on the number of NODs that apply to a homeowner.
      2. The way I read 2924, once a default is cured, then all of the clocks are cleared and must be restarted if the borrower defaults in the future. However, there may be court cases on this point that I did not find, and I urge you to consult with an attorney with experience in California property law to research this further.
      3. As mentioned above, I do not find a limit on the number of times a homeowner is allowed to cure a default on a single loan before foreclosure can proceed. California has limits for leaseholders.
      4. A QWR is a part of federal law, and California's NOD is state. California law makes no mention of a stay-like mechanism that postpones an auction during the time in which a lender answers a QWR.
      5. The Dept. of Housing and Urban Development enforces RESPA. See the 24 CFR Part 3800 Final Rule to learn the procedures and penalties.
      0 Votes

    • 35x35
      Jan, 2011
      Steve
      I'm told that RESPA and TILA have a 3 year Statute of Limitations with respect to challenging a banks lending practices. There are many companies out there that are selling Forensic Loan Audits touting that they will uncover a significant number of RESPA/TILA violations, however, most courts are strictly enforcing the 3 year Statute of Limitations from the date of the loan. Not surprisingly, the Forensic Loan Audit companies are suggesting that the Statute of Limitations does not begin to run until you have discovered the violation. Are you aware of any circumstance where the the Forensic Loan Audit companies might be right? Otherwise, anyone with a loan that was issued more than 3 years ago maybe throwing their money away on a Forensic Audit that can't help them. Thanks
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      The Dept. of Housing and Urban Development (HUD) offers a copy of Real Estate Settlement Procedures Act (RESPA) regulations online. RESPA Statute: 12USC Section 2614 concerns the statute of limitations on bringing an action under RESPA. The statute reads in part, "...within 3 years in the case of a violation of section 2605 of this title and 1 year in the case of a violation of section 2607 or 2608..."

      I was unable to find any cases where a court interpreted Section 2614 to mean "three years from the date of discovery of the violation," which is the case for some instances of fraud. However, I hasten to add that my search was not exhaustive; there may be case law that expands 2614. Consult with an attorney who has litigated these matters in your state of residence.
      0 Votes

  • 35x35
    Dec, 2010
    Mike
    Mark, Can you share some of the details of this?
    0 Votes

  • 35x35
    Dec, 2010
    Tamara
    In Sept we had our Chapter 13 discharged. We were in the bankruptcy for five years. We are current on our first mortgage payments. Our second mortgage was also part of the Ch 13. The second mortgage sound our loan from what I understand...don't know when this happened. We were never notified of this. Now that we are out of the Ch 13 the second mortgage has sent us a letter saying they want to foreclose on our home. I guess they want us to come up with five years of payments we didn't even know where to pay. I know when we would get behind on our first M. they would notify our Attorney and then we would somehow catch up. We never received any mail notice from the second that we needed to catch up. My husband and I are both on SSI disability so we don't have a huge amount of money on hand. What can be done. The amount owed on our first is about 90,000 and what they want on the second is about 10,000...
    0 Votes

    • 35x35
      Dec, 2010
      Bill
      It is difficult for me to comment on your rights without reading your bankruptcy filing and the discharge. Return to your bankruptcy attorney and ask him or her to review the discharge and explain your rights and liabilities. It is possible the threat of foreclosure is a ruse. Or, the collection agent may be telling the truth. Your attorney will explain your rights and liabilities.
      0 Votes

  • 35x35
    Dec, 2010
    I am working on a loan modification for my 1st. Now my 2nd is wanting to start foreclosure process. If they foreclose will they take my house if I still have my 1st or will they need to buy our my 1st to gain full control over my property? I am afraid that all my hard work with the 1st will be for nothing if the 2nd sells my house. I have started working with the 2nd to see if we can work some type of program, but they said they will not stop any foreclosure process while I am gathering my information. I live in Colorado, is there anything in Colorado bylaws that can help me?
    0 Votes

  • 35x35
    Nov, 2010
    ken
    I have a 1st mortgage of $72,000 and 2nd of $20,000. Ex-wife is primary and I am co-borrower on 2nd mortgage. 1st in my name only. Ex-wife has bailed on the 2nd and is now 3 months behind and the 2nd mortgage holder is talking to me of foreclosure since I live in the house. Can they force me to lose my house?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      As explained in the original answer, in theory and under law it is possible for the second to foreclose and evict you from the premises. In practice this happens rarely, which is not to say it will or will not happen to you. You need to open a negotiation with the second to resolve the debt.
      0 Votes

