Can second mortgages foreclosure

Yesterday I did a long interview for the New York Times. I asked a few of you to visit with the reporter and a few of you did. Thank you for that.

The subject was large jumbo type loans, ARM or interest only or option arms on very expensive homes, like upwards of a million dollars.CC attribution commercial sharealike http://www.flickr.com/photos/pnwra/

Many if not most of these folks in this situation have two mortgages. Maybe you do. And even if you "only" owe $200,000 and not one million, you will want to know about liability and whether the second mortgage holder can foreclose. Second mortgages foreclosure is not as common as it was in prior cycles and here is why.

in the "old" days before around 2001, if you wanted to buy a house you had to have a down payment. And if you did not, you had to qualify for FHA or private mortgage insurance and have pretty good credit.

Second mortgages and foreclosure - how it used to work

If you had a second mortgage, the second mortgage holder would make sure they had some collateral. This is known as loan to value ratio, or LTV. Basically, you had to have some equity.

Then if you stopped paying on your first mortgage (or both mortgages), the second mortgage holder would keep your first mortgage current. And the second mortagage holder would bill you for whatever they paid on your first, plus interest and penalties, and they would go after you in foreclosure. They would go to the foreclosure sale if you still didn't pay, and they would often end up with your house back. Still with the first mortgage on it.

If you had a lot of equity, someone would bid at the foreclosure auction. They would bring cash that would pay the second mortgage for everything that they were due including your balance and fees and the amounts they had paid to the first mortgage holder on your behalf. And that buyer would end up with the deed to your house, with the first mortgage still on it.

Now, I speak in the hypothetical because this does not happen so much now. Now, there are so many first mortgages that have no equity, and the second mortgages are long since left without equity, wiped out.

So if you are in a situation with foreclosure with two mortgages, more than likely the second mortgage will not foreclose. They have no reason to. They have no equity to get anyway.

They will leave the foreclosure to your first mortgage.

The first will foreclose and then the second mortgage holder will be able to go after you.

The second mortgage holder can pursue you in civil court under a breach of contract claim.

Even in states like California where first mortgage foreclosures do not lead to personal liability in most cases. Even there, in virtually all states, the second mortgage, once wiped out, can come after you personally. They can get a judgment and garnish wages, go after your cash and vehicles, and force you into potentially a bankruptcy.

And please watch my video on how to avoid foreclosure by doing a short sale even if you have a second mortgage foreclosure situation. The answers are here. I will never share your name or email with anyone.

And watch this video on short sales and foreclosures. 

Should you rent while in foreclosure

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117 Comments on Can second mortgages foreclosure

foreclosurefish @ 9:30 am:

Good points on the possibility of a second mortgage foreclosure. Although they might eventually foreclose if the homeowners get severely behind, the bank would much rather work out any kind of payment arrangement if there is little equity. They won't get anything from the auction, so it's much more profitable to work out a payment plan or modify the terms of the loan. That's also why second mortgages are so much more willing to take a reduced payoff on a short sale.

Daniel @ 10:15 pm:

Since the second mortgage holder usually agrees to take a drastically reduced principle in the case of a short-sale (between $3,000 and $5,000), would it be reasonable to assume that the second mortgage holder would be willing to work out an analogous type of re-payment plan given a foreclosure on the first mortgage? In other words, if the first mortgage holder is stuck with the property in the event of a foreclosure, could the second mortgage holder reasonably be persuaded to consider the account settled if some type of payment plan for a drastically reduced principle were instituted, mimicking the conditions of a short-sale?

Richard Geller @ 7:22 am:

Daniel, a lot of second mortgage holders are negotiating deals with borrowers.

1. No interest is very common

2. 10 year payback period is quite common

3. Sometimes principal reductions

Thing is, the negotiating can go on and the game isn't over. You can if you have to stop paying, and open up negotiations again. The second mortgage debt is an unsecured debt at this point. Just like credit cards. And there are lots of things you can do if the payment is difficult or impossible and you need to settle for less.

regards

–Richard

Tiffany @ 9:35 pm:

My question is what if the first mortgage (fixed @30) and the second (HELOC) are from the same lender and were issued at the same time to purchase the property? It's not that we can't afford our home it is the fact that we have lost $400K in one year due to the decline in house prices. Our same floorplan down the street is now selling for $230K and ours was $650K when we bought 16 months ago. We are in CA so I know the first is non-recourse. Unsure about the HELOC when both are Wells Fargo and were issued at the same time for purchase. Thanks so much!!

Wow, that is awful, $400,000 in one year. Absolutely dreadful. But unfortunately you have liability for the HELOC. They are very unlikely to foreclose because they have no equity. So their note becomes an unsecured note and they can pursue a breach of contract collection action against you. Negotiation is a good idea here. I teach settlement of debts in my course. Same technique for credit cards also works for this type of unsecured HELOC debt.

 

–Richard

 

jack @ 10:01 am:

I live the in State of California and went through a foreclosure process two years ago. I recently received a summon for the remaining balance due from the second lien holder (105K). There was no equity in the property so the note became an unsecured note and the second lien holder is going after me. I lost about 120K in the transaction so there is no way I can repay this debt back. Is this becoming a common practice for a secondary lender to pursue a breach of contract two years after the foreclosure process and what other options do I have? Repayment, Bankruptcy, Negotiation or whatever… Thanks you.

Yes, this story will be repeated again and again, hundreds of thousands of times. By summons I assume you mean a legal complaint filed in court for collection against you.

It is very common. They have four years to come after you in California, I believe, and other states have a different statute of limitations.

I would try to negotiate. I would try to get a note for a fraction of what you owe. I would then try to drag out payment of the note and you can end up negotiating this to a much smaller amount.

–Richard

Sandra @ 10:00 am:

My 'second' was a hard money loan. He did a "foreclosure" and auction sale (supposedly). I never got a posting on my property of any auction. The "first" mortgage said they would not allow an 'assumption of the loan'. I'm not sure what that means exactly.

When I recieved a notice of aucton, it stated the lean holder to be a title company, not the man that made the loan. The 'first' told me that they would not release the property, and they were never informed of any auction or foreclosure proceedings. There is not enough equity in the property to pay all fees for both loans.

There was never any court hearings on any foreclosure.

The many holding the 'second' has been paying the first, and is 'requesting' I take cancel my homeowner's insurance. And is telling me I have to move.

He had the realtor hand me a note to vacate, giving me 3 days, but told me I could stay for another week. I had the house up for sale with another realtor until the supposed day of auction. The 'second' was an interest only, with a baloon payment of the loan due in one year (last March).

The 'first' told me, along with the tax assesors office, that the 'notice of aucton' sounded like a 'scare tactic' and didn't sound lagitimate. There was a noitce of Trustee's Sale recorded. The 'auction' amount was only for the amount of the 'second', not to include the amount of the 'first'. I guess my question is, can he do this? Can I just turn the house over to the 'first', giving them the property back? If I move, as the man insists, what if the 'first' doesn't get paid? What am I liable for?

You might want to contact a title company and ask them where things stand. Your Realtor will have a good title company contact who can do a "property profile" and tell you where title stands.

The second can foreclose and get the property back, and the first mortgage will still be on it.

warmly

–Richard

Mark @ 10:34 pm:

Here is a situation you may know something about. My now deceased mother in law, made a bad investment in a Ca. home to help a friend in 2005. It was 100% financed by Indymac ( two loans - both Indymac) who had no business loaning her over $500,000. to buy the home, as she had no income or income history. My mother in law never lived in the home nor intended to. The property was foreclosed upon for lack of payments. It was then re-sold at a much lower price. Our family now wants to know if there is any chance of recourse for this debt, or if upon foreclosing on the property the bank gave up any right to seek recourse on their losses. Any light you can shine on this is helpful. thank you, Mark

Hi Mark, isn't it incredible to think that a bank would lend that kind of money with someone with no income or income history? It's not ony incredible, it's shameful, isn't it?

You should talk to a lawyer who knows California law. From what I know, which isn't much, the first is no recourse but the second is usually recourse because they did not actually foreclose, most likely. The first foreclosed, leaving the second note holder basically in the same position as any unsecured creditor such as a credit card balance.

warmly

–Richard

Lana @ 2:41 pm:

I own a home that was purchased at $205, I put $30K down, have second mortgage (HELOC) of $70K, house today is worth $125K. It IS a primary residence, I pay for all mortgages, HOA, Insurance, etc.. I do NOT live there given I was laid off, and it was very difficult to find a job in Florida - I had to move out of state, so I have my FLorida expenses, and all expenses to live were i found a job ( Rent, Utilities etc) I Lost homestead due to change of address , but it is the only home I own. Almost a year has passed and I have been supporting 2 homes ( so that I dont loose the FL one ) I am considering a short sale , I can not afford both homes any more and can not make Mortgage payments… I am catching up in debt incurred while unemployed and relocating. Can lenders forgive both loans? Can my realtor negotiate this with my bank or should I call the lenders directly and tell them I cant make more payments what are my options? 1st Mortgage is different bank/lender than HELOC, I am avoiding foreclosure… PLEASE HELP!!!!!!!!!!!!!!!!!!!!!!

I hate to be self serving but I would buy my course:

http://www.MortgageReliefFormula.com/short-order-video-4_2.html

It will help you negotiate with the lenders and give you instructions as to how to do the short sale. Even if you have someone else do the actual selling of the house for you, and someone else negotiate, you need to know what they are doing so you can avoid getting ripped off or losing out.

Lenders will get something out of a short sale. More than they would if they get your property back through foreclosure. That's why they prefer a short sale. Even the second HELOC will get something out of it. The proceeds come from a buyer and will pay some of the first and a little of the HELOC.

I wouldn't count on Realtors to do the negotiation although you occasionally can find one who can. Ask how many COMPLETED short sales they negotiated in the past 6 months. If it's less than 10 or 20 COMPLETED ones I'd find a professional negotiator, or better yet, do it yourself using my material.

warmly

–Richard

Niloofar @ 3:13 pm:

I live in Florida and we own a house that worth around $250000. We have a 1st mortgage for $170000 and the 2nd mortgage for $200000. My husband has lost most of his income and we are falling behind the 2nd one which is $2000 a month but we are still making the 1st one for $1000. I have talked to 2nd one to reduce our 15 yr loan to 30 yr or for few years reduce our payment to $1000 a month, but the did not accept it . If I am still making the paymenton the 1st one can the 2nd one foreclose the house. I want to keep the house, can I file for chapter 13 before they foreclose the house to get rid of the 2nd one. Thanks,

It is not likely the second will foreclose. They would have to maintain the first, meaning they would have to make the payments on the first (if you weren't) and have to go through a foreclosure process, get the house back, market it, and pay all the costs. They have very little equity according to your numbers, so they would not want to do this. Unless they think the house is worth a lot more than you do, or unless they are prepared to write down their loan from $200,000 to $70,000 or $80,000.

