underwateringa
Thanks for your post.
For guidance on settling a 2nd I recommend you visit this thread and follow the guide at post #1. Strategy for Settling Your 2nd
For possible tax ramifications, I recommend you consult with your tax person, as he/she knows your overall tax situation.
FYI, I'm not a tax practitioner and take very little interest in the subject (except of course for my own situation, LOL).
Good luck to you.
Thanks for starting this Thread! After just refi'ing our 1st ($278K) into a VA Loan 30 year fixed @ 4.25%, we started our journey last month with settling our B of A HELOC ($147K) on our home which is valued around $300k, so underwater about $125K. We made our last payment in May and my goal is to shoot for <10% following the Settling 2nd guidelines by TEason. This thread will be very helpful in watching as we go along. The combination of the VA Refi and the hope of someday settling the HELOC and writing off $110k is a huge step in the right direction for our family. So, we are nervous, yet confident and excited to be moving forward. When your back is against the wall, sometimes you just have to come out swinging!
Originally Posted by StuckInTheMuck
Thank you and good luck in your quest!!
One question I didn't realize, (to anyone who knows).
Can one actually refi a first mortgage whilst not paying on a second or in "arrears" or what have you? Or would both have to be current?
You would need to refi your first mortgage prior to defaulting. The main reason, and most logical, is that your credit will be affected as you begin defaulting and this will reflect directly in approval of your first and, if somehow approved, your interest rate. I am no expert, but I would say it would be best to refi your 1st mortgage prior to defaulting. It isnt easy to do as only so many programs offer it. For me, the VA refi only went off of FLTV, not CLTV, so I was able to refi first. Hope this helps and best of luck!
Here's the story and not sure if this will turn into a success but would love to here comments on course of actions.
Divorced: Jan 2010
First Mortgage (CitiMortgage) = $175K
Second Mortgage (Quicken>Countrywide>BofA) = $51K (debt consolidation and home improvements)
Home Value = $135K (Merced, CA)
Stopped payments: Feb 2010
Ex-wife successfully negiotates loan modification (Aug 2010) on first without my participation even though I'm the primary but no longer living there. Refuses to do anything about the second cause she says she wasn't aware it existed. Ok. Fine.
Bank Of America harassed me for about 6 months and I gladly participated. I mentioned settlement and was laughed off. I even attempted to contact them to be proactive and to let them know I wasn't blowing them off. After several wasteful conversations with several reps, I gave up. Even went to an attorney about a year ago and while he was able to prove that ex-wife signed the paperwork when we got the second, he thought maybe we shouldn't wake the sleeping giant and not pursue it any further.
30 months later and 30 missed payments, and basically nothing from B of A. Just the normal monthly bill. No calls. Nothing. My online banking account says I have a $51K balance. Pretty much in limbo here. I even bought a new car a couple of weeks ago and lowest credit score came back at 660? I had told dealer that I'd have bad credit but dealer comes back saying there were no reg flags (nothing passed 90 days on report). Huh?
Any recommended course of action? Not sure what the deal is.
defaultdave
Thanks for your post and welcome to Loansafe.
I agree with that lawyer you saw. If I were you I'd let sleeping dogs lie. Seems as if your 2nd has slipped thru the cracks. What's confusing is that, although your ex said she wasn't aware of the existence of the 2nd, she did sign the promissory note, LOL.
You might check to see whether there's a 2nd lien of record against your property. If there's not, you may be in luck!
Since your 2nd is underwater, they won't FC. If the loan ever surfaces (i.e. BOA "rediscovers it"), you can eventually settle it. If that ever happens, I recommend you visit the following thread and follow the guide at post #1.
Strategy for Settling Your 2nd
Last edited by TomEason; 06-27-2012 at 09:44 AM.
Thanks Tom. Not sure that the loan has slipped through the cracks because it still reports at 180+ days late on my credit report. I agree that I'll just keep waiting it out with the hope that B of A initiates some kind of settlement so I can come back with counteroffers. I must just be low on their totem pole. And of course I'll check out the "strategies" thread. I'll repost something later if my status changes.
