What Would You Do????

[Michigander]

I've read through so many threads and apologize if this is already addressed somewhere. Our situation is a bit unique and we'd really like to hear your advice and opinions as we aren't sure the best route for our family to take. After job loss and inability to sell, we ended up losing our home to foreclosure in 2008. First mortgage was settled through the sale of the home, but 2nd mortgage (through HSBC) received nothing.


We received a collections letter from Penncro Associates LLC, 1 month following the foreclosure, listing that the debt was a chargeoff sent to them from HSBC and that we owed the full amount of $66,000. We had 0 income at the time, so we ignored the letter. We never went through bankruptcy and still owe on the $66,000 SOJL in a recourse state (Michigan). SOL is not up until Feb. 2014. To date, we have not heard another word from them about this debt.

Fast forward. New degree, new career and a new $60,000 house that we own the title on. We purchased it through a private lender/investor/friend/lawyer with the agreement that we would refinance and get off his books as soon as possible. We have great credit, great debt to income ratio and husband has a stable career. So, we attempted to get the refinance done. Loan officer said all looked great. We had the appraisal done and found that we have created $75,000 more in equity. We were pre-approved, but then underwriters saw the chargedoff 2nd mortgage and denied us based on the risk involved.


I know that the status quo here is that it's best to never settle with a sojl because the odds are in our favor that they will not place a judgment on us. I should add, we are a single income family of 6, making $45,000 a year. So I supposed we are considered very small fish.


Here are our 3 motivating factors to settle:
1. the investor wants us to get off his books asap. Not threatening us, just would like us to.
2. The ability to refi would give us the funds necessary to repair the home. $60,000 doesn't exactly buy a dream home ;-)
3. The current interest rate would have us locked in at 3.75%, as opposed to the 7.5% we pay now. This translates into a great deal of savings each month.

We keep going back and forth. We will be consulting a lawyer, but would love to hear from everyday people who are actually living with these types of decisions. We have 2 more years of waiting for the SOL.

So, bottom line question, if it were you, would you think it is worth the risk to poke your head out of the sand and attempt to settle this debt?


One more thing... we have also just remembered that the 2nd mortgage was only listed in my husband's name. I was not on it. However, I am a non-working mother, so no income to do the refinance on my own. Still, does this have any bearing that you can think of?

TIA

[Rillion]

So, bottom line question, if it were you, would you think it is worth the risk to poke your head out of the sand and attempt to settle this debt?

Do you know for sure that if you were to settle (for less then full amount) that you would then be able to qualify for a mortgage loan? If it is still going to be two years after you settle before you can qualify for a new mortgage then settling the loan is not going to be the short-term solution to your current problem.