If you are behind in payments, the lenders are more likely to work with you. I am NOT telling you to not make payments, it is just the reality of the situation. I wouldn't consider bankruptcy until I talked to a good lawyer who could talk you out of it and show you options. It solves problems for some but not for many people who end up with damaged credit and no better off.

warmly

–Richard

 

Craig @ 1:34 pm:

I have a rental property in St. Paul MN that I no longer can afford to keep. It has a first of 89,000 and a second with 75,000. The value of the house three years ago was 202,000. Should I be worried about the second coming after me if and when it goes into foreclosure? Or is there enough equity in it to keep them away? Thanks

It is always a concern. It is quite possible that there is insufficient equity for the second. If you are no longer going to be able or willing to keep paying on the loans, have you thought of a short sale? That way, the lenders get partially paid off, it's kinder on your credit and you can be in more of a negotiating position.

warmly

–Richard

Victoria @ 2:01 pm:

I'm on the verge of filing bankruptcy, but I'm hesitant of including my mortgage into it because I have my other two sons on the loan. If I do keep the house, it is headed for shortsale/foreclosure anyways because my loan is already too high for the value of the home. My question is, if I decide to file for bankruptcy, can I include the HELOC (2nd mortgage) which is also from the same lender my first mortgage is? My lender bought this loan from another lender at the same time meaning lender acquired both loans at one time.

Eek. I am going out on a limb here.

I am not a lawyer.

I can't give anyone advice.

I am not qualified.

So what I will say is what I would do but isn't to be taken as what YOU should do. It is there for others to think about and read and consider.

My understanding is that in bankruptcy, you cannot get rid of secured debts. The court can discharge any debt that is left after foreclosure.

I would personally consider ways of not filing bankruptcy. You could for instance do a short sale. Then you could negotiate with the HELOC lender and sometimes they will accept a very small partial payoff, paid out in payments over many years. Everyone's credit will often (not always) come out better that way. And the liability is gone, not just for you but for your sons.

warmly

–Richard

mike @ 8:22 pm:

I bought a house in CA in 2004 for 650K. I put down 200K and my loan was 450K. Later on I took 200K equity line on my house for improvements. My first mortgage payment went up because it was an adjustable. my house is worth 475k to 510K now. My income went down. What will happen if I stop making 2nd mortgage payment and continue making First mortgage payment. I can just afford first mortgage payment now? Will 2nd foreclose? I heard they will try to settle with me? What kind of settlements they usually go for? IF it's too dificult I will let my house foreclose.

Adel @ 12:28 pm:

I bought a house in CA and I owe more than the principal. I have two loans with the same lender. I have been trying to talk to the bank to modify the second loan either by lowering the interest and payment or by reducing the principal. I am getting nowhere. I was adviced that if I stop payment on the second, they cannot foreclose because they will lose everything. BUT, both loans are with the same lender. Will they be more motivated to work with me if I stop paying the second and just continue paying on the first? OR will they foreclose completely? I have been paying both mortgages on time and never late. I am also thinking about bankruptcy. Will that make a difference?

I am not sure what bankruptcy will do for you. Consult a bankruptcy lawyer. But in general, courts don't have jurisdiction over mortgage loans on your principal residence in bankruptcy so it won't have any affect other than stalling things for 6 or 8 weeks.

If you don't pay the second, chances are they won't do anything. They can't foreclose if they have no equity. There are two loans here, even though they are serviced through the same lender. Still two separate loans. The second has no security anymore, from what you are saying, so they won't foreclose.

I would suggest you get my course http://www.GetLoanModSecrets.org on doing loan mods for yourself or for profit. You will learn how to properly present loan mods to the banks. Principal reductions are extremely rare.

warmly

–Richard

Emad @ 12:34 pm:

I bought a house (Say House A) in CA. by borrowing from the same bank, HELOC for $200K to put down as down payment. That HELOC was given to me by using my other house (house B)that is paid off as collateral. I am current with both loans. However, House A has gone down a lot in value and I am thinking about letting it go into foreclosure. Will foreclosure of house A still make be liable for the HELOC on house B? Will they sell house B to pay off the HELOC?

The house that WAS paid off now has a mortgage on it. They will want to foreclose on House B. And the lender on house A will want to foreclose on house A. If you only have one loan on each house, in California you probably don't have much to worry about because if the lenders foreclose non-judicially, as is normal, they cannot pursue a judgment against you for deficiency, even on a second home.

warmly

–Richard

Karen Kleinman @ 9:17 pm:

I'm totally upside down with a 1st (which is considering a loan modification) and a heloc which has already issued a notice of default and intent to foreclosre. I was unable to pay August, October payments and now November. The heloc of $86,000 is totally underwater; first is $242,000 and about 20,000+ underwater. Short sale would be in the $200,000 range, but I want to keep my home. Will the 2nd foreclose, even though it has no equity ? Or are they just playing hardball. I just sent off a formal application for modification or forbearance as I recently lost my main job and need knee replacement surgery. Should I pay 1 payment to Heloc just not to be 3 payments behind ? Does it make any difference in the procedures and decisions they'll make ? I'm hopeful that after the election next week, a "freeze" will be issued on all foreclosures for at least 90 days, which will give me some wiggle room and hopefully both the 1st and heloc will modify substantially. Your suggestions would be appreciated as "time is of the essence". I am contemplating filing Chapter 7 or 13 but would rather come to an agreement about the house first.

I don't think one payment one way or another will make any difference. The HELOC is under water, as you say. They won't foreclose because there is no equity to foreclose.

I wouldn't count on a general "freeze". The banks won't like it. I doubt we will see it. What we will see (and do see) is a greater inclination to do loan mods. Even principal reductions are still quite rare and may remain so.

I would consult with a bankruptcy lawyer but I don't see how bankruptcy will let you stay in your house. Bankrupcty courts don't alter mortgage loans on principal residences.

warmly

–Richard

 

 

Alan Kennard @ 1:07 pm:

I have a $290,000 1st mortgage and $95,000 equity line of credit that was used to purchase a condo in Florida (which was my permanent residence until I moved back up north). Both loans are with the same bank. I tried a short sale for $225,000, got approval for the first but not the 2nd and the deal fell through. I have a 2nd offer also for $225,000. My question is if the 2nd was used for the purchase of the condo and the note says "non-recourse" does that mean that the bank can still come after me with a deficiency judgment?

If a note is non recourse, it is non recourse. They can't come after me for a note that is non recourse. They have to look to the security interest they have, their equity or lack of equity.

But I am not sure that a note really says that, are you?

warmly

–Richard

 

Linda @ 8:04 pm:

Question is what is a deed in lieu ? The bank wanted us to send in the papers for that to be considered. We did and now we are waiting to here. What is the difference with Short sale vs deed in lieu ?.Will we owe anything if they cant sell for what we owe, which they wont. Can they get it from us or is there new laws out there to pretect us?.

One more big question, can you turn of the gas and elect?..I live in Minnesota, when do you get to get it out of your name..we are moving out in a few weeks

john @ 9:39 pm:

we remortgaed our house in 2004. then I became very ill and had thousands of dollars in medical bills. we checked into a 2nd mortgage. they said our house was valued at $60,000 more then the first mortgage. they paid off a car my wife had just purchased which left us with $35,000. Most of which that went to medical bills. 4 years later we are back in the same situation with medical bills but now our house is worth less then what we owe on our 1st mortgage. we just had a car repoed because I can't afford it due to becoming disabled. We are filing chapter 13. We had the house appraised and its worth $30,000 less then what we owe on the 1st mortgage. Our attorney is getting the 2nd stripped away since the 2nd inflated our house value and over extended us. So for once we get to stick it to them this time. We still have the car they paid off. At least we got somethig out of this mess.

Nathan Fortlage @ 12:31 pm:

I have a first and second mortgage on a property in Florida that used to be my primary home. I have been told a bpo on my house came in at around 200k. However I owe 169k on the first with Citi and 146k on the second with wachovia. Total payments at almost 2k a month 5.5 fix on the first and .50 under prime on the second. My renter's lease is up in January and am not going to be able to afford it with my other $1800 mortgage on my primary in NC. What should I do? I had my house for sale for almost 2 years. Nothing is moving there in Punta Gorda,FL. I am right next to Cape Coral , FL which has almost the highest foreclosure rate in the US so they are giving away homes. If I find a renter to pay the first and let the second payments go I do not believe they can foreclose on it in Fl. But what recourse will they take on me. Can they put a lien on my house that I have in NC that has equity? If so I should quit claim myself off and just leave my wife on it so they can't touch it right? Can I do a deed in luei on a first and second and would they allow it? Thanks for your help. What do you recommend .

Phill @ 10:49 pm:

My house in CA, bought in 2006 (485K), now worth about 250K, first 389K, second (refi - 125%) 145K, If I stop paying on my second, what can the second do? (different banks). Can they sue me for breach of contract in CA or do they have to foreclose first? Are they just going to send to collections? Can they garnish wages or take money from my bank account? What should I be worried about…besides my credit…and the time it will take to gain equity back over the cost of the first mortgage(eventual forclosure)?

Mike Moser @ 4:02 pm:

What is the next step in a situation where the 2nd lien mortgage has not been paid?
am located in North Carolina. I used to own a property that consisted of a 1st and 2nd mortgage. The property has since foreclosed (on the 1st lien). Now the second lien has attempted to collect debt ($60,000) owe. I tried to work out something with them but it wasn't satisfactory to them. They told me that if I didn't send in some payment by June of 2008 the loan will go back to the lender which then they would come at me legally. Mind you they keep coming at me with different account managers so I was confused as to who to work with. To make a long story short, It is now November 2008 and they are still coming at me (which means the account never left their office). The other thing is that this account has never reported on my credit and it's been over 2 years and it is still not being reported. My question is how would you handle this situation? Knowing you can't afford to give what they are suggesting and they aren't willing to accept what you are trying to offer? Also what is the worse case that can happen under North Carolina Laws? I failed to mentioned that one of the collection agent from that 2nd lien stated that they do not report to the credit bureau.

Cathie Redmond @ 10:30 am:

Can a bank foreclose on a person if they were forced to take out a 50,000 line of credit (or second mortgage..unsure which) on their home for the payment of medical expenses in the state of Virgina. The first mortgage is paid and up to date.