  • 35x35
    Oct, 2010
    richard
    I hold a second mortgage on a residential property in HI. There seems to be plenty of equity to cover the balance owed to me now. I've started a forclosure procedure (non-judicial) and would be interested in bidding at the auction when it's held. I plan on cashing out the 1st holder. In HI bidders need to show proof of cash or equal in the amount of 10% of what they are willing to bid. I would want to bid up to the 1st balance and up to my balance too. Do I need to show proof of cash at that time equal to 10% of my bid above the banks balance??
    0 Votes

    • 35x35
      Oct, 2010
      Bill
      I do not know enough about Hawaii's foreclosure laws to make a competent observation. Consult with an attorney in Hawaii who has experience in real property law, and ask him or her to analyze the law and your plan for bidding on the property.
      1 Votes

  • 35x35
    Oct, 2010
    Angel
    I found the information posted on here very helpful..My husband and I are going through the exact same thing right now with our second mortgage.We would like to make good on our debt but do to the economy right now were unable..I have been at my wits end trying to keep our home and provide our kids with the comfort of knowing that but its a scary situation. TY for allowing me to have a bit of comfort knowing that all is not lost.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    Your question is impossible to answer precisely, because there are many relevant facts you did not include in your question. First, check with your divorce attorney. See if your wife did something improper, if she did not disclose that she took a second mortgage out without your knowledge. This raises the question of what she did with the money she borrowed and if those funds were taken into consideration in the division of property. Also, if you cannot make payments on the loans against your property, you should consult with a licensed bankruptcy attorney in your state. You may need to file for bankruptcy also. Alternatively, you may be able to negotiate a lump-sum settlement for the second. Either way, you should have the advice of an attorney before following either path.
    0 Votes

  • 35x35
    Sep, 2010
    Mike
    Hi Bill,My exwife took a second mortgage behind my back while we were still married. I was awarded the home in the judgement of divorce. I am current on my first mortgage and I do not want to loose my home. I can not afford to pay second mortgage. She and I were divorced in 2009. She is going to file bankruptcy, but the lien for second mortgage is still on home. Now company of second mortgage is threatening to forclose. My first mortgage is 98,000 and second is 47,000. Home/property value is under 100,000 at this time. What should I do.
    0 Votes

  • 35x35
    Sep, 2010
    Rexypup
    I am an attorney in New York with a concentration on personal bankruptcy. In working with lenders and homeowners, it is often necessary to get rid of subordinate mortgages. This is done by a "Pond motion" in chapter 13, when the property value is equal to or less than the first mortgage. If there is one dollar of value in excess of the first, it doesn't work. As an alternative, I need to know how much a junior lender has to realize on a foreclosure, requiring the satisfaction of the first mortgage, to make the process worthwhile (as a ratio of money received to the cost of foreclosure) assuming that the debt will be discharged in a chapter 7 bankruptcy, and that the junior lender will have only a lien.
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Consult with an attorney in your state. Ask him or her about filing a temporary restraining order stopping the foreclosure. If you have the canceled checks or other proof the bank accepted the payment, then you have a strong case. Also ask the attorney if your state has a law allowing you to sue the bank for the intentional infliction of emotional distress, which will allow you to recover your costs for the head, neck, and stomach pains the bank caused you.
    0 Votes

  • 35x35
    Aug, 2010
    DWIGHT
    I have a second morgage and I was notified myfirst morgage had been sold.When I inquired about my second morgage te bank said they could't find a second morgage.I continued paying the second morgage as I had been in the past while I continued to talk to the bank in getting a loan number ,payment book etc.The kept telling me they couldn't find the loan.After three months I received a late notice with additional charges for a late payment.I refused to pay any late payments as none of my payments were late.The only thing late was their applying the payments to the second morgage.Now I have received a foreclosure notice.I have called Hud and the attorney General and al I get is a runaround.The bank won't even talk to me so what is left?I am retired and have a good etirement so there is no problem paying my morgage.
    0 Votes

  • 35x35
    Aug, 2010
    Kevin
    Yes, the 2nd lien holder has the right to foreclosure and Bill is correct, they probably won't. The largest issue with this is that in the event of foreclosure or short sale, the 2nd lien holders as the non-foreclosing lender generally reserves the right to pursue a deficiency judgment against the borrower. Trustee sales generally do not bar 2nd lienholders from reserving that right. Kevin Kim, Seattle Foreclosure Expert
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    You may be skipping ahead a few steps. Your parent's estate needs to be probated. If in this process the trustee learns the mortgage is assumable, and assuming you are the sole heir, then you may be able to assume the loan. However, you need to take the necessary steps I outline very briefly to get there. If you inherit the property, you may not be able to assume the loan. If that is the case, you need to refinance the mortgage. I urge you to consult with an attorney in your state who has experience in wills and trusts and/or probating estates.
    0 Votes

