Disputed 2nd Mort. on Credit and it came back "verified, unchanged"... Now what?

[zatoichi311]

So after our Arizona house foreclosure the 1st Mortgage came off our credit (0 balance) at the correct time. The second is still showing late every month. I followed advice here and disputed the second (arizona law, non-recourse) with all three bureaus (online). Transunion was the first to come back: Verified/Unchanged
All of the second mortgage money was used to buy the home and qualifies under Arizona Law as Non Recourse Debt...

What do I do now that Transunion won't change/close the account and continues to record it open and late?
Any advice would be greatly appreciated!

Best-

[Evan Bedard]

Did your 2nd get anything in the foreclosure? Meaning anything left over from paying off the first or was the 2nd completley underwater? This can be a reason why the 2nd is still being recorded. the 2nd looks like it has not been charged off yet. They could still hold you responsible for it, however if it was under water, the security instrument used was equity. With that being gone, it is now an unecured debt just like any credit card and handled the same way.

According to the FCRA, regardless whether the account is reported open, closed, charged off or whatever, the debt can remain on the credit file for 7.5 years from the date of the last activity, which is almost always the date of the last payment on the account.

[zatoichi311]

Evan, thanks so much for your response...

The second didn't get anything from the foreclosure, nothing was left after paying the first (completely underwater).
So you are saying we are still responsible for it? I thought that because it was an arizona house they couldn't hold us responsible (as long as it was under 2.5 acres, a single family house, etc. and 100 percent of the second went to purchasing the house)
Or do you mean that even though they can't come after us for it legally per Arizona law, it will still be reported on our credit for 7.5 years?

Does anyone know if this situation can get any better (that is without negotiating/paying off the second)? Do we have any way of making OCWEN charge off/close the second mortgage or is that impossible? Not sure where to go from here...

[interesting...]

no no... if it's non-recourse under Arizona law, they CANNOT collect a deficiency. That debt is gone. You should be able to sue the bank in court and win.

[Evan Bedard]

no no... if it's non-recourse under Arizona law, they CANNOT collect a deficiency. That debt is gone. You should be able to sue the bank in court and win.

I agree, the bank should not come back at anytime and file a suit to collect the deficiency..

Arizona’s foreclosure “anti-deficiency” laws may be able to help protect you from any losses that you suffer as a result of losing your home to. The law is outlined in Revised Statutes, Title 33, Chapter 6.1, and its states that a borrower cannot be sued by their mortgage lender if the subject property is located on 2.5 acres or less and is a single family residence or duplex.


If your property does not fit the above guidelines, the law says that your lender will have 90 days to pursue a deficiency judgment in order to recover any losses. If they fail to act within this time period, then they for fit the right to sue.

There is one exception to this statute and that is VA mortgages. VA is allowed to pursue borrowers despite the law that prohibits this. So, veterans may get the foreclosure shaft, which I feel is completely unfair!

Arizona Foreclosure Deficiency Laws | LoanSafe

[zatoichi311]

Ok, so I feel pretty confident I don't need to worry about the second further pursuing me... But I can't expect them to close or charge off the account on my credit report? I'm a bit confused as what I should do at this point. What would your next actions be? they don't bother me except for a phone call now and then to ask if I want to "restructure" the loan, lol, which I would never do...

But do I need to pursue them further to charge off the loan so that my credit can begin to repair? Do I need to involve an attorney...sorry if I'm slow on the uptake here...

Thanks again,

[interesting...]

If they're still trying to collect on the loan, I'd write them a letter explaining to them that this debt no longer exists. Maybe cite Arizona's non-recourse law? See how they respond to that. Otherwise, I believe they're in violation of the FCRA. I am NOT a lawyer... so... I could be wrong. It wouldn't hurt, though, to get some kind of response from the bank about that 2nd.

[zatoichi311]

Thank you, that sounds like a good course of action... Evan what do you think?
So if this debt should no longer exist due to state law, shouldn't my credit reflect that?

I'll continue to update details of my situation here, I know its a common one. Hopefully more can benefit from the information...

[TomEason]

zatoichi311

FYI, credit reporting rules have nothing to do the legal status of the loan (whether recourse or non-recourse). Credit reporting is governed by the FCRA, a federal law. Recourse / non-recourse issues are governed by state law, and the topics aren't at all closely related.

In accordance with the provisions of the FCRA, a derog can remain on the consumer's credit file for as long as 7.5 years from date of first delinquency. It matters not what subsequently happens to the account. The derog can still remain.

However, you can try to get the reporting removed. Thus far, you've gone about it incorrectly. It's recommended you write a letter to the lender and request / demand they change their reporting or remove it.

What has happened thus far when you've contacted the CRAs is this. While they can remove an item, there's nothing to prevent that item from reappearing in the next round of reporting by the lender. You need to go to the source and deal with them.

And keep in mind that the lenders are the customers of the CRAs. Consumers aren't really considered big revenue generating customers like the creditors.

For more info on the credit reporting rules, why not just download and read the FCRA?

[ArizonaSecond]

Zatoichi311,

Any update on your situation? I am in the same boat. Actually, I just received a settlement offer from Specialized Loan Servicing, LLC for 10% of money "owed" on the purchase-money second. Wondering how to proceed......

[Evan Bedard]

Zatoichi311,

Any update on your situation? I am in the same boat. Actually, I just received a settlement offer from Specialized Loan Servicing, LLC for 10% of money "owed" on the purchase-money second. Wondering how to proceed......

I'm sorry sometimes when you press the percent sign it shows up as some weird coding lol.. Can you please share the balances of your mortgages and how much your property is currently worth? It sounds like your home is underwater and your 2nd being SLS is coming up with a settlement offer because underwater 2nds are in no position to pursue foreclosure on your home to collect on the debt..

[ArizonaSecond]

I'm sorry sometimes when you press the percent sign it shows up as some weird coding lol.. Can you please share the balances of your mortgages and how much your property is currently worth? It sounds like your home is underwater and your 2nd being SLS is coming up with a settlement offer because underwater 2nds are in no position to pursue foreclosure on your home to collect on the debt..

The house was foreclosed on over two years ago. Still getting statements/collection calls/settlement offers from SLS though. Purchase money second mortgage was for 33k...settlement offer is for 3k.

[TomEason]

ArizonaSecond

Since your home is gone, the SLS debt is now a SOJL. In my state, if that loan were purchase money it is a non-recourse SOJL debt.

If that's your situation and in AZ, the loan is also on-recourse, you should not settle, as SLS can do nothing. What they're attempting to do is get you to pay them any $$ at all, under the hope that you will not be aware of your rights and will be intimidated into paying.