LN @ 5:27 pm:

We have received a summons from our 2nd (ELOC) on Dec08 and owe 94K since we stopped payment in Mar08. Due to unemployment, our income reduced drastically. Our 1st mortgage was adjustable and would have increased to 4400/mo. in Mar08. We've negotiated with our 1st lender and our mortgage was reduced to 2800/mo. which was $500 more than we use to pay which led us to default paying the 2nd. Our first is being paid up to date. We owe 520K on our first which is more than the value of the house right now. Current value approximately is 450K. We don't have any other credit card debt except for a car loan which will be paid off in the next 6mo. Are we candidates for bankrupcy? Short Sale/Foreclosure?

mstand @ 4:09 pm:

My house is now worth exactly the principal of my 1st mortgage (185k). The value of the home declined in the amount of the 2nd mortgage (40k) over the past 2 years. When going bankrupt, I know it is possible to reaffirm debt. Is it possible to go bankrupt on credit cards and the 2nd mortgage - while still reaffirming the 1st mortgage and keeping the home?

pj @ 11:46 pm:

i have a first mortgage 114k, 2nd mortgage, 30k,i am unemployed but recieving unemployment benifits…do i qualify for loan modification. Any advice.

It might be awkward. They look at the amount of your income, in relation to your loan payment. So it is possible. I would highly recommend you try for one.

warmly

–Richard

E. Vaughn @ 11:25 pm:

I have a 1st at $225 which is interest only till Nov of this year. Then it converts to an arm. I have a 2nd at $65 for about 8% interest. Between the two I owe about $290. Up until about a year or so I still had an extra $150 equity in the house. However due to the many foreclosures in my neighborhood alone (Southern California) I will be lucky to be appraised at $150 at this point. I am in the process of trying to renegotiate my loan to reflect the lower value. If neither one will cooperate then I will be forced to do some kind of short sale because we will then be moving out of this state. When I leave, it will be literally the clothes on our back and the one car we own. Can B of A pursue us legally for the balance owed on the 2nd?
I do find this question rather ironic since it is B of A that has contributed in California at least so highly to the subprime mortgages that cost me my equity. They have also been given bail out money which will be covered by us (me included) the taxpayer so that they can sue me for the balance on a loan unable to be paid because of their bad practices….Yikes, don't get me started….

JR @ 1:48 pm:

Have this exact situation transpiring in CA. Went upside down on equity in my house due to construction and finances…it has to be sold uncompleted at a loss to me in a short sale. Had an all-cash buyer in escrow for 5 months and deal was never done as 1st was INDY MAC and months were wasted during bank restructuring till approval was granted. In thay time 2nd which was B of A had original approval expire. Then went back and forth with B of A FOR MONTHS and buyer walked. Had a realtor listing property and dealing with lenders. He was OK, but in my opinion lost too much time with lenders and that cost us the deal. Now B of A has filed Notice of Default and started clock on foreclosure via a 3rd party collection/servicing co. Their policy is unless a short sale has current approval the clock is running on foreclosure. Thing is they are not getting a thing and will not even cover first trust deed loan if the "pull the trigger" on a foreclosure. My orignal deal would have largely paid off first their 400K and given B of A 10% of loan. If B of A forecloses I think house will go for 100K less and at best first will be owed 100K and B of A gets nothing. I am relisting house with a new realtor and using a dedicated negotiator for dealing with lenders. Is B of A likely to foreclose on procedural practice even if going further upside down by doing so? House needs at leas 100K to finish and they may be looking at a computer generated value as if it can be occupied in present condition. What is my best option here. Would really like to keep property, but don't have funds to finish so loan restructuring seems like a bad move…it's either short sale or let 2nd foreclose. My suspicion is that the latter is possible but not likely so a new buyer in a short sale gives a cleaner outcome. 2nd was after purchase so I will be on the hook for future collections.

Shelle @ 2:55 pm:

Hi! My husband was in the process of working w/a short sale co. to short sale his property (purchased before we knew one another) when it was foreclosed on. First mortgage was for $320K and 2nd was for $80K. The condo is now worth about $200K and has no equity in it. First mortgage was forgiven and 2nd is still outstanding. What does this mean? Also, I recently discovered that the ONLY reason he was approved for this HUGE loan on his $60K/yr. salary was b/c somebody throughout his loan process 'fudged' his assets and listed on the loan documents that he 'owned' $800K worth of real estate assets. (He was NOT aware that this was done). Now, since he had a job relocation he had to foreclose on the property. Would he have serious grounds for litigation? Please advise. Thanks…….Shelle

Sure, he might have grounds for litigation. It's a tough one. Lawyers will do this mostly for a combination of reduced fee and contingency, but they won't do it only on contingency in my experience. I would talk toa  few lawyers who specialize in truth in lending (TILA) violations and they usually handle stuff like this. But I'd hesitate to get into litigation.

I don't understand a first mortgage being forgiven. Doesn't make sense to me.

warmly

–Richard

Felicia @ 12:20 pm:

I am in the process of a short sale. The first lender (countrywide) seem like they're finally going to approve the short sale and give the second lender (USAA) $3000. Well the second lender wants $6800 and a promissory note to cover the deficiency at closing; We owe $68,000. The second is a HELOC and was a refinance to get a new roof for the home.

Is it still a good idea to do the short sale with the second lenders request or just let the house foreclose?

Could bankruptcy help in this matter if we do decide to short sale and sign the promissory note?

Bernadette @ 8:48 pm:

I PURCHASED MY HOME IN OREGON PURCHASED FOR 247,000 1ST MORTGAGE $1336.00 WITH SPS SPECIALIZED PORTFOLIO 2ND IS LITTON 47,000 $473.00 PER MONTH I PAID IT DOWN TO THE BALANCE BEING 24,000 ON SECOND I CANNOT AFFORD TO PAY THE SECOND ON MY HOME ANY LONGER. WILL MY SECOND FORECLOSE ON MY PROPERTY FOR $24,000 HOME IS VALUED AT 180,000 TO 200,000 MY BALANCE IS ABOUT 225,000 OR SO

There are no guarantees but the second is not likely to do anything because in order to foreclose, they need to keep up the payments themselves on your first. They have no equity, the second, so they are not likely to do this. If you stopped paying on the second, they wouldn't be able to do anything most likely.

Standard disclaimer: I am not an expert in your situation, see a lawyer, don't blame me if something doesn't work out.

warmly

–Richard

Joe Connolly @ 9:30 pm:

While I do not support fradulent reporting by brokers, the fact is your husband signed the loan documents, requested the loan amount that broker "fudged" documents to get approved for him and truth in lending requires that he see the payment and interest due monthly on the mortgage. Therefore, to litigate you have steep uphill battle as a prudent borrower should know whether or not they can afford the payments. The payment amount and borrower's accpetance of it by signing loan documents is entirely separate issue from what assets are listed.

Karen Kleinman @ 2:55 pm:

I fortunately modified my first mortgage and am current. However, I've
done nothing for 11 months with the Heloc, other than politely converse
with their reps.

If I file Chapter 7, how do I and the Court treat the HELOC?
If it's totally unsecured, will it be discharged or do I have to reach
an agreement of some kind with the lender before filing ? The
Heloc is approx. $90,000, and the first is now $260,000 even though
it appraised at $170,000. Many thanks for your help !

Karen Kleinman @ 2:56 pm:

I fortunately modified my first mortgage and am current. However, I've
done nothing for 11 months with the Heloc, other than politely converse
with their reps.

If I file Chapter 7, how do I and the Court treat the HELOC?
If it's totally unsecured, will it be discharged or do I have to reach
an agreement of some kind with the lender before filing ? The
Heloc is approx. $90,000, and the first is now $260,000 even though
it appraised at $170,000. Many thanks for your help !

Georgina @ 5:06 pm:

I had a first thru GMAC and a hard money loan thru a group of private lenders. The second foreclosed and have rented out the home. The 2nd lien holder had been making the payments but now they are two months behind and the GMAC keeps calling me for the payment. Is there anything I can do? I just do not know where to turn. I have contacted three foreclosure attorneys and they said they cannot help.

Bruno Ricci @ 6:08 pm:

Here is my situation. I obtained a HELOC to prevent a foreclosure on a 1st mortgage where I didn't live at all nor was I on the 1st mortgage. I merely got on title with the 1st mortgage holder. (Being my Xwife) to help prevent the foreclosure so my children would not move far away from me. 1st mortgage holder is listed as a valid Trustor in the title section of my HELOC loan documents. (This is in Califronia) - Needless to say, a year or so later I found out that a foreclosure was in the works on the 1st mortgage - No notification was given to me since I wasn't on the 1st mortgage and I spent months 3.5 months, before the foreclosure to find out what would happen to my HELOC. No straight Answers (THis is WAMU) who held both the Senior and Junior Loan. Needless to say - various people, whom I have on audo tape from wamu told me I would not have the charge off occur in my name. The Property Foreclosed and they never closed the HELOC - in fact they ran my credit report on the date of foreclosure and probably seen that I never had a deliquency on the HELOC and was a responsible person and therefore on their own decide not to charge it off. They basically ignored the HELOC in all foreclosure proceeding because their computer would not link me to the 1st mortgage at all and they behave like computer robots. ANyhow, as to prevent my credit report from Damage and still have the hope the 1st mortgage holder could be charged off I attempted to have that occur for 15 months and even requested a hardship because the property foreclosed. WAMU even sold the property to another home owner and still left the HELOC OPEN. Eventually - I managed to have the HELOC charged off. However, again - they neglected to do what they said they would and have ignored me for 3 months again note even answering the phone or call me back to a point where CHASE Execustives FTC and BBB and OCC have complaints. They now put me in collections and are harrassing me. I have a CHARGED OFF HELOC that occured 15 months after a foreclosure and only paid it because I didn't want deliquencies on my record. Since WAMU foreclosured the SENIOR mortgage - and neglected to charge HELOC off on the foreclosure date - I believe I am protected now under CCP 580d even if not purchase money on the HELOC if the 1st and 2nd is the same lender and they instigate the charge off can they now seek a deficiency judgement? How do I now stop the Collections? I have audio tape that this CHARGE off was done because of the retroactive foreclosure and they will not send me a letter stating this fact. I need serious help. Should I worry? What should I do. I can not find a similar case like mine - the bank was negligent to do the charge off as they claimed they would in writing Apriil of 2008. Thanks Bruno

Dennis @ 6:01 am:

We built a new house this year, the old house was on the market for 2 years and still not sold. We can not afford both, moved into the new house and want help with what to do with the old house.