  • 35x35
    Aug, 2010
    Janet
    My mother passed away recently and I have been in communication with her mortgage regarding assuming her 1st mortgage, but not the 2nd - home equity line of credit. I'm being told if I take over the 1st mortgage they will foreclose and force the sale of the property for the 2nd. Seems like they are not making wise business decisions in this ecomony-I've aleady checked comps in the area and 2 homes (in better condition) sold/pending sale for far less that what mom owed on her mortgages. What's your opinion?
    1 Votes

  • 35x35
    Jul, 2010
    Bill
    Your second was charged-off by the bank. It sold your collection account to a collection agent, which has the right to collect the balance due on the loan from you. Please reread my original answer above for an analysis of the economics and law regarding a second foreclosing when the value of the property is at or less than the balance of the first. Regarding your question if the second (or its successor in interest) has the right to foreclose, the answer is yes. Does it make economic sense. No! Consult with a Florida attorney who will review your situation in detail, and advise you precisely.
    0 Votes

  • 35x35
    Jul, 2010
    Manny
    Hi Bill! I have a concern regarding my home and the mortgages. First of all, we bought a new house in the Tampa, FL area in July, 2006 for $305,000 dollars. We got 2 mortgages (80/20) on the house (1st for $245,000 **Interst Only** and 2nd for $60,000). For the first 2 years we were paying the mortgages just fine, but then the financial crisis took over. By now, the house was worth $152,000. We couldn't pay the 2nd mortgage, and also missed a few payments on the 1st mortgage. We applied for the "Home Affortable Program" and got the 1st mortgage modified with a lower fixed interest 30yrs program ($250,000). I thought that 2nd mortgage was going to be charge off, but it wasn't. Bank sold it to a collection agency. We just got one letter from them...nothing else. Can the collection agency file for foreclosure against our home?? Is the bank going to let them do that, even though they (the bank) have the higher loss on the transaction?? Either way I really can't afford to pay a 2nd mortgage. What would you advise me to do?? Thanks again!!
    1 Votes

  • 35x35
    Jul, 2010
    Brian
    Thanks for the comprehensive article. It's funny that when I have a customer with an 80/20 or 80/15 loan combo from a 2006/2007 home purchase, and we get to talking about how they can refi their first mortgage under the HARP program, that it's the 2nd mortgage lender who holds the cards in the end. Because they have the power to NOT approve a re-subordination to the new first mortgage, even though the borrower would be better off financially after refinancing the first! And of course they (the 2nd mortgage bank) want a non-refundable $250 fee to simply figure out if they want to do it. Ugh!
    1 Votes

  • 35x35
    Jul, 2010
    Bill
    Your guess is as good as mine. I have two observations that may provide insight. First, the mortgage operations at the big banks appear to continue to be in disarray. Readers continue to report that banks are acting in illogical and non-nonsensical manners, including actively renegotiating a mortgage while foreclosing on that customer simultaneously. Second, your bank is most likely a mortgage servicer and does not own the money invested in your home. Your bank represents investors such as foreign banks and governments, pension funds, and so on. Each of your mortgages is probably owned by a separate investor. Also, first and second mortgage departments are separate and may actually be in different regions of the country. Therefore, due to general disarray and my guess that your first and second are owned by different investors and represented by different departments at your bank, you are seeing inconsistent behavior from your bank. Does this solve your problem? No, but hopefully it gives you insight into why your bank seemingly forgot about your second mortgage.
    0 Votes

  • 35x35
    Jul, 2010
    Grace
    Your site has been very helpful but does not address my need. We filed chapter 7 and were discharged our 1 & 2nd mortgage. Our in-laws are willing to cover $76,000.00 of first mortgate which is the price of Notice of Trustee's Sale in the newspaper. What about the 2nd mortage? the same bank ownes both loans. The second is more than the first $127,000.00 And why didn't the bank ask for all the monies owed. Time is of the essence.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Over the last two years, I have seen mortgage companies act in a manner discordant with logic. I think in any other time you would have been foreclosed upon and living elsewhere by now. The mortgage companies are clearly overwhelmed by mortgage modifications, short sales, and foreclosures. They seem incapable of keeping track of files relating to each of these events consistently. Is it possible your mortgage company is overwhelmed and has not got to your file yet? Certainly. Is it possible your file simply is lost? That is less possible, but who really knows?
    0 Votes

