- 4 min read
- Understand that an account that is charged-off does not mean the debt may not be collected later.
- Negotiate with your lenders, to avoid foreclosure.
Table of Contents
Should I negotiate with the banks that are foreclosing on the first and second mortgages on my home?
My home is in the final stages of foreclosure in Nevada. I had a first mortgage on the house with Countrywide/BofA. There is also a second mortgage HELOC with Charter One. I stopped making payments on both about 9 months ago. I continued to receive billing statements from Charter One, but about a month ago they updated my credit report as a Charge Off. I found this strange since the first mortgage holder has still not completed the foreclosure. I am sure that there will be no money available to pay the second lien holder, but found it curious that they would report as a charge off before the foreclosure sale. It has also been strange that I have never received a collection call or piece of mail from them trying to collect on the account in the last 9 months. I continued to receive the regular monthly statement until a couple months ago. How would you recommend that I proceed? Should I contact them to settle or let it ride for a while? The 2nd mortgage is for $37,500 and the first is for $352,000.
A mortgage is a written pledge of property used as security for the repayment of a loan. The property you purchase is the collateral for the mortgage. If you fail to make payments on the loan, the lender can repossess your home. As a result, the lender has some legal rights on your property as you pay off your mortgage.
Unlike a standard loan, the mortgage is used to enforce the lender's rights to the property if the borrower does not repay the home loan. If the borrower does not keep up with his/her monthly mortgage payments, the borrower can obtain the home through what is called foreclosure.
Mortgage charge off
I sense you may not fully understand what "charge-off" means. Charge-off is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of your last payment. The fact that an account is charged off does not mean the debt may not be collected later. Charge-off is not required before a creditor initiates foreclosure. To understand more about the concepts of charge-off and why this term and event means almost nothing to debtors, see the Bills.com resource Charge-Off & Credit Report.
Mortgage loan foreclosure
Foreclosure is the forced sale of a home or property that s pledged as security against a mortgage. The property is sold so the lender can recoup its losses on the loan.
There are two types of foreclosure: judicial and non-judicial foreclosure. A judicial foreclosure basically means that the foreclosure is a court-ordered legal process.
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Dealing with a Mortgage Charge-Off and Foreclosure: Exploring Your Options
Understanding your options is crucial in making informed decisions that could alleviate some of the pressures you're facing. Here's a brief look at the various paths you might consider:
- Communication with Lenders: Your first step should be to communicate with your lenders. They may offer modification options, forbearance, or other forms of assistance to help you manage your payments and avoid foreclosure.
- Loan Modification: This involves negotiating with your lender to modify the terms of your mortgage. Modifications can include reducing the interest rate, extending the term of the loan, or even reducing the principal balance.
- Refinancing: If you have enough equity in your home and a good credit score, refinancing could be a viable option. This could lower your monthly payments and make your debt more manageable.
- Forbearance Agreement: In some cases, lenders may agree to a forbearance plan, where they temporarily reduce or suspend mortgage payments. This is often a short-term solution to give you time to improve your financial situation.
- Short Sale: If you owe more on your mortgage than your home is worth, a short sale allows you to sell your home for less than the outstanding mortgage. This needs to be approved by the lender and can be a way to avoid foreclosure.
- Deed in Lieu of Foreclosure: This is where you voluntarily transfer the ownership of your property to the lender in exchange for release from your mortgage obligations. While it still affects your credit, it's less damaging than a foreclosure.
- Bankruptcy: Filing for bankruptcy might temporarily stop the foreclosure process. Chapter 13 bankruptcy, in particular, can allow you to keep your home and reorganize your debts.
- Legal Counsel: Get legal advice from a real estate attorney if you think there are problems with your mortgage or the foreclosure process.
- Government Programs: Investigate government programs designed to help homeowners in distress. Programs can offer refinancing, loan modification, or other forms of assistance to those who qualify.
- Credit Counseling: Seek advice from a reputable credit counseling agency. They can provide guidance on managing your debts and may offer solutions you haven't considered.
There are advantages and disadvantages to each option, and the best choice depends on your circumstances, like your financial situation, the value of your home, and your goals for housing. It's important to make decisions quickly and thoughtfully, as your choices can have long-term impacts on your financial health and credit
Bills Action Plan - Dealing with your mortgage foreclosure
Given the seriousness of your situation, with your home in the final stages of foreclosure, it's crucial to take immediate action.
- Engage with Your Lenders: It's essential to open a line of communication with both lenders. Inaction can lead to more complications, and negotiating might offer a pathway to a more favorable outcome.
- Seek Professional Advice: Consider consulting with a financial advisor or a lawyer who specializes in real estate and foreclosure. They can provide personalized advice based on your specific circumstances.
- Educate Yourself on Foreclosure Processes: Understanding your rights and options under Nevada's foreclosure laws is vital. This knowledge will empower you to make informed decisions. Check to see if bankruptcy or other foreclosure alternatives are practical.
- Explore Options for the Second Mortgage: Since the second mortgage is a significant part of your dilemma, it's important to understand the specific implications and options available to you. For detailed insights and guidance on handling a second mortgage foreclosure, visit Bills.com's Second Mortgage Foreclosure.
- Consider Financial Implications: Be aware of the potential impact on your credit score and future financial opportunities. Any decision you make should factor in these long-term considerations.
You mentioned your home is "in the final stages of foreclosure." You later ask, "Should I contact them to settle or let it ride for a while?" The time to let things ride for a while is over if your goal is to retain your residence. Negotiate with both lenders now.
I hope this information helps you Find. Learn & Save.