We dropped the price on the old house from 875K to 700K, after paying fees to sell, we can olny pay off the 1st ($218K) and the 2nd ($440K). It's unlikely it will sell soon and can not afford payments on both so we need to walk away from the old house in some fashion. Our realtor says to clean it up a little, stage it and hope it sells. We say the market has tanked and we're out of resources to keep both.

What can we do? The 1st and 2nd mortgage are with different banks. We have a new house, newer cars. I understand we may need to pay a shortage if we forclose but am sickened over the thought of short sales, deed in lieu of forclosure and the process of trying to figure out what to do. I'm in construction my wife a manager and she can carry the basic bills but my work will halt soon.

Paul @ 4:21 pm:

I have a home in southern California that is upside down, with a much larger 2nd mortgage which was a hard cash loan. The first is Wells Fargo $165k, the second is Pentagon FCU $281k and the house comps at around $350k. The payment on the second is nearly triple the 1st and I lost my job and can just no longer afford it I am facing a foreclosure as I have stopped paying the second for nearly three months. I would love to keep the house and can afford the 1st but not the second any more. I was thinking of offering Pentagon $100k as a payoff which I could scrape up from family and credit cards. Is there any chance they might take it? Would you course help me in negotiating? really desperate, Paul

Paul, they might take it if you do a short pay package with them. Financial statement, hardship letter, proof of your income, tax returns, two months' bank statements. It is possible.

warmly

–Richard

Melissa @ 8:43 pm:

Hi,

I filed bankruptcy and kept my home. After the bankruptcy, my husband and I separated and the house went into foreclosure. The house had a first mortgage and an equity line of credit in which they filed a second mortgage. The house sold at auction for less than the first mortgage so the equity line of credit got nothing. On my credit report remains the equity line of credit and they keep it as a reaffirmation of debt.
I am trying to get a loan for another house. Is this equilty line of credit able to keep me from getting a home?

Thanks,
Melissa

zen @ 11:14 am:

Ok replying to this cause im in california.. I also have 1st and 2nd and i am filling a ch 13 bk in california a ch 13 will negotiate payment with a 3yr or 5yr term after that you owe nothing on your second and you keep your house and continue paying the 1st. Contact a good Bk lawyer and dont let these greedy banks take you and use scare tatics on you. Your lawer will have you stop paying your 2nd imediatly and sence our homes are under water use that time to save money cause they will not forclose on the second get ch 13 bk filed and in 3 to 5 yrs that loan will be forgivin and it ws better than paying it for 30yrs..

Ana @ 6:57 pm:

Good for you! How were you able to include the second in the bankruptcy? I read judges don't have jurisdiction over mortgages and therefore the court cant discharge secure debts.

AM @ 10:21 pm:

Hi Richard:
I'm in CA. I have a duplex I bought in 2006 for $550K
1st Mort is for $440K
2nd Mort is for $110K

I have been on-time with all payments. I tried to modify my loans over the past year and was denied because I have been current in payments. I then found a home for $135K around the corner in foreclosure. I convinced my family to let me borrow money to purchase (60K..so I now have equity in the home. The unit is now a rental whos income pays the note. I want to move into that home and foreclose on this one, however, I don't want the second to come after the new place. Can they come after my new asset if I have the loan amount for the remaining $75K is with another bank? They couldn't force me to sell, could they? I live check to check to afford the payments on my primary home, but I have a baby on the way. I want to just walk away…or rather..around the corner and live peacefully. I have read some of the comments above and it appears that the second has 4 years to come after me. I don't want to be in a situation where I'm making court appearances two years from now.

Any advice.

Jared @ 10:59 am:

I have a first loan 7 year ARM intrest only of $135,000 and a second loan of $38,000 that's a 30 year fixed that I purchased in Sep. 2005. The value of the house is now about $160,000. Should I stop paying the second loan and try to negotiate a lower principle. Or maybe stop paying both? I live in Oregon, can I just walk away from this, can they come after me at all for the first ir second loan. Both are different mortgage companies. I don't know what to do. I can't refinance since I owe to much now and my first loan is soon to reset and become higher payments. Thanks in advance

Randy @ 10:40 pm:

I have a big one–$1M First Mortgage and a $200,000 HELOC–all maxed-out. Today, my house *might* be worth $1,000,000 under the most favorable of circumstances, but probably not.

I want to move–literally out of the state (I'm in California). I don't particularly want to declare bankruptcy by any means–I can pay my other bills if I didn't have this crushing mortgage, but it was obtained back when I made 2x what I've been making the last couple of years. And its a big place–sucking me dry on the electric, water, etc. So I *want* to move away–right out of the state. I understand that Calif. is a non-recourse state and they can't come after me for anything more than taking the house, and I'm okay with that. And I can accept that this will mess up my otherwise pristine credit rating.

What I *don't* want to do is have the 2nd Mortg. come after me, if I can avoid it. Any idea how I can do that? Clearly there's no equity there for them to take (the 1st mortgage holder would be extremely lucky to get their $1M).

Help?

Randy @ 7:21 pm:

Actually, here's a question:

If the 1st mortgage forecloses and takes the house, but I continue to pay the 2nd mortgage/HELOC…even though I no longer have the house…would the interest on that 2nd Mortgage payment still be tax-deductible?

Barbara @ 12:04 pm:

OK…so what if I stop paying for the 2nd mortgage and keep paying for the 1st. What can the 2nd mortgage do to me? Can they force a foreclosure??? We would like to stay in our home, however it's a townhouse, maintenance just went up and there is no equity at all. One of the units just sold for 200K less than what we paid for. Right now I do not work and my husband barely makes payments and we have two small children so there is really nothing to garnish.
My question is if we can just stop paying for the 2nd and than settle for $5000 or so to get rid of it completely without actually going to foreclosure or any kind of civil court. PLEASE HELP!!! IS THIS AN OPTION???

Charlene @ 11:59 am:

I have a first mortgage that I pay on time. It is upside down and I haven't paid my second mortgage in over a year. I am now unemployed. Is it possible to settle the second mortgage for less than I owe.? They say I owe 30K, I could pay 10K, after that I am broke. I live in Alabama, if that matters how do I find out how my state laws apply?

Liz @ 6:40 pm:

I could use some advice. We bought a home in Idaho 2004. with a 1st and 20% down. We added on and improved the property-barns,, fencing, etc. with a 2nd. After huge medical bills- back surgery, heart issues - the ecomony and bank lending hit the skids. My husband was employed in the construction industry and lost his job- add into that my company downsized me (and others) huge medical bills and we could not keep up. We used all of our savings and investments while we tried to get First Horizon and Chase to negotiate and modify our loans- First Horizon/Bank of New York - flat out told us no- we were more valuable as a forclosure and Chase would not speak with us until both of us had a job. We had 3 short sales presented and no response- this process lapsed over 2 years. Finally we found work out of state and relocated. The 1st forclosed on the house for less than what we bought it for in 2004. Both the 1st and 2nd show up on my credit report as Profit & Loss write off, Now 1 1/2 years later - the 2nd has a collection agency calling and demanding the $43,000 for the 2nd. What is our recourse or best options? We barely make ends meet each month and had to relocate a 2nd time to keep a job. Eventually we would ike to own another home ( we had been home owners for over 20yrs with no previous issues with credit, employment, etc) Please advise!

same boat @ 7:21 pm:

we are basically in the same boat… 2nd foreclosed, but didn't pay off 1st. 1st is telling 2nd that they are not negotiating with them for a bargin-basement price (ha ha). now 2nd served us with unlawful detainer… 1st is in foreclosure, too and about to wipe out 2nd. question — how can 2nd have "title" to house if they haven't taken over/paid off 1st?

Bruno @ 11:41 am:

My Scenario is different.
1st mortgage is solely in Xwifes name purchased by her after the divorce.

As to prevent a foreclosure and have my Children not move away I obtained a 2nd HELOC on the property although I am not affiliated with the 1st mortgage. (I had to add myself to TITLE concurrently with X-Wife) to get the heloc.

The HELOC funds were disbursed to the Xwife and the Foreclosure on the 1st was averted and my children were saved. In exchange, I had agreement with Xwife to use the Childsupport to cover the loan.

Now with the above staged here is what happened and I need some advise now.

A year or two later the 1st mortgage went into foreclosure although the HELOC never was deliquent.

Although I was informed by the BANK - WAMU in this case, the foreclosure would not effect me and the HELOC would be absorbed into the foreclosure. The day of the Foreclosure I called and the WAMU chargeoff department for HELOC indicated my Loan was zeroed out and that I would not be effected. LAter that day they ran my Credit report and found that I was in great standing and behind my back elected to keep the account open. by this time and many months prior to the foreclosure trying to get answers from WAMU unsuccessfully I had a Letter complaint into the BBB. 1 week after the foreclosure of the property and the HELOC remaining open (After their lies) I received a letter that they are CHARGING off the HELOC Effective the day of the foreclosure.

They didn't perform the charge off Still. The account remained open without any written agreement to keep it open after the foreclosure had transpired. As the Charge off was pending to occur I continued to make payments as to not have my credit damaged by WAMU and there Greed and lies. Of course at this time the X-wife then attacked me with Child support services demanding her full child support although our agreement stated I would pay the LOAN since it was an advance of Child Support. So there I was in a big PICKLE.

I contacted the Hardship department at WAMU indicating what happened and they ignored me. My thought was that at least if the Charge off is pending and the Loan is still erroneously active I had to try to temporarily reduce the interest rate via the Hardship dept. That was another 6 month battle and they new the property was foreclosed. With luck the Hardship went into effect and documented that the property was already foreclosed.

With all this going on I maintained my good credit score and eventually wanted to make a new life - since I was currently nearly in the street with the Child Support and Loan and hell of WAMU greedy liars.

I eventually moved into another home to make a new life. By now CHASE took over WAMU and were in transition. CHASE executives then received my complaint and were also unable to get answers out of WAMU. Finally - I found a contact Number I jotted down for WAMU HELOC mgr - alternate Phone from a Wamu insider. Basically what happened was I managed to tell him of my BBB, OCC Federal Trade commission letters the lack of response from WAMU Chargeoff department and basically found out what I already knew - This person had recommended the charge off a year prior in which the Charge off dept didn't follow. WAMU told me at this time I must be 150 days late before I can be charged off. I also found out that they sold the property to another party 3 months after the Foreclosure a year back. I told them this is nonsense. I managed to get the account charged off as they stated based on the retroactive foreclosure. However, they went into immediate collections against me. I contacted CHASE executives and they indicate that I must now deal with the collection agency. I did just that. I sent the Cease and Desist Letter and then Asked them to Validate the HELOC loan. If they can not do that within 30 days they are to drop the case. I never heard from them again.