  • 35x35
    Mar, 2010
    michelle
    after loosing my full time status and working a 20 hr work week, we fell behind on our second mortgage. it's been over a year and still have not heard anything nor have any intentions of paying. We also claimed bankruptcy 2 years ago this July and didn't reinstate our loans. We also did not receive the tax info on the loan this year. What do you think has happened to our loan?
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    I recommend you speak directly with the IRS and ask them this question. They will be best suited to explain how the process works.
    0 Votes

  • 35x35
    Mar, 2010
    benny
    i am losing a rental house to foreclosure i am trying to save it the internal revenue service has a tax lein against it in the amount of 27.000 the house is worth around 40.000 i owe the lein holder 12.700 what will the i r s do about the foreclouser thanks benny
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    I discussed this very same issue in a previous post (http://www.bills.com/second-mortgage-foreclosure/) which I encourage you to read.
    0 Votes

    • 35x35
      Aug, 2011
      Chad
      One year had a house foreclosed on and sold at auction for more than I owed. I just got a strange call from someone claiming to be collecting on the second mortgage. They wanted to know what I was going to do about the second mortgage since they did not receive any money from the bank holding the first. Can they come after me in this case?
      0 Votes

    • 35x35
      Aug, 2011
      Bill
      First, validate the debt. Second, consult with a lawyer who has real estate or consumer law experience to learn what happened with the surplus funds that resulted from the foreclosure.
      0 Votes

  • 35x35
    Mar, 2010
    lee
    I have a 1st & 2nd mortgage with two diferent company(80/20) 1st is $2181 2nd is $588. My 1st balance is $244,000 2nd $52,000. I cannot afford to pay second due to severe hardship and I am behind two months, they keep sending foreclosure package, GMAC.. The house is valued at $265,000. Can the 2nd go ahead and foreclose after 3 months behind.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    You are in luck. The The Mortgage Forgiveness Debt Relief Act allows homeowners who have had debt canceled due to a mortgage avoid the usual taxes on debt cancellation.
    0 Votes

  • 35x35
    Mar, 2010
    spinsonic
    Our mortgage company sent us a settlement letter, for a fraction of what we owe. They mentioned that they will report a 1099c to the irs. are there any way to avoid paying taxes on the settlement? who does one qualify?
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    As mentioned in the article above, although second mortgagees often take a hard-line stance with homeowners, the current economic conditions do not make it economical for for a them to foreclose on a homeowner in your situation. Every situation is unique, but general speaking, paying off the 1st mortgagee to retain their stake in the property isn't something they're too fond of doing. That said, I highly recommend that you consult with a professional financial adviser or bankruptcy attorney to help you review the specifics of your situation and evaluate your options.
    0 Votes

  • 35x35
    Mar, 2010
    Heather
    Hi Bill, 1st mortgage 292K property value according to zillo 238K and a second mortgage of 60K we stopped paying on the second while we are doing a modification on the 1st but the second is completely unwilling to help us. I did get a rep the other day who told us that even thought they would call us from the collections departments and threaten forclosure that they would more than likely do a charge off or sell the debt to collection. If it went into forclosure by chance would we be able to stop that process and catch up if needed? Unfortunately my husband is in construction and we are able to make the first but have to let go somewhere. If the house is negative on the first would the second actually assume the 1st? Is that how it works? Can the second forclose without assuming the 1st?
    0 Votes

    • 35x35
      Jul, 2011
      robin
      I filed bankruptcy and the first mortgage and second have been discharged. I choose to stay in the home. and I am current on the first mortgage but not on the second. I received a notice to to accelerate for a foreclosure. the second is 33,000 and the first is about 270,000 the property valve is around 199,000 . can they make me move!
      0 Votes

    • 35x35
      Jul, 2011
      Bill
      As the original answer above tries to explain, the mortgage servicer for the second has the legal right to foreclose if you do not either:
      1. Make your monthly loan payments, or
      2. Agree to a settlement of the second

      As you point out, it is ridiculous financially for the second to foreclose. However, that is an economic assessment of the situation, and not a legal one. You have four choices:

      1. Become current with your second and then make your monthly loan payments
      2. Open negotiations to reach a settlement agreement to resolve the second, perhaps with a lump-sum settlement
      3. Consult with a lawyer to learn if you have any cause of action against the second, and file a lawsuit, which may delay the foreclosure
      4. Allow foreclosure

      Consult with a lawyer in your state who has real property litigation experience to learn if you have a cause of action against the second.