Hi Everyone,
Has BofA been actively trying to collect on your defaulted 2nd's? I havent made a payment since 2008, house FC spring 2010. Have not heard nada even though loan is recourse. Just wondering if this is the norm. Thanks.
IsItOverYetCa
Thanks for your post. Your 2nd became a SOJL when your 1st FCed.
I recommend you visit this thread.
Sold Out Junior Loans
Oh yes, I'm well aware it is a SOJL as I already follow that thread. Just curious what others experiences are with BofA and collection activity.
I think the debt forgiveness mortgage act expires this year (2012) so if you get a 1099 from your heloc in 2012 and the property in question was your primary then the debt will be forgiven. But you need to get the 1099 this year, unless the law is extended.
jobani
Thanks for your post.
Why would OP's 2nd be forgiven? She stated that loan was refinanced; hence it's recourse. The receipt of a 1099 is irrelevant. They might be able to claim exemption from CODI due to insolvency, but only their tax person would know.
I'm not a tax person, but refinanced loans used to build or improve your principal residence can also be forgiven according to the IRS (The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
"Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately."
I'm curious now if anybody has successfully gotten their heloc forgiven by the IRS.
First of all, OP never said the proceeds of the refied 2nd were used to improve the property. I'll bet the refi was made for better rate and terms, and that the proceeds were all used to pay off the balance of the existing 2nd.
Besides that law and associated IRS regs cover only potential tax liability attributable to CODI. It has nothing to do with the laws of any of the 50 states regarding the legal status (recourse/non-recourse) of refi loans.
I hope you're not implying that your statement is applicable in all 50 states.
Hi Tom, Thanks for the reply. I'm not an expert at this and i don't event know that if it applies to my home state - CA. So i guess, i can't assume that the CODI for my HELOC which I refinanced for my primary residence will be forgiven. My original HELOC was purchased loan which was refinanced for another HELOC (BofA) for better rate and terms. My tax accountant seems to think so. I guess I have to look for another accountant
Hi jobani
Thanks for your post.
If your tax accountant believes your refied HELOC is non-recourse and not subject to CODI tax liability, I'd take his word for it and file that way.
The general rule is that when there's a grey area, the taxpayer should pursue the choice most favorable to him/her. In this instance you have the supporting opinion of your tax accountant.
Seems to me we are confusing two separate questions.
The first question is whether the loan in question is recourse or not. In California, the 2nd IS a recourse loan if it is a refinance, period. It seems from the questioner that this is the case and he knows that. He therefore doesn't incur any "income" or potential tax liability until the loan is settled (at which point he'll likely get a 1099).
The second question is whether the debt-forgiveness "income", when it is received, will cause a tax-liability. To the extent that the loan was a refinance of an earlier loan made to purchase or improve the property, the income from this loan's forgiveness will be exempted from income tax, provided this happens before the law expires (currently scheduled for the end of 2012).
If the forgiveness happens after the laws expiration, he may still be off the hook for income tax if he is insolvent (i.e. the sum of his liabilities at the time of the loan's forgiveness exceeds his assets). This exemption does not expire -- it's part of the regular Tax Code.
The upshot is that for those of us who aren't insolvent, it may be worth it to pursue a settlement before the end of 2012 even if that means a settlement on less-favorable terms. If you have a 2nd loan of $100K, for example, the difference between settling for 10% and 15% is $5K -- but the potential tax liability, once the exemption expires, is calculated on the entire forgiven balance, and will almost certainly be quite a bit more than $5K.
Conversely, perhaps the banks will have no choice but settle for even less, considering the borrower will need to come up with $ for the IRS.
BTW -- So far we've only got ONE account of a successful settlement of a BofA HELOC. Anyone else out there?
Seems to me we are confusing two separate questions.
The first question is whether the loan in question is recourse or not. This is governed by State law, and therefore varies by State. In California, the 2nd IS a recourse loan if it is a refinance, period. It seems from the questioner that this is the case and he knows that. He therefore doesn't incur any "income" or potential tax liability until the loan is settled (at which point he'll likely get a 1099).