Now yesterday - I received a CALL from a new Collection Agency now indicating that CHASE home finance requested they try and collect. Again I sent another Cease and Desist and called Corporate office at Chase to clarify without any resopnse yet.

My question is? COnsidering the negligence of WAMU and the Greedy methods and lies and that they were both the 1st and 2nd HELOC holder. Am I protected under Civil Code and Procedures CCP 580D?

I can prove all of the events either with Audio Tape or Written letters.

Should I worry about on going collections! How would you suggest I stop this nonsense now.

Thank you for listening. (I am the only one in the world that probably gave his X-wfie - after being divorced 66,000 to save my kids) So this situation is unique and I need advise now.

Thanks

dave @ 7:04 pm:

Paul

RE: I have a home in southern California that is upside down, with a much larger 2nd mortgage which was a hard cash loan. The first is Wells Fargo $165k, the second is Pentagon FCU $281k and the house comps at around $350k. The payment on the second is nearly triple the 1st and I lost my job and can just no longer afford it I am facing a foreclosure as I have stopped paying the second for nearly three months. I would love to keep the house and can afford the 1st but not the second any more. I was thinking of offering Pentagon $100k as a payoff which I could scrape up from family and credit cards. Is there any chance they might take it? Would you course help me in negotiating? really desperate, Paul

Paul, they might take it if you do a short pay package with them. Financial statement, hardship letter, proof of your income, tax returns, two months' bank statements. It is possible.

*****************************
I live in So CA and I'm faced with a similair situation. I owe $195k on a 1st that is current and owe $550k on a 2nd that is now late and the home is worth maybe $700k. I used my equity to buy some rental properties but had to short sell them when I could not rent them. Now I have no income from the properties and no way to pay off the extra debt. I'm considering BK or wondering if the bank will settle for pennies rather than foreclose on the 2nd.

Can you offer any advice or let me know how your situation is going?

Russell @ 10:17 am:

We live in Michigan and have a 130k 1st with Wells Fargo and a 325k 2nd with BofA.

The house that once appraised for 680k now appraises for less then 300k. My wife lost her job and I had to close my company under the weight of the resession and take a job making 40% of what I was making in 2007.

The second did a loan modification which will expire in February 2011. When this happens the loan will be unaffordable. They wont even talk top me right now.

I talked to a friend in the banking industry and he said that when the loan adjusts I should stop paying the second loan but keep paying on the first. He said this because he feels the following to be true.

1) the bank will finally talk to me about options

2) Chances are they wont foreclose. He said he talked to others he new at the big banks and they said that there is no way that they would buy up the first mortgage that there wasnt enough equity.

3) I could negotiate the second away for 10 cents on the dollar or less.

4) he also refered me to an attorney who told us that if the house does go into foreclosure that because we live on a larger piece of property thay we may be able to stay in the house for up to 2 years without making payments.

Is any of this correct in your opinion?

thank you for your time

ash @ 5:48 pm:

Currently I live in CA. But I have a house in AZ, it was owner occupied till 2 years ago. I had lived in that AZ house from 2004-2008. Since July 2008 it has been rented out, as we moved for jobs to CA. There is first and second mortgage(home-equity line of credit). I know both first and second are non-recourse type. loan due on first is 245k, second is 263k. current value is around 325K. Both loans are from WellsF(investors may be different within WellsF). Personally cannot cover the difference in the balance due to paucity of funds.

Questions:
What are my options and can I negotiate and avoid paying the balance?
what happens if I do short sale, or Deed-in-lieu or foreclousre?
Can the second lender still go after the remainder balance, even though it is a non-recourse even though I am in CA.
Should I have a lawyer to review the paperwork before going for short-sale and after the short-sale to get settlement done correctly and review paper work post sale, so that there is no deficiency claim later on from the lender ?

Please advise. thanks!

Janet Anderson @ 9:30 am:

Can a short sale transaction close which has been approved by the 1st mortgage lender, if the 2nd mortgage lender is asking for $30,000, which no one is able to come up with?

Ola @ 12:18 pm:

Can I get a deed in lieu of foreclosure on my house with two mortgages on the house? The second (smaller) mortgage is already in collections.

lenny @ 2:34 am:

Hi, I live in Pittsburg and I have a primary mortgage of $400K and a second of $170K plus $30 equity loan. The home is a historic property what I spent over $200K on restoring and that requires a lot of maintance as it is old. The secondary and equity are the same lender. I lost my job and could not make the full payments so I stopped paying the first for 3 months. The lender worked out a lower payment via the mortgage modification program which I have been paying now for 14 months. I have been paying the second and equity line all along from savings hoping that I would get a job. Still no job. I tried for 2 years to sell the home for what is owed by no luck. So I moved out of the house and rented it out to a couple that was interested in buying it but had just moved into the area from the Boston. The rental income is $500 less than what my payment is for the reduced payment on the first and the second plus equity. I can make up the $500. I just received a notice from the first that I was not approved for the mortgage modification program, after making reduced payments for over a year. I still do not know if the renters will buy as they are concerned about the market but they may want to rent another year. If they do not buy or rent than my only choice will be to either try to short sell it or stop all payments and walk away. There is no equity in the home and I do not believe that there will be for a very long time. Do I continue to make payment to the first at the reduced rate while I try and negotiate that rate until such time that I can sell the home? Do I stop making payments so as to have leverage? Do I stop making payments on the second and try and negotiate a lower payment with them? Will my renting out the home make things more difficult? Maintance on this home is very high if left empty, over $1000 month, so if no one lives in it it will deterioriate very quickly and is my reason for renting it.

Linda @ 2:41 pm:

I have a 1st mortgage I got back in 2003. I took out a loan with Wells Fargo to do updates to my house. I ended up filing bankruptcy do to difficult times in 2005 and the loan from Wells Fargo was listed on the Bankruptcy. I got a call today from Wells Fargo saying I still owe the money from 5 years ago because they have a lien on my house. Can they come after me 5 years later without a word to me about paying them back after 5 years? I live in Michigan. How can I get the amount reduced or not pay at all?

Can Ergun @ 11:02 am:

I have first motrgage of $ 850 K and second LOC $ 1Million . My houese is worth 1.5 Million . I am current on both . I would like to keep my house but I can not affort the second mortgage payments . Is it possible to negotiate the second with chapter 11 ?

Upsidedown @ 6:19 pm:

We live in CA, bought in 2005 originally, refinanced in 2006 with BofA. First mrtg is $759,000 and 2nd (HELOC) is $249,000. We qualified for a MOD, but they actually raised the payments, not very helpful. We do not qualify for a HAFA as the limit is $729. Our home is worth about $330 now, a loss of over $600k. We are about to be foreclosed and we are actually considering just walking away. But we are terrified of any deficiency judgements on the 2nd, as the amount would be ridiculous. We have considered short-sale, or deed-in lieu, as well, but the tax implications would be greater if they forgive all deficiency but give you a 1099 as earned income! The debt forgiveness would be over $600k and that would be treated as income as far as the IRS is concerned. We are really in between a rock and a hard place here! What makes more sense? I know we will have some liability, either in the form of a 2nd deficiency, or a tax consequence if they forgive the debt all-together!

Jim Smith @ 9:52 pm:

We live in CA, bought in 2005 originally, refinanced in 2006 with BofA. First mrtg is $759,000 and 2nd (HELOC) is $249,000. We qualified for a MOD, but they actually raised the payments, not very helpful. We do not qualify for a HAFA as the limit is $729. Our home is worth about $330 now, a loss of over $600k. We are about to be foreclosed and we are actually considering just walking away. But we are terrified of any deficiency judgements on the 2nd, as the amount would be ridiculous. We have considered short-sale, or deed-in lieu, as well, but the tax implications would be greater if they forgive all deficiency but give you a 1099 as earned income! The debt forgiveness would be over $600k and that would be treated as income as far as the IRS is concerned. We are really in between a rock and a hard place here! What makes more sense? I know we will have some liability, either in the form of a 2nd deficiency, or a tax consequence if they forgive the debt all-together.

Damon @ 9:08 pm:

My wife and I bought a home for 360k 8 years ago. We refied the 2nd and now owe 445k (took money out to renovate). We are 85% complete, but have structural repairs that would need to be addressed to put the home on the market. Today our home is worth about 350k, less counting the structural issues (missing exterior walls!!).

When the bubble burst for us 4 years ago, we both lost our jobs and were sued by our medium credit card lender (we have 3 cards, 5k, 16k, 22k), who also holds our first mortgage. We made arrangements by phone with the other 2 lenders: 5k became no interest and $200/month, the 22k became defered for 1 year with a min payment of $400. The lender that sued for 16k levied our account for 3600 and are holding it hostage (not applied to payment) and won judgement for 354/month for 5 years. We exhausted everything to save our home, including maxing out credit cards and our revolving interest only 2nd mortgage (175k).

Today we make together 158k and can afford all the payments. However, we also have 2 car payments and our 22k lender has now opted us into an economic recovery program and reinstated our credit @30% for a min payment of $800/month, $970/month for 3 years to pay it off. This combined with the tax hikes for the income have broken us down and we work!!!

We have wanted to divorce for the last 3 years, but see no responsible way to accomplish this and simply go on pretending to be happy, while hoping for a miracle. I know I am not the brightest financial guy, nor to I pretend to be. I need some real eye opening advice as I have scoured the Internet for information. We do not qualify for bankruptcy (7 or 13), as we make too much together. Apart neither one of us can buy out the other. We have lived apart, she rented a new apt. While I brought in renters to supplement the income loss. But we are still married and wanted to provide some kind of nest egg for her kids (16 & 19) college funds. We do not have 401k or any other investments. I am 35 and my wife is 40.

Please help!!! Thanks!

~Damon

anthony @ 10:49 am:

we have a 80 and 20 split with two seperate banks. our first mortgage is about 292.000 and our second is 73.000. Our house is currently appraised at 315.000. If we stop paying our second mortgage can they forclose being that we are underwater and the house has lost so much value and there is no equity in it for us?

Mark @ 3:54 pm:

So I owe B of A 270,000.00 loan on my house and the house is worth 200,000.00. I owe wells fargo 40,000.00 for an equity line. if on my B of A loan im current with loan insurance and taxes what can wells fargo do to me if i stop paying them on the equity line and there is no equity left. my work has gotten real slow and i have tough choices to make. Dont care about my credit at this point just dont want my house taken.

Jeryld @ 4:02 pm:

Thanks for the useful info on this site! This may be a little different because it's regarding bare land with no home. I purchased the property with a private loan (hard money loan) of $110,000. Appraised value at that time was $145,000. I then had a 2nd mortgage from a previous real estate deal that I had to switch to another property. I had closed on a home and wasn't able to pay off the 2nd, but was able to attach the 2nd to this peice of property. The 2nd was $40,000. Then the real estate market crashed.

