How to settle 2nd Mortgage with Chase

[Enough Already]

Originally Posted by dogatemy

I live over near 19th Ave and Bethany Home. My first is $130k and my second is with Chase for $35k. I also own an investment property in the same area that I recently purchased for $80k. I don't have more than a few hundred in my checking account but I do have a significant 401k and IRA balances. (I love to gamble :-) ) I'm not a hardship but I have taken a $20k paycut in the past 1.5 years. My management kept telling us everything was fine but on 4/1 my boss announced another $8k/year reduction that I was not expecting. These payments used to be easy but I recently had to decide between medical care for my *** and making a mortgage payment. My cats come first.

I did write a check to an attorney for a couple of hours of his time. He looked over the paperwork for both loans on my primary residence and the loan on my investment property.
Basically he said the bank could not touch my IRA or 401k. Since there is little left in my checking account; it would cost more to garnish my bank account than what I had in there.

The attorney said..

• I should refuse to make any payments on my second
• I should tell them I am loosing my job (even if i'm not)
• I should explain that I have about 10% of the loan in my IRA and I could liquidate that (at a loss) to settle the loan
• they may try to negotiate the amount
• don't ever pay more than 15% of the loan balance
• some of his clients have settled their recourse loans for as little as 6% of the balance
• make sure they know you have an attorney
• get it in writing before sending them a check
• have an attorney review the settlement offer
• be prepared for the tax implications of a 1099 for the forgiven amount

Chase called tonight. The guy was really nice. He said I should fax over a letter barring them from contacting me via phone so the calls will stop. He said Chase would not make any effort to settle until after the foreclosure is complete. Once the foreclosure process is over they will offer to settle.

If you have any questions then feel free to post or email me.

Dogatemy,

Thanks for this post. Very useful info here for anyone who plans to try to settle their 2nd mortgage with Chase. My loans, 80/20 are both with Chase, and the 2nd is about $62K. Knowing that they may offer to settle at the end is just great. I've been wondering about this.

This is a great tip too: I should explain that I have about 10% of the loan in my IRA and I could liquidate that (at a loss) to settle the loan. I'm sure we'll put that sort of strategy to use.

Please, refresh my memory how far into the process are you?

[markmc2000]

Dog or Enough,

What is the idea? to call the lender and tell them I am going to let the property go and try and settle later? I would like that option becuase I feel dealing with the lender may be easier thatn the debt collector.

Thanks
Mark

[snapple candy]

Although I understand that dragging it out could be helpful, I hear many 2nd lenders are easily settling these for cents on the dollar. If you have the extra cash and want to walk away and not look back, its worth asking to settle now just to see what they offer you. Even if you turn it down, you at least know where to start next round of negotiations.

[BinAZ]

I have a friend that was offered a settlement from Chase on his $100k HELOC for 10%. He did not have the money at the time so he refused. They ended up accepting $2k for the short sale!

I also am in the same boat with a Chase HELOC for close to 100k. I'm watching both you to see what happens with your settlements. Keep us posted!

[Enough Already]

I agree, it doesn't hurt to ask, but as Dogatemy said he talked to Chase and person he spoke with told him they wouldn't settle until after the foreclosure. That may vary depending on who you happen to end up talking to, but it's good info to have.

One possible problem with trying to settle the debt, rather than waiting for them to come to you, is it may cause the lender to think you've got money, and to take a closer look at your assets. I like the idea of telling them you can get some money (10% or less) from an IRA or 401K (exempt assets), at a loss. Seems like a good idea to me.

I've also heard they will settle for much less too. Great example above by BinAZ, $100K debt settle for $2K!!! I love it. I'm hoping for a sweet deal like that one.

Let's all keep each other posted on any news about settlements of 2nd mortgages.

[ORNV3]

100k for 2k would be awesome. It's worth a try I'm sure we'll all keep each other updated on our progress.

[BinAZ]

It's unreal that they would settle for that low. However, that was with a short sale show they had to negotiate with the 1st lender. But I guess it shows how low they are willing to settle for.