The second question is whether the debt-forgiveness "income", when it is received, will cause a tax-liability. To the extent that the loan was a refinance of an earlier loan made to purchase or improve the property, the income from this loan's forgiveness will be exempted from income tax, provided this happens before the law expires (currently scheduled for the end of 2012).
If the forgiveness happens after the laws expiration, he may still be off the hook for income tax if he is insolvent (i.e. the sum of his liabilities at the time of the loan's forgiveness exceeds his assets). This exemption does not expire -- it's part of the regular Tax Code.
The upshot is that for those of us who aren't insolvent, it may be worth it to pursue a settlement before the end of 2012 even if that means a settlement on less-favorable terms. If you have a 2nd loan of $100K, for example, the difference between settling for 10% and 15% is $5K -- but the potential tax liability, once the exemption expires, is calculated on the entire forgiven balance, and will almost certainly be quite a bit more than $5K.
Conversely, perhaps the banks will have no choice but settle for even less, considering the borrower will need to come up with $ for the IRS.
I have a first loan mod and seeing this question of the debt forgiveness expiring in 2012 leads me to wonder what happens in a situation like mine. I have a dishcharged chapter 7 and the HELOC was charged off. They cant try to collect on the "loan" so what happens if I settle with them on the LIEN? Would there still be "debt forgiveness" if its a settlement, not on a LOAN but on a LIEN of the property?
I'd appreciate hearing anyone who might know about this.. Havent found any resources yet that addresses this ..
Thanks much!
siverwesoke
Thanks for your question.
The debt was discharged (not charged off) in your BK case. Hence you have no tax liability due to CODI because there's no surviving "debt".
If that HELOC is in the money, the lender can, and probably will, FC but that HELOC owner would get the property (after paying off senior liens), and nothing more.
Since there's a strong probability that lender will eventually FC (likely in the distant future) it's compelling you eventually settle in order to have that lien reconveyed.
Good luck.
Last edited by TomEason; 07-01-2012 at 08:44 PM.
Tom..Actually it was charged off before the BK ( thats how long this entire process took) but the end result is the same .
Your response is what I thought would be the situation..and I will be working to settle as soon as possible..
Thanks much for the reply and confirmation..
Thanks for your update.
If it were me, I wouldn't settle as soon as possible unless there was a risk that the loan will soon be in the money due to price appreciation. However, unless you're in an extraordinary RE market, that's highly unlikely.
I recommend you follow the guide at post #1 of the following thread, and exercise patience. Good luck to you.
Strategy for Settling Your 2nd
Point well take Tom.. My 1st is a HAMP mod and so I was wondering if the 2 MP might kick in somehow. They wont be able to modify the loan since there isnt any after the BK, but there is an extinguishment feature and I thought it might be worth waiting to see if that would apply somehow to the LIEN. Noone seems to know how this works including the banks and HAMP. because Ive asked
Also, this HELOC is bank owned, so might the DOJ principle reduction section apply ? Pie in the sky Im sure but Ive learned anything can happen.
Do you think there is any chance for either of these to kick in?
Hi silverwesoke
If it were me, I wouldn't think about or wait for any government solutions. You're much better off eventually settling with the lender, which will extinguish that lien.
I agree with Tom; I waited for 3 years thinking the same thing, only to be disappointed that nothing applied to me. Unless you have a Fannie or Freddie loan, you're mostly out in the cold.
Not sure if I'm in the right thread. Bought home (NY) in 2005. Worst move ever. Am current on 1st mortgage from AHMSI after a modification (owe 335K, house worth approx same, maybe slightly more). No other debt.
Haven't paid BOA (owe 137K, junior mortgage, 12% interest rate!) in 30 months--44K behind. Called in today (before I found this site) to offer a settlement, was told BOA doesn't settle, and that we probably woudn't even qualify for a modification. I don't want to modify, I want to settle, but there doesn't seem to be too many 2nd success stories re BOA.
Would like to settle for approx. 10-15%. Am I wasting my time waiting them out? Especially as I pay down 1st, if we sell, then BOA would get some money from sale OR actually have a foreclosure leg to stand on. Credit is bad and would like to move forward. Is there any way to come out of this ahead? Or at least break even?
Webclaire
Thanks for your post.