The property is now worth about $60,000 total. I found a buyer for the property and the 1st is willing to settle for $60,000. That would be great except I cant sell the property with that 2nd on there. The 1st is not willing to share any of that $60,000 because they are already taking almost half what is owed to them. If this sale doesn't go through, the 1st is now threatening to foreclose (I haven't been able to make payments in the last 6 months).

I'm just trying to figure out what position the 2nd is in at this point? Would it benefit them more accept what I can offer them (which is only about $5,000 at this point), or would they rather let the 1st foreclose? I don't see how they would because they would have to buy out the 1st and there's no equity in the property. I'm sure that either way they could "go after" me for the funds, but they are well aware that I do not have any assets and do not make enough money to pay this debt….it could take 30 years to do that!

Just wanted to get your thoughts on what that 2nd could do. Thanks.

Mario @ 11:11 am:

I bought a home in California in 2004 for 250,000 on an 80/20 Interest only adjustable loan. 2 years later when the adjustment was going to be made I refinanced the house on another 80/20 loan at a fixed rate for both. I am currently in foreclosure with no sale date. I have read that California is a non-recourse state on the first loan if you have not refinanced the home. Is this true? Would my lender be able to come after me on my first loan?

Vanilla Bean @ 10:54 am:

If the 2nd Mortgage or HELOC can be treated as an unsecured debt by the bank and the bank can pursue repayment/ judgment without having to foreclose (due to decreasing property values) does the borrower have the "right" to include this "unsecured" debt in a chapter 7 filing or will the court still view this debt as a mortgage/ secured? The answer is NO! Talk about a double standard.

Once the HELOC agreement was made the bank takes an interest in the property as collateral for repayment of the debt, under the agreement should the borrower default the bank gets the collateral…that is the agreement. So, as long as property values are rising (and they only go up…right?) the bank that holds the 2nd can and will take the property BUT if values drop they can call it "unsecured" and get a judgment for breach of contract! But the consumer/ borrower does NOT have the same right to include it in a Chapter 7 BK and wipe it out….somethings wrong with this …can you say ponzi scheme?

Jack Thomas @ 12:57 pm:

The line of credit is a lien and they can foreclose. Push hard with them to make a deal or you will have a big problem

Linda @ 8:48 pm:

I'm in Washington State. I sold a house to a friend 5 years ago and she gave me a secured note for $50,000 which is registered on the title. Just found out she hasn't paid her 1st mortgage with B of A for 18 months and they want $18,000 in arrears which she can't pay. She's been trying to get a loan modification during that time and no decision yet from B of A. She did a modification 3 years ago and added $30K to her principal, so between that and the arrears her equity is gone. She says if the modification doesn't come through she'll stay in the house until they foreclose and declare bankruptcy. Her debt to me is now $68,000. Do I have any options for getting anything back? Great site — I appreciate any advice.

Jeff Newsome @ 7:27 am:

Hi Richard,

I have been dealing with an investment firm that bought out my HELOC from the FDIC after a bank take over. I have a first on my home that is around 275k which is current. The HELOC is for 43k. There is question if there is any equity if the house would be sold at market value. I also have a loan with Wells Fargo on some raw land adjacent to my house that is about 93k that has matured. US Bank has loaned me enough money to pay off Wells Fargo and have enough to pay the investment $11,900 as settlement for the HLOC.

Should I stand firm on my offer and let them pursue me for the debt if they do not accept or should I take their offer to extend financing for ten years @6 % for the full dollar amount? I live in Idaho which is a non recourse state and a single action state.
Thanks

Craig @ 11:27 am:

I have a house in ca that I have modified the first on. The second is with a different bank & they have refused to modify it after the first has done so.The value of the house is still less than than what's owed on the first. I haven't made the payment on the second for a year. There is no equity in the house & I don't believe there going to pay off the first (500k) to get to it.
Can they go after me & my assets rather than the house? Can my other assets be protected by a bankruptcy if they decide to go after me?
I am disabled also, will this status help protect me if they do come after my assets.

Kathryn @ 9:38 am:

I was screwed by Countrywide in 2005 and they stripped my equity with a HELOC for 33000. Lost the house in IL and moved to Georgia. I am currently being garnished for 43000 for the HELOC and other cost. I can't file bankruptcy because my income is too high. Why if Countrywide if being investigated for mortgage fraud and was shut down is it legal to garnish for bogus loans. Is there any way to stop the garnishment other than bankruptcy. What is the statue of limitations for collections on a HELOC

Lana Chapman @ 3:50 pm:

I filed Chap. 7 BK (prepared by paralegal) and included both 1st & 2nd Mtgs. On 3/8/2011 Trustee said BOTH loans would be discharged. I received/accepted short sale offer not yet approved by Wells Fargo and don't know how to amend or take first mtg out and don't have income to pay attorney. Where could i locate needed forms/amendment to file with trustee to take out for short sale? Or, should I decline short sale and allow both mtgs to stay in BK and be discharged as per Trustee on 3/8/2011? Your help would be greatly appreciated as I am in a state of panic and preparing for surgery at same time. I appreciate any and all help, answers you might have for me. Thank You !

Linda carbajal @ 11:42 pm:

heres our situation, husbands job suffered and we fell behind in our mortgage payments, our debt to ratio was very high, we ended up filing for chapter 7 bankruptcy. Husbands job finally picked up, it took a year in a half….just recently, bank capitalized on our first loan, making us current and lowered our interest rate, and its a fixed loan…prior, we were paying interest only..all this took forever. Now, we await what will happen with our second, it has been in review for 2 months. We were told banks do not normally foreclose on second because they would have to buy out our first, and lose money since home is worth less. My question is…do you think they will be willing to forgive some of the second, in order to make our home more affordable?, especially since the first went thru already? Bank of America services both loans, but we were told we have two different investors. Both loans were actually listed on our chapter 7 bankruptcy, but then we decided to try and save it, but legally it is still there & our bankruptcy was discharged already. Hope this does not sound too confusing……

Darla @ 8:26 pm:

Hi. We paid 160,000 in 1998. We owe 18 more years on a first with a balance of $90,000 at 5.25%. 5 years ago at the height of the market our home was valued at $450,000 (no lie). We were encouraged by everyone to take a $150,400 HELOC and consolidate date and also pay for college, with a current balance of $113,000. During that time, we accumulated $30,000 additional credit card debt due the illness of a family member who we helped out paying bills and keeping her home. We are current and have been current. However, it has become increasingly hard to reduce our revolving debt–X is earned and Xplus is spent. We hit a deficit in August 2010 and were able to close an old, dorman IRA for $10,000, which infused a little cash. Now, we find ourselves scared to death of winding up in that same hole and overwhelmed by our debt. We are doing 0% for a year credit card balance transfers to help as well.

Currently owing $30,000 on credit cards, $113,000 on the HELOC and $90,000. Home MIGHT sell for $280,000. We saw a realtor today for that figure. Were it to sell in 6 months, we'd be able to pay it all off and rent an apt. We are not sure we want to do that. What would be the consequences of stopping payments on the HELOC which is in 2nd place of priority? Could Chase force a foreclosure and how long would it take to happen? We are curious. Many people have told us to stop paying it–it would take 3 years for a foreclosure and by then we'd be able to renegotiate if we kept the 1st current and paid off the credit cards. What say you? We think its a crap thing to do, but desperate people do desperate things.

Ed @ 9:38 pm:

I have a first with one bank. After 18 months I am in the modification trial period and will complete it successfully.
If everything stays the same, that mortgage should be ok
Value 455,00 +/- Load 402,000
Scond repeatidly said we can't do anything until the first approves a modification.
Finally it did.
I contacte the second, they sai it was charged off.
Now:
Second, another bank, un secured equity loan 155,000. CHarged off, now charging 39.40 per day so presumed debt 174,000 and growing.
Recently received offer to settle for 24K. I did not have the 24 K at the time. Called to talk about solutions. I noted that I was to contact them as soon as modification on the first was approved. I stated my climb back to stability is moving in the right direction. I got yelled at and treated poorly. representative terminated the call with" I am putting a note to escalate this to the next level because you ahve no intent to resolve it."

Now what?
Can they forclose?
Should I offer to settle?
Thanks

Rene @ 2:43 pm:

I have a first with one bank for $269,00 and a second with another for $65,000 @ 12%. The first mortgage was modified, but the 2nd turned me down for missing doc's. After starting the process again, this time sending them the approval letter from the first mortgage modification I contacted them and was told they received the doc's. After 3 months with no word, no correspondence from the 2nd, I received a letter from a collection agency stating they had the loan.

The agency is asking that I supply them with finanical information to work out a settlement/make payment arrangements. Although I've fallen behind on the first, I plan on bringing it current, or at least keep it from going into foreclosure. The collection agency claims the lender is not going to foreclose but lien the property, and if I make payments the loan to go back to the lender. My property value is more than likely equal to what I owe on the home. I would like to keep my home.

I don't want to lose my home. Should I file for bankrupcy? What should I do now?

Mo @ 12:21 pm:

I have a home in NV it was my primary home when purchased but I moved and rented the home to tenants. I took out a HELOC on the home and have a balance of 85k the first mortgage has a balance of about 169k. The first does not appear to be upside down-zillow says the home is worth 170k. I can no longer make the payments. Should I consider a short sale? Could I quit making the HELOC payments only? What will likely happen in NV? I dont want the deficeincy hanging over my head…

Lisa @ 3:59 pm:

We had a shortsale buyer for our house in GA. who backed out at the last minute. We apparently were realeased from our first mortgage and in the process of negociation with the second. The Realestate company failed to tell us that our buyer backed out and the house went into forclouser around Feb. 20, 2011. The house is now bank owned. We had not known or recieved any paperwork until a few days ago (April 10 ). The second Mortgage company sent us a very confusing letter stateing that they want our response in writing withen thirty days. From all the reading that we have done, it looks like in the sate of GA.,the second mortgage needed to file a deficiency judgement withen thirty days of final sale of property. It has been almost sixty days. is the house concidered sold when it is bank owned or is it concidered sold when it is privately owned? I am not sure if this is a "bully" letter or a real one. Can they still come after us if we live in CA. The origional contract on the second says that the only collateral against the house is the house itself.

R.D. @ 9:16 am:

We have a 1st and 2nd mortgage on our home in missouri, both are with Bank of America. We recently filed a bankruptcy and we signed a re-affirmation agreement on the first mortgage only. We are seriously delinquent on the second mortgage and cannot afford to catch it up or make the payments because I have been placed on social security disability. we signed a re-affirmation agreement on the first because we can afford the first mortgage, but did'nt sign a re-affirmation agreement on the second because we new we could never afford it.