      0 Votes

    • 35x35
      Aug, 2011
      Ed
      I have seen where the 2nd TD will foreclose and take the property, they then work with the 1st to lower what is owed then the 2nd can sell the property and recoup some of their funds. I have seen this done on 4 properties so far this past year.
      0 Votes

  • 35x35
    Feb, 2010
    Bill
    What is the market value of the property today? It is fair to surmise it is worth less than $3 million otherwise you would have the house up for sale and would not be writing me. As the answer above states, the second mortgagee has the right to foreclose. Whether it does depends on the economics of each situation. Here, the balance of the first and second are the same, but that doesn't matter if the auction price of the property is at or less than the balance of the first mortgage -- the second loses. Review my original answer above for your options.
    0 Votes

  • 35x35
    Feb, 2010
    mike
    Hi Bill , have a major problem....1st mortgage for 1.5 mil and a heloc for 1.5 mil ...our home is in Hawaii 6 years old. we are 6 months behind in payments on both due to major drop in tourist spending. we have had perfect credit until this last year...lendor was Countrywide on both now Bof A...we were have been making partial payments on both loans though very small. BofA just contacted us and advised they would like to help us modify the 1st mortgage to stay in our home..we are in the process of providing all the info they requested to make their desision and today I received a letter from an attorney for the heloc advising a 30 day notice of forclosure.can the helco go forward ? properties in Hawaii have dropped in value, but not as much as on the mainland.WDYT ? Aloha
    2 Votes

  • 35x35
    Feb, 2010
    Bill
    The Mortgage Forgiveness Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. See the Bills.com resource Mortgage Forgiveness Debt Relief Act for more information about this program, how to qualify, and the tax forms to complete.
    0 Votes

  • 35x35
    Feb, 2010
    Mark
    I settled on my HELOC for my personal residence. Can this be considered as part of the Making Home Affordable and be cleared from my taxes? I did do a cash out refi for a portion of this. Thank you
    0 Votes

    • 35x35
      Dec, 2010
      Mike
      Mark, Can you share the some of the details of this?
      0 Votes

  • 35x35
    Feb, 2010
    Bill
    The creditor is preserving its right to foreclose by sending you that notice. It does not obligate the creditor to foreclose, but the creditor may choose to do so.
    0 Votes

  • 35x35
    Feb, 2010
    Kathy
    We are about 80 days late on our second mortgage. The lender (which is the same lender who holds our first) has sent us a Notice of Right to Cure Default letter. Is this a precursor to foreclosure?
    5 Votes

  • 35x35
    Jan, 2010
    Nikki
    Thank you SO MUCH Bill, I am just a mess with all of this, which I'm sure you hear a lot. Thank you Thank you Thank you for responding!
    1 Votes

  • 35x35
    Jan, 2010
    Bill
    Review my answer above for a more complete explanation of what I write here. Given the market value of the property and the balance of the senior deed of trust, it makes no economic sense for the junior to foreclose. Charge-off has no legal consequence to you -- it does not remove a lien. See Charge-Off & Credit Report to understand more about this term. A creditor can assign or sell your collection account to a collection agent. Usually, a collection agent buys a collection account at a steep discount from its original balance. If a deed of trust is sold or assigned, the encumbrance on the property stays with the deed of trust. If you reach a settlement agreement with the bank or collection agent the debt is resolved and the encumbrance on the property is dissolved. If there is a settlement there can be no deficiency judgment. You will receive a 1099-C if the debt is forgiven or settled, but not simply written-off. The information on a 1099-C is filed with your 1040.
    1 Votes

  • 35x35
    Jan, 2010
    Nikki
    Property in CA. Current value $194K 1st mtg $215K 2nd mtg $120K ...both are recourse due to refi/cashout. I work in Real Estate/Mtg lending for 25 yrs (Broker) and have had barely any income past few years). I am thinking about not paying the 2nd only.. unlikely they will foreclose as they would not get any $. From my reading I've determined that their most likely course of action would be to charge off/ sell to a collection agency (are these the same things?) If they charge off (write off the debt) then A. it is no longer a lien on my house and B. they cannot send to collection but I will get a 1099-C (and as long as I can prove insolvency then should not be taxed as income)? However if they send to collection then they are able to A. file a deficiency judgment or issue me a 1099-C for the difference between what they sell it for and what is owed? (I'm thinking no). B.) If they sell to collection is it still a lien on my house (I'm thinking yes)? If I settle with the collection company for a lower amount (say $10K) do they then remove the lien from my house and can they (the collection agency) come after me for a deficiency judgment or issue me a 1099-C (I'm thinking No since they agreed to settle). I'm just trying to find a way to stay/save my house. I can afford payments on the 1st (with part time job/roommate etc). Just not on the 2nd. If property went into foreclosure 2nd would not get any $ anyway. What are your thoughts?
    0 Votes

  • 35x35
    Jan, 2010
    Alena
    I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
    0 Votes