Strategic Default on Non-Recourse Chase Loan (2nd Mortgage)

**Leilah** · 01-18-2011, 07:29 PM

Hi,

I would greatly appreciate any advice on our situation. Any feedback you can offer is very much appreciated. Thanks so much!!

We purchased our home in 2006 in California. We did an 80/10/10. Our first is a 7-year ARM through Wells Fargo at 6.375% (820k loan amount) and our second is a 30/15 through Chase (principal and interest) for 120k. We got both loans at the same time we purchased our home and we have never refinanced.

Our home value has dropped a lot. We're lucky if this home is worth 725k right now given the amount of foreclosures in our area. We don't want to walk away. We want to stay in this home.

We stopped paying our 2nd mortgage in July. It's been 6 months since we made a payment on the second. Chase keeps calling us and leaving messages. Chase sent us a certified letter about 3 months ago saying that if we didn't contact them within 30 days that the amount would become payable in full. We ignored this letter.

This evening, we got a call from the "Recovery" department at Chase. We didn't answer the phone and haven't answered the phone or returned their calls all these months.

Thankfully, aside from these 2 mortgages, we don't have any debt (no credit card debt or car loans). When I wasn't bringing in income, we asked Chase to work with us on a modification, but they took a long time to get back to us and when they finally contacted us to start talking about it, we decided not to go through with it and then I was bringing in income. Since the values have fallen a lot in our area, we want to get rid of this second, but don't want to file for bankruptcy.

We are current on our 1st mortgage through Wells Fargo, but really want to get rid of this 2nd.

Sorry for so many questions... I am wondering...

1. Is it better to work directly with Chase to settle for less than the amount owed or to work with the collections agency?

2. Has anyone had any luck working directly with Chase to get rid of their 2nd for less than 10%?

3. Should we just let this loan get charged off and let it go to collections?

4. If we can't negotiate with collections, can they come after us? What happens if we don't settle and don't pay collections or Chase?

5. What are Chase's options in terms of collecting from us?

6. Will this affect our credit score the same as a foreclosure would?

**TerrinPhx** · 01-19-2011, 12:54 PM

I'm not an expert, but if settling is the option you decide upon then it would be best to settle with Chase direct rather than a collection agency. I settled my HELOC with Chase for 16%, so I don't know how low they will go. I would guess that the higher the balance the better your chances are for a smaller percentage in settling. My balance was $50k. If you don't settle then I guess you probably just have a lien on your property for the full amount - I doubt they will foreclose with such a high deficiency in the valuation of the property. A settlement is going to negatively affect your credit score, but not as much as a foreclosure. You already have a charge off on your credit, so it probably doesn't make much difference and will likely improve if a settlement is reported on the charged off account. That's only my two cents.

**Leilah** · 01-20-2011, 08:36 AM

Thanks so much for your advice. I really appreciate it. I wasn't clear on that lien on the property until now. How long did it take you to settle?

**TerrinPhx** · 01-20-2011, 08:57 AM

I was told by the account manager assigned to my account at Chase Recovery that after approx 90 days (after charge off)my account could be put into a pool and randomly selected to go to collections. I made my settlement offer at 80 days after charge off. I had to submit 2 months bank statements, last 2 paystubs and proof of the source of the funds that I was using to settle with. They accepted my offer in writing 30 days later with an agreement that they would release the lien on my property. Payment was required by wired funds within 5 days. Chase was not willing to negotiate lower than 50% with me until it got close to the 90 days. My theory on that is that the "account manager" knew that if it went to a collection agency he would lose out on a chance at any commission.

**Leilah** · 01-20-2011, 09:58 AM

I am really glad for you that you were able to get rid of that loan. And thank you so much for your feedback. I appreciate it. Did the bank put in writing that your payment would constitute satisfying the loan and that they would not come after you ever for the remainder owed?

**TerrinPhx** · 01-20-2011, 01:32 PM

You're very welcome....I couldn't have gotten to that point without all of the feedback from other members on this forum. Yes, they did put that in writing and also that they would file a lien release.

**chephil111** · 01-26-2011, 04:41 PM

I have a 2nd mortgage that went into default and it's a non-recourse loan in CA because we never refinanced it. We stop making payments 6 months ago. we are currently still in a modification process and just waiting for approval from the invester. Our 2nd mortgage has now been referred to a collection agency. We want to keep the house but we just want to get rid of the 2nd mortgage. What should we do? Any advises is helpful.

My questions are these...
1) Since it's a non-recourse loan for the 2nd mortgage, can they sue us and take us to court to collect the money?
2) Can they foreclose on us? Our loan on the 1st mortgage is $420K and the 2nd mortgage is $100K. The current value of the house is $346K.

Any advises is helpful.

**LostInSFBay** · 02-08-2011, 12:22 PM

Originally Posted by chephil111

I have a 2nd mortgage that went into default and it's a non-recourse loan in CA because we never refinanced it. We stop making payments 6 months ago. we are currently still in a modification process and just waiting for approval from the invester. Our 2nd mortgage has now been referred to a collection agency. We want to keep the house but we just want to get rid of the 2nd mortgage. What should we do? Any advises is helpful.

My questions are these...
1) Since it's a non-recourse loan for the 2nd mortgage, can they sue us and take us to court to collect the money?
2) Can they foreclose on us? Our loan on the 1st mortgage is $420K and the 2nd mortgage is $100K. The current value of the house is $346K.

Any advises is helpful.

Hi chephil111,

I'm new to these forums, but from what I understand:

1) They cannot sue you because it's a non-recourse

2) The 2nd cannot foreclose on you without the 1st agreeing to foreclose also. What's your situation on the 1st mortgage?

We are in a similar situation. We are leaning towards just defaulting on our 2nd loan, and hoping for a settlement.