What does "move forward" mean? Is it your intent to buy another home and move out of this one?
If you're not in a hurry you can eventually achieve a very favorable settlement. I recommend you visit the following thread and follow the guide at post #1. All you need is patience.
Strategy for Settling Your 2nd
Thanks for the quick reply! I am afraid that if the house is worth more than the first mortgage, even slightly, I don't have much leverage to get BoA to settle the second for around 10%.
I'm also afraid that BoA has more impetus to foreclose on us. I would prefer to stay in the home and some day even have some equity in it.
Also, 30 months seems like a long time to not pay anything and still hear nothing from BoA. Will they ever move to attempting to settle?
Webclaire
thanks for your post.
Your 2nd is underwater and won't FC. To find an explanation on how to figure that, you might visit the following thread, where you'll find several.
Why on earth would you worry that BOA hasn't contacted you in a long time? Most property owners would be thankful.
Settling with "in the money" 2nds
They don't even call you anymore? Interesting. When did they stop calling you ?(for example, I'm going on 5 months late and get 2-3 calls a day).
30 months is a long time. I think if anyone were to call up and propose a settlement, you'll always get the stock response of "we don't settle".
Would I qualify to get the 2nd fully extinguished through 2MP if I am currently unemployed?
I lost the job I had while going through HAMP on the 1st, and if they need docs with proof of income or need income period to qualify me for the full extiguishment then I am out of luck
Would I qualify to get the 2nd fully extinguished through 2MP if I am currently unemployed?
I lost the job I had while going through HAMP on the 1st, and if they need docs with proof of income or need income period to qualify me for the full extiguishment then I am out of luck
I would not recommend sending in documents or letting them know your financial status has changed. There is a provision that allow the reviewers of 2MP to report to HAMP if there is evidence that your financials do not match the originals, and I personally would not want to take that chance. I suppose you could ask to be reviewed for extinguishment, and if they ask for financials, just dont send any. They will then have the choice to extinguish your loan or not. This is my take.. Good luck..
Really, would that mean that they could "UNDO" my HAMP terms on the 1st mortgage based on info I provide to the 2nd?
This worries me, because in order for me to get a settlement of 10% with the 2nd, the rep asked me for a hardship letter stating my current situation and last 2yrs of income taxes. I sent it in stating I am unemployed etc.. and they approved my 10%.
I will tell you though that the 2nd has always seemed extremely disconnected from the 1st even though it is BOA.
Have you ever heard of anyone that their HAMP on the 1st was compromised and taken away even after 7 months of payments under the program?
onemoretogo
Thanks for your question.
In accordance with the HAMP qualification criteria, a borrower cannot be unemployed. So, the answer is no.
Hello everyone. I am new to this forum. Heres my info.
FC May 17
SOJ=49,000
BoA sold it to Old Republic. I had no contact with Old Republic. Ignored their requests and threats for about a year.Today I recieved a letter from ORep stating that they are authorized to present a "generous" offer to settle for the sum of 25K.To me this is great news...they are willing to settle.My goal is to get them down to around 10% or less. My question is...Do I take this opportunity to open a line of communication/negotiation? Or do I ignore them hoping the next letter extends a lower offer. It seems like if I were to counter offer like 3K, they would laugh in my face,just as I do to a "generous" offer of 25K.Where as, if the next letter were 15K Ide feel better about countering 3K.
Any advice/ experiences?
MNsickofthiscrap
Welcome to the community.
I recommend you follow the guide at post #1 of Strategy for Settling Your 2nd
Good luck.
I absolutely did follow the guide. I just dont wanna be bothered with the fear of an actual judgement against me for the next 6 years.I would trade a settlement under 5k for peace of mind.
If, by following the guide, don't you think you'll be able to eventually settle? And wouldn't a settlement take care of the debt so you wouldn't worry about being sued?
OK new question.... I have never even acknowledged Old Republic.They have never tried to phone me,only mail. Per the guide, you advise to not negotiate with"collections",but only with the settlement department. This settlement letter is singed from the same account representative as all the previous letters.Can they actually be one in the same????
At the bottom of this letter is a toll free number and then its signed in ink by the acct. rep. with his ext. number.
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