Will Bank of America foreclose on the second, and do I have any options. Our house is currently worth about what our fist mortgage is?

Would Bank of America take a settlement offer if I could come up with some money?

Deni @ 7:10 pm:

I am in Utah and consulted a bankruptcy attorney regarding my same similar situation. He said that as long as my home value was less than what I owed on the first mortgage I could file a chapter 13 and include the second in it. Essentually wiping it out once my several year of payments was complete

Laura @ 9:14 am:

Every situation is different and in my case the 2nd foreclosed, the 1st auction backfired, buyer found out before he paid the balance within 24 hours that there was a 1st mortgage for 155K and backed out. 2nd auction took place, buyer paid everything, tried to fight the court after the fact for not doing his homework. Judge overruled and the guy got stuck with the house with my old tenant downstairs still living there! Now, months later the 1st is trying to proceed with formal foreclosure. I've claimed chapter 7 as of last year. I have a few burning questions at this point. Does the new owner (from the auction purchase) not have responsibility to pay off the 1st if he sells it? I was told that awhile back. Also, when the 1st forecloses does it go to auction again and what happens to the owner from the auction?? Thank you.

That's How It Used To Be But Is No Longer @ 10:16 am:

Our second mortgage bank is selling our house. Our first mortgage with a different bank has been approved for a loan modification. We are $100K upside down on the first mortgage and owe $70K on the second. The junior lien holder not selling the house was the rhetoric of 10 years ago, that is no longer true today, the banks are pulling all sorts of stunts these days.

jennifer @ 9:43 am:

Richard, we owe 163000.00 on our home. 150000 on the first and 113000 on the second. No will work with is because our home is about 80000 underwater with both loanes being interest only. Our payments are unbearable. We have managed to make our monthly payments but we are ina place where it has become difficult to make them. We don't want to foreclose and ruin our credit and would like to buy another house that is affordable down the road. We don't know what to do an feel we are backed in a corner. On top of all this we are planning on adopting and need a house and our finacial records will be looked at. Foreclosure and late payments won't look good. We are are in Washington state. We are at a lost.

Valerie @ 8:19 pm:

My husband and I own a house in NY, but are currently going through a bitter divorce. Since he has left our home I have been paying for the mortgage for over four years. About a year ago I found out that he taken out a home equity loan of $70.000 and with out my knowledge. I have been trying to deal with the bank to repay this loan back but they are refusing to deal with me since it is not my loan to pay, but my house was used as collateral for this loan. They are planning to foreclose and he refuses to help me in this matter. Is there anything that I can do to stop it I'm willing to pay regardless if it's mine or not.

Rebekah @ 11:47 pm:

My husband died by suicide in 2009. I had to foreclose on our house because I wasn't emotionally strong enough to stay. I tried to sell it but couldn't. The loans for my house were 80/20 loans. Bank of America loaned us the 80% and auctioned our house in Dec. of 2009. Citibank carried the 20% and were going to sue me in 2010. I talked to a representative and he told me he would talk to Citibank and explain that my circumstances were beyond my control. A few weeks later I received a notice that the lawsuit had been dropped. I assumed everything worked out. A few weeks ago I got summoned to court because they are suing me again. They said they dropped it the first time because they couldn't find me to serve me the summons. I have a great credit score (725) and I’m going to lose all we worked for over this lawsuit. I have an appt. to talk to a lawyer about filing bankruptcy. I’m sick about it. I can't afford to pay them because my income is fixed (I'm on disability). I owe them almost $32,000.00. What do you think I should do? Thank you in advance! :)

iFrances @ 7:42 am:

Wow great of you to answer so many distressed homeowners.
I am underwater more than $150K in Los Angeles, on my only property, my residence, and when I bought in 2005 it was a no-down 100% single loan, no second, no refinance since, no PMI.
BofA says they will not modify out of the ARM as my salary allows me to pay. I have perfect credit now (820) and a stable job. My question is:
Will anyone else give me a legitimate loan (without lying on any documents) before I miss any payments, to purchase a second home in the same area? I am so angry with the bank that I plan to foreclose on this one anyway, credit score be damned, and (if necessary) rent, but there would be tax benefits to buying.
Though not rich, I could afford both mortgages and have paystubs to prove that and no other debt, and I can (with some sacrifices) make a 20-30% downpayment, but don't want to put that kind of money into the current property which I'd only intended to be in temporarily and is simply not ever going to be worth it.
I'd appreciate your comments.

David @ 3:30 pm:

I live in Arizona and last december i lost my home to foreclosure, i also have a home equity loan with the same bank, i have continued to pay on my equity loan even though many have told me to stop paying on it, my question is, what would happen if i did stop paying on it? my credit is already ruined and i have lost everything…

Scott @ 9:08 am:

John - did you have success having the second stripped as a result of the inflated appraisal? I assume you sued the 2nd lender? I'd love more detail as I am about to file a fraud claim for the same reason.

Don @ 7:55 pm:

I am in MI, have 1st mtg of $116,000 (B of A)..I have 2nd mtg of $28,000. I filed Ch7 bk in 2006 so 2nd Mtg was considered wiped.Current on 1st mtg. I have been paying 2nd but stopped 3 months ago. Home now worth maybe $65,000. What will 2nd mtg (Citimortgage) possibly do?

Jerry @ 9:06 am:

We have a primary (300K) and HELOC (90K) on a home in Ohio, now worth only 350K. We are not behind on payments that are too large a portion of our income. We want to sell simply to have a much smaller housing cost and/or transfer out of town.
We have tried refinancing for a lower percentage and payment on only the 1st but were told that we can't because we are upside down. We were told by the 1st that they would not consider it a short sale because there is more than enough equity to cover what we owe them. Assuming we can sell for anything near the estimated worth and after fees, there will not be any more than 25-30K for the HELOC (about 1/3).
What can we do to get the HELOC to release the lien to allow us to sell?Transfer to Unsecured? Negotiate a more equitable split with the 1st on a short sale?
or at least Refinance the two into one mortgage with reasonable terms and lower payment?

jay @ 3:41 pm:

Hi, I bought a home in Seattle WA and recently CHASE foreclosed it. I was laid off by chase and t I have moved out of the home to find a job in east coast during the process. We have submitted 10 offers for Shortsale and the bank turned it every time. They sold the property on the foreclosure for less than the lowest Shortsale offer we produced. Fist mortgage is 335K (Sold for 228K in the foreclosure) remaining and 2nd (hard money used to buy the home) is about 55K. Since WA is a non deficiency state, I am hoping they will not come after my 1st loan. But I am not sure about the 2nd. Can you please advice can I wait until the bank come after me and work out a repayment plan with debt negotiation. or do I do anything at this time proactively?

Philip M @ 6:17 pm:

I have 1st 175000 im current I have 2nd 105000 1 month behind im filing for chapter7 this month. the house is worth 220000 this leaves the 2nd about 60000 in the whole . I want to try to stay in house. can the 2nd still foreclose on me.

Donise @ 1:43 pm:

OK I have the same scenerio, does the 4 years start the day you signed the contract for the second? Or 4 years from your last payment?

billie hernandez @ 9:09 pm:

hi i live in Ga!!! i lost my house to a foreclosure! and now the second mtg is coming after me for 50k… am i liable to pay?? should i pay?? or should i fill bankruptcy??

vince @ 1:52 am:

I purchased my home in 1991 for $66,000. as a primary residence needing alot of work. It was a 30 year fixed mortgage at 5.5 % rate. I paid it off early without penalty in 2001 in 10 years with lump payment. I took out a line of credit and unfortunately ran it up to limit of $85,000 due to job loses and major medical bills. The problem now is that the 10 years on this line of credit expired and the bank PNC will not renew term period or do a loan refinance or loan modification due to low income level. I am laid-off again and collecting UI benefits. Yes the timng for me is awful. How can I avoid foreclosure since I can not pay this loan off all at once? I can withdraw some 401k savings to put down 20% to refinance it, but bank won't consider this due to low credit rating of 620 due to medical bills and my presently being unenployed. How can I get help to save my house of 20 years, which I paid off once. until I am employed again. I am 59 years old.

Thanks, Vince

GG @ 10:39 am:

I have a $475k 1st and a $280k 2nd on a house worth about $550k. I filed for CH7 a year ago and am now about 9 months late on my 1st mortgage payment.

I'm trying to work out a modification with my 1st, and am contemplating trying to buy the 2nd back, if possible, using funds from a 401k and help from family. I don't know if it's possible, but if I can buy the 2nd back for less than $75k, it might make sense to try, so I can sell the house and avoid short-sale or foreclosure.

The 2nd was put into the BK filing, so they can't come after me, all they can do is take whatever is left after the 1st gets their share, which might be nothing.

Does this make sense, would the course help with this specific process?

Thank you!

GG @ 10:48 am:

Contact a bankruptcy attorney for the specifics in your state, but in CA I filed for CH7 with a $480k 1st and a $275k 2nd on a house worth about $550k. The 2nd was included in the BK filing, so they cannot go after me for any deficiency or personal claim, but they still maintain the lien on the property. If I'm foreclosed on or sell the property, they would get any money left-over after the 1st lien is satisfied.

KK @ 2:20 am:

Because of income loss, we were behind on our 1st with Chase and they were unable to approve a remod at the time because of lack of income (go figure). We asked our 2nd (American General now Springleaf) to work with us but they would not. When we received our notice of default from the 1st, we stopped making our 2nd mortgage payment and made plans to leave the house and rent. The 2nd mortgage company immediately became aggressive, visiting our home repeatedly demanding checks. They harrassing us with demands for payments every day, and then the calls and home visits stopped and they sued us before the 1st started the foreclosure process. Then after the judgement and garnishment notices arrived, they called us and told us we would have to make a payment equal to our former 2nd mortgage payment or they would garnish our income indefinitely every 2 weeks $43K for the 2nd mortgage loan now a judgement. This effectively forced us into making payments, and we resubmitted remod papers to the first who finallly agreed to do a remod. We have made three payments on both the 1st mortgage and the judgement which used to be our 2nd mortgage. The 2nd mortgage company calls us daily telling us they have some papers we need to sign and to set up an appointment to come in and sign them. It is very intimidating. We think they want us to come in and sign new loan papers with them. We think we should not do that. We can file for a chapter 7 bankruptcy in 16 months. After all they have put us through, we would like to try to have this loan stripped from our home. We are upside down. Your thoughts?

