Help with 2nd Mortgage when 1st Mortgage is under 31% of Income?

[feellost]

My story is complicated in that my first mortgage plus taxes and insurance add up to just under 31% of my gross income. So I am not eligible for the HAMP program. However, when I add up my second mortgage, it makes up 41% of my income. In addition, I have to support 3 children on my own, one of whom is in college. I am also slighly upside down on my mortgage because the house is worth $60,000 less than what I owe on it. The smart thing would be to walk away, but I don't want to mess up my credit. I should add that the first mortgage is in my ex-husband's name, so I stopped paying it. His credit is completely shot, and was already messed up before I stopped paying the mortgage. The second mortgage is in both our names, and it is current. I was told by Bank of America that they cannot lower my first mortgage because it's only 30.5% of my income. They offered me a modification that raised the first mortgage by $200 to cover the arrears on that mortgage. I have not signed that modification. I have emailed the BofA execs and am now working with a negotiator who says they can try to do something on the second mortgage, but can do nothing on the first. The interest rate on the first is 6%, and the second is 7.125%. Anyone here had any luck with a similar situation? Any advice would be appreciated.

[jakelabry]

My story is complicated in that my first mortgage plus taxes and insurance add up to just under 31% of my gross income. So I am not eligible for the HAMP program. However, when I add up my second mortgage, it makes up 41% of my income. In addition, I have to support 3 children on my own, one of whom is in college. I am also slighly upside down on my mortgage because the house is worth $60,000 less than what I owe on it. The smart thing would be to walk away, but I don't want to mess up my credit. I should add that the first mortgage is in my ex-husband's name, so I stopped paying it. His credit is completely shot, and was already messed up before I stopped paying the mortgage. The second mortgage is in both our names, and it is current. I was told by Bank of America that they cannot lower my first mortgage because it's only 30.5% of my income. They offered me a modification that raised the first mortgage by $200 to cover the arrears on that mortgage. I have not signed that modification. I have emailed the BofA execs and am now working with a negotiator who says they can try to do something on the second mortgage, but can do nothing on the first. The interest rate on the first is 6%, and the second is 7.125%. Anyone here had any luck with a similar situation? Any advice would be appreciated.

That is a tough one - and unique! Despite whose name is on the first mortgage, it is the one most likely to foreclose so that's the one people generally focus while letting the second go. I can understand wanting to protect your credit but you will lose your house unless that first mortgage is dealt with. Are you okay with losing the house?

[alwayshope]

WOW! Your sitiuation sounds so similar to mine (with the exception of the ex) I was told at the time I called CW that there was nothing they could do with 2nd, however, accroding to what I have read on this forum there are now things they are doing with the second...I can't remember what the thread title I will let you know...maybe that will answer some of your questions. Sorry wasn't much help. Good Luck!

[alwayshope]

Here is the title to that thread.....new second lien program update 8/13/09...hope that helps.

[feellost]

Thanks for the thread. I read that one yesterday, but it seems that it only concerns second mortgages where the first mortgage has been modified under the HAMP program. In my case, my first won't be modified under that plan because it's slightly under 31%. So I'm not sure if they will do anything, but I'm hopeful since the negotiator said she'll see what they can do. My hope is that they offer to bring the interest rate on the second mortgage down to 1%, or that they offer to settle it for 10% of its value. I can afford the settlement amount, and I can continue to pay the first with no problem. Thanks again, and if anyone has had experience with a similar situation, please write and let me know so that I can have some ammunition when talking to the negotiator.

[feellost]

And in reply to Jakelabry, I would rather not walk away from the home, but will be forced to do that if I can't find a solution for that second mortgage. I'm okay with a refinance or modification or settlement of the second - anything that will allow me to afford the payments. I can live with any arrangement where my mortgage/tax/insurance comes to at most 50% of my take-home income, or 31-32% of my gross. Otherwise I won't be able to live on what's left, and I have to think of those children who depend on me. As much as I want to keep them in their home, we have other expenses too. I have a good income and credit, and I don't see how the bank would choose to foreclose when they have someone willing and able to keep the house if they modify the mortgage(s).

[feellost]

Alwayshope, what are you planning to do with your house? Will you be trying again to get a modification now that the guidelines on second liens are out?

[hope67]

And in reply to Jakelabry, I would rather not walk away from the home, but will be forced to do that if I can't find a solution for that second mortgage. I'm okay with a refinance or modification or settlement of the second - anything that will allow me to afford the payments. I can live with any arrangement where my mortgage/tax/insurance comes to at most 50% of my take-home income, or 31-32% of my gross. Otherwise I won't be able to live on what's left, and I have to think of those children who depend on me. As much as I want to keep them in their home, we have other expenses too. I have a good income and credit, and I don't see how the bank would choose to foreclose when they have someone willing and able to keep the house if they modify the mortgage(s).

feellost, from what you posted your house value is about $60,000 below what you owe. Is your 2nd totally an unsecured loan at this point? If so, that gives leverage as you are negotiating with the lender. I understand that you want to protect your credit, however, as I was researching the subject I found that BK can discharge an unsecured 2nd due to loss of property value. Check with an attorney (free consultation), if this is true, you can use this piece of info to your advantage.

[feellost]

Yes, the second is either unsecured, or has very little equity. I'm being hopeful in saying that my value went down by 60K because a house across the street from me has been for sale for $200K less than what I owe on my house, and it still hasn't sold after 8 months or so. I even thought about buying that house because my kids could stay in the same school and moving my stuff would be cheap! lol! Seriously though, I'll take your suggestion and look into extinguishing that second mortgage or at least settling for a very low amount. Thanks for the advice.

[jfieser]

Yes, the second is either unsecured, or has very little equity. I'm being hopeful in saying that my value went down by 60K because a house across the street from me has been for sale for $200K less than what I owe on my house, and it still hasn't sold after 8 months or so. I even thought about buying that house because my kids could stay in the same school and moving my stuff would be cheap! lol! Seriously though, I'll take your suggestion and look into extinguishing that second mortgage or at least settling for a very low amount. Thanks for the advice.

Feellost, what was the final outcome? Did you get help somehow? I'm still oin the same situation on a 2nd mortgage, with an interest rate over 11%, that is killing me.

[yomann]

Yes, the second is either unsecured, or has very little equity. I'm being hopeful in saying that my value went down by 60K because a house across the street from me has been for sale for $200K less than what I owe on my house, and it still hasn't sold after 8 months or so. I even thought about buying that house because my kids could stay in the same school and moving my stuff would be cheap! lol! Seriously though, I'll take your suggestion and look into extinguishing that second mortgage or at least settling for a very low amount. Thanks for the advice.

Feellost - if your 2nd is completely underwater (not even $1 of equity), you can lien strip the 2nd in a CH13 BK.
BK attorneys are very familiar with the provisions under BK laws, and as others have suggested, I would seek an initial consultation (usually free) with a couple of BK atoorneys in your area.