Quote:
Originally Posted by Hopefull2009  Davephx - I was told by Aurora about ? 5-6 months ago that they charge off 2nd mortgages rather than foreclose. The rep actually said this was a "good" thing because once it was placed with a collection agency, the repayment terms would be better - go figure. She did say if the 2nd were to charge off, it wouldn't have any effect on my HAMP I was applying for. In Sept, when I spoke directly with the underwriter for a status update, she confirmed the charge-off information. Who knows - the stories seem to change from day to day, but in theory - that 2nd mortgage really isn't worth a whole lot to them these days I guess depending on the home's value. |
Interesting.
I also pulled by credit report and my 2nd shows that sevicer BOA charged it off in August. BUT. BUT.. I still get about monthly calls from BOA warning me they already have sent letter of acceleration etc so they think they still can foreclose. But I tell them how far under I am (they are half way to China underwater) and I'm in the HAMP trial and they are appeased.
Charge off doesn't always mean sell to a collector. With cc they often retain and keep up collections they just have to write off after 180 says accounting wise.
I am not clear if 2nd not being a lien would help or hurt for HAMP. It would mean more equity - less underwater for the NPV test. But help the budget. But NPV Test seems more critical.
Here is some research results still confusing:
From
My second mortgage became a charge off - What is that?
Property retains the 2nd lien: The charge-off does not remove the second lien from your property unless you pay it off.
HOWEVER.. I like this answer well a little better from
Letting Your Second Mortgage "Charge Off" :: Mortgage and Foreclosure Law Blog
your second mortgage would charge off as bad debt and become unsecured debt. The reason is that there is no equity in the home to foreclose on. Two years ago, in this situation, the holder of your second may have decided buy out the first mortgage and sell the home to recoup their $50,000. Now, that doesn't make financial sense. So in this situation, if you don't pay your second for at least 6 months, it will charge off as bad debt; but what does that mean?
That means the holder of your second makes an accounting entry and "writes off" the $50,000 you owe them as a loss. However, they will continue to collect on this debt. Usually they send it to debt collectors who will harass you for months. Eventually, if you are employed, they are likely to send the debt to a law firm to sue on, for collection.
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SO if no equity and it therefore becomes unsecured... that is good because the rest can be dischaged in BKK and not interfere with HAMP.
It also depends of State law and can depend if purchase money 2nd or not.
Here is a post on a bkk forum:
in CA (a non-recourse state) they MUST go after the property first. Whether you are a 1st, 2nd, or 3rd lien holder you must take action against the property. If there is a deficiency they would have to eat it. Since going after the property was their ONE ACTION, they are not allowed a "2nd action" to seek a judgement against me for the deficiency. Again they must pay off all liens ahead of them.
The 2nd or 3rd could ONLY seek a judgement against me if they became unsecured assets. Meaning the 1st foreclosed making the other lien holders unsecured debt. Since the 2nd and 3rd haven't had their ONE ACTION yet, under CA law they can now seeking a judgement and wage garnishments. But this only applies to NON-purchase money. A 2nd used for to purchase the house cannot seek a judgement against you and goes away.