Richard @ 1:25 pm:

My wife and I have bare land property in California purchased for $240k five years ago with $145 balance. (We are only able to continue payments on our primary residence, and completed a residential loan mod on our 1st & 2nd with B of A.) We wish to do a short sale on the bare land property on the 1st with our lender, Chase (we don't have a 2nd.) A realtor did some comps and thinks we may be able to get $85k. Chase's short sale process includes demonstrating hardship which we should be able to do considering my wife lost her job. Questions: can Chase seek a deficiency judgement on us for either a short sale or deed in lieu for the difference of that which is owed vs. what they settle for? Would there be a tax implication for the "gain" in that difference?

Mss Duval @ 9:09 pm:

I put down 200,000 on a home I have a one million first mortgage and a 800 heloc second my home is worth 1.5 million now and I am having a really hard time making both payment as I incurred credit card debt to do some repairs on the home. If I file chapter 13 can the second be stripped or can they work with me to bring the principle down the to current market value so I'm not upside down.

Brandi @ 10:40 pm:

We filed for bankruptancy two years ago. Our first did not reaffirm, but our second mortgage did. We have since fallen behind in payments, and are considering walking away from it. Where do we stand on this? Any info you could give me would be great. Thanks!

Shawnda @ 10:33 am:

Just want to say i have done some research myself.I live in california and found they can come after you for your second for breach of contract yes but, only for 4 years.Each states have a set of (SOL) Statue of Limitations check with your state on what are.If the original creditor or collections call after that time frame simply tell them your SOL is up then send them a cease and desist letter do not claim the debt as they can re-age it.I am no professional just in the same boat and done alot of research hope this helps.I myself am dealing with an Illegal re-ageing on a 4 year old forclosure trying to purchase another house.

Shawnda @ 10:42 am:

I am really curious is it the law that a mortgage company for the second on a recourse loan after first has foreclosed and it is already 4 years old.Has to charge it off at 120 days in order to get credit on there tax loss?Or can they wait as long as they want?I do know that your 7 year period goes off of your dofd.But why does my dola change all the time!

Rick @ 10:21 am:

Hi, we have two mortgages. Our house value is less than both mortgages combined so we can never refin. We live in Mass. Our 2nd Mort is a 10yr interest only Home Equity loan. We wanted to either buy a new home and pay off both loans when we sell and start over or refin but now of course with the prices of homes in the area we can not do either. Looking for ways to lower our 2nd Mort as its killing us monthly
Any suggestions?

Yoli @ 11:42 pm:

I have a different situation and do not know where to start with this situation or what to do. We are in Arizona and my first home is not behind in payments and never have been. I pulled equity from my 1st home to purchase a 2nd home as rental property. My 2nd mortgage is not behind in payments either. Both mortgages is with the same lender and the 2nd is with our bank. Now the rental property took a nose dive quickly. We have been unable to get a renter for some time now due to the are therefore the mortgage has not been paid on the home. We purchased the home for 80K and now the home is worth 10K at best. We cannot short sale due to the amount the home is worth. The payment has not been made in over a year. There has been no contact from the mortgage company. We have received no letters or calls, nothing from the mortgage company. When we pulled our credit it shows it as a charge off. Every time we call them it is as if they do not care, they do not respond, we get no assistance as all. They have stated that it is not worth the foreclosure as they will spend more money in that process. My question is since they have charged it off does it now belong to us? If not what can we do to get from under this situation? We don't know where to start with this situation at all. Should we try to get a renter? File bankruptcy? Any suggestions?

Darren @ 7:50 pm:

I had a question. I purchased a home in NY state and the day before the closing the bank said I needed to have a second mortgage which would be held by the seller. I had written up a separate contract with the real estate agent that after the first mortgage was signed that I wanted a letter in effect dissolving the second mortgage. (As I had money tied into the house which had not been paid to me by the seller.) The realtor said that the owner had agreed to this and would give me the paperwork after the closing. Well I never got the paperwork and the real estate agent has since passed away. I have never made a single payment to the previous owner, nor have they asked for a payment. Is there a statute of limitations on a second mortgage like that? I would ask the previous sellers to sign a release, but am afraid of what might happen if now 7 years later they have changed their mind. If there is a statute of limitations, I would almost rather just wait it out as I have heard nothing from the previous owners and have nothing to prove that this arrangement had been made.

Syed @ 2:08 pm:

I thought that if the HELOC was used as purchase money then AZ real estate laws protect the borrower. Can you speak to this also?

Abbie @ 10:18 pm:

We foreclosed on our condo in June of this year. Originally we have an 80/15/5. We still owned $95K on the second and the bank (BofA) keeps sending us monthly bills. Can they come after us for this? I was under the impression that once you foreclose and the bank takes the house you do not have to pay the loans off. We are in CA.

maria @ 9:50 pm:

i have an 80/20 loan used to purchase a home for 445,000. My first loan is for 356,000 and second for 86,000. My home is under water and worth about 380,000. Both my loans are current but am struggling to make payments due to loss of icome. I have tried to negotiate a refinance with wells fargo but was only successful for first mtge, i have tried subordinating the second into the first but was denied that opportunity. I have also tried a loan modification for second but was also denied. This second mtge is at almost 10% and continuing payments is quickly putting me in a financial crisis, i am seriously considering not paying this second loan but continue making payments on first. I do not wish to foreclose unless i have no other choice. What do we suppose will happen if payments on second stop, how will this effect my credit score, will i be held liable in the future, what are the tax consequences? Thank you.

Alex Frias @ 8:58 am:

Bankruptcy courts are now allowing second mortgages to be discharged like an unsecured credit card. The second mortgage obviously has to be wholly unsecured.

Eliminating second mortgages is still very controversial as not all bankruptcy court jurisdictions are allowing this. In my bankruptcy court district in New York it has been done successfully.

Bankruptcy attorneys are also somewhat limited in dealing with this because they can only seek relief for homeowners in the particular bars that they have been admitted to practice in. Homeowners can file bankruptcy (chapter 7 or 13) on their own in their corresponding bankruptcy court to request this relief.

With the continued decline in home values and continued foreclosure crisis, I believe we'll see many more bankruptcy applications seeking relief from second mortgages.

Alex Frias

Alex Frias @ 9:00 am:

Bankruptcy courts are now allowing second mortgages to be discharged like an unsecured credit card. The second mortgage obviously has to be wholly unsecured.

Eliminating second mortgages is still very controversial as not all bankruptcy court jurisdictions are allowing this. In my bankruptcy court district in New York it has been done successfully.

Bankruptcy attorneys are also somewhat limited in dealing with this because they can only seek relief for homeowners in the particular bars that they have been admitted to practice in. Homeowners can file bankruptcy (chapter 7 or 13) on their own in their corresponding bankruptcy court to request this relief.

With the continued decline in home values and continued foreclosure crisis, I believe we'll see many more bankruptcy applications seeking relief from second mortgages.

Alex Frias

Alex Frias @ 9:17 am:

Is the servicer of the rental property paying the taxes? If not have you been paying the taxes? A charge-off simply means that they creditor is no longer interested in taking collection activity against you.

This may be good in that your not getting any phone calls, but in many instances, home owners have been receiving a 1099 form from the lender for the amount charged-off, which gives rise to new income tax liability.

I've seen instances when home owners in your situation have ignored the legal scenario and rented the space for as long as they can.. especially if they're not expecting a foreclosure action in the foreseeable future.

Filing bankruptcy (chapter 13) will mean that you enter into an affordable payment plan with the court for the arrears or the actual value of the home (10K). These type of payment plans involving reduction of mortgage liability is outside the box and although many bankruptcy jurisdictions are allowing it, many others are not.

I hope this helps. Feel free to email me anytime. alexfrias@docstowork.com

Chris King @ 4:00 am:

I have a home in Florida that was bought in 2004 when I was stationed there with the Navy. I was transferred in 2007 to Washington state and was not able to sell the house in FL as by that time it had a Second Mortgage on it. When it was obtained we had 20k more equity than what the loan took us to. needless to say we lost a lot of value, over 90 from the time of the appraisal for the second. I am now retired in Texas and own a home here ( couldn't find a job back in FL). I can luckily still make the payments although I have not been able to make any headway anywhere else financially and am looking at years of this. I believe the value to be around 150k now and the first is somewhere around 162k and the second is about 34k. I would desperately love to get rid of this financial sink hole but the bank (BOA) will not work with me after countless hours on the phone with them. They now hold both mortgages but have the second serviced by another company. I have never been late on a payment, which is why I cannot find any help. Is there any option for me?

rene @ 7:07 pm:

I am in this very position, the second lien holder NEVER cured the first. It has been 2 years, the 2nd served me with vacate notice by sheriff, I knew nothing of it. BofA is the first and would not allow him to take over my first and now I have to do something asap or they will have me out of my house! He sold my home to himself for 100 thousand dollars and I owe the first 1.3 million! Help~!!! I got a stay of eviction for one week as he did not properly serve that either!!

Banking Guy @ 3:38 pm:

Here is your reality. If you have a HELOC it may be considered a recorse loan and thus if the HELOC elects not to buy out the first then they can come after you for the amount of your loan. The cure is filing bankruptcy.

HW @ 8:44 pm:

We have a 1st & 2nd mortgage with Chase, in NY. We filed chapter 7 bankruptcy 2 years ago & the 2nd mortgage "note" was included but the lien is still on the house. We are current with our 1st & there is not enough equity in the house for the 2nd to foreclose. We are considering selling the house, if we did & made enough money back to pay the 1st off can we be personally sued for the 2nd mortgage? Also, can we even sell the house being that it has the lien on it?

Stacey @ 6:26 pm:

We live in Nevada. We purchased a home and signed a jumbo loan with both a 1st and a second mortgage in 2008. We were forced to foreclose 1 year after we signed the loan due to the econemy and losing half of our income. Today I received a call that the second mortgage company is going to come after us for repayment. This loan was a mortgage only loan. What can I do?

Josie @ 1:21 am:

My house was foreclosed in June 2010. 1st. Loan issued me a 1099A already in 2010. 2nd loan with a $113k is now on collection agency and is pursuing. Had a letter saying I have until feb28 to contact them otherwise they will recommend to their client to pursue legal action that may result for a judgement and garnishing.I would like to settle it with them but don't know what is reasonable offer of settlement that they would probably accept. Property foreclosed is in California. And the loan was refinanced from the original. To what extent can they garnish from me. Would they really do that? How long is a civil case like that will last? Can I qualify for bankruptcy chapter13. I have a good income enough for me to leave comfortably, but adding a $113k debt is too much to handle. It's just like working to just pay my present mortgage and this debt.please help!