[Enough Already]

BinAZ,
Just curious, what state is your friend in? Was it a recourse 2nd mortgage?

[dogatemy]

My payments for both loans were due on the 1st. The grace period expired on the 10th. The phone calls started at 8am on the 11th.

BEGIN RANTING:

The Chase rep seemed to agree with my attorney that I will have to give up the house before they will offer a settlement. Citi said they will not entertain a loan modification unless I can prove a hardship. My cats medical care and lack of a kitchen does not constitute hardship. My intention was a loan modification but none of the players who created this mess are willing to play "Lets Make an Equitable Deal". I'm not willing to see Citi take 50% reduction in principal while Chase (who created this mess too) refuses to lose a single dime. My foreclosure will only incite more foreclosures. This makes no financial sense.

Of course my last resort is to move into the rental that I just bought. It was not my intention (as stated on my mortgage application) but the road to hell has always been paved with intentions.

[dogatemy]

Originally Posted by markmc2000

Dog or Enough,

What is the idea? to call the lender and tell them I am going to let the property go and try and settle later? I would like that option becuase I feel dealing with the lender may be easier thatn the debt collector.

Thanks
Mark

I have a $35k recourse 2nd with Chase. I was late as of 4/11/09. I told him I would be happy to settle now or later. He said Chase would wait for the foreclosure process to be complete. After that I should contact Chase and settle the debt.

I cannot remember the exact wording but he alluded to..

• the settlement would be based on their internal policies of the minimum amount they could accept
• my financial situation (outside of a foreclosure) did not have any influence on the amount of the settlement they would accept
• the amount of 10% to settle the debt would be acceptable but I would need to wait until the foreclosure process was complete before they could discuss a settlement

He suggested a Deed in Lieu to save my credit which I thought was interesting. Not used to debt collectors trying to help me accumulate more debt. There are plenty of posts throughout the forums indicating that the banks have been pleasant to deal with. I would certainly prefer to settle with the man who called last night than some debt collector.

Does this answer your question?

[BinAZ]

Dogatemy, thanks for the info. It sounds like Chase is going to be "easier" to settle with than the other banks. I'm keeping my fingers crossed.

Enough Already, my friend is here in arizona and since it was a HELOC I think it is a recourse loan.

[dogatemy]

My attorney seemed to believe Chase was about average. Of course I am positive the amount due affects the settlement terms. Obviously if you owe $2,000,000 then I don't see them accepting $200,000 especially if your name is Warren Buffet or Bill Gates. I strongly suspect if you owed $100,000 and you just went through foreclosure then they will probably be willing to settle knowing the attorney expenses will exceed the collective fruits of their labor.

Plus.. When the economy recovers I am positive Chase, BofA, Wells Fargo and many others will once again try to sell us the 'American Dream' of Debt Ownership. If I knew (insert name of bank here) was going to behave in bad faith during the collection process when I am going through (insert major disaster here) then why would I even consider signing up for another HELOC down the road?

If Chase settles with me then I see no reason why I wouldn't sign up for a HELOC with Chase in a future (and at least give them the opportunity to make their money back).

[chefette]

dogatemy,
Totally correct. I have noticed that both my lenders (2nd chase) have been as sweet as sugar and we talk like best friends. You get more flies with honey than vinegar. Besides wanting you again as a customer in the future, they do not want you blabbing to friends and reliatives about how badly you were treated so that you sway others to stay out of their claws. I'll tell ya, I don't know which is worse, being a-holes or all sweetness in life. The latter is an insult to my intelligence. Banks will never again see a dime of my money. Texas

[markmc2000]

Originally Posted by dogatemy

He suggested a Deed in Lieu to save my credit which I thought was interesting. Not used to debt collectors trying to help me accumulate more debt.

Does this answer your question?

Dog,

thanks for the response that helps. However, looks like the first lender offered a "died in lieu" with a second in line? How does that work?

Also, was this your primary residence? My house is an "investment property" which has done nothing but loose me money.....But maybe i'm considered the bad guy. I can see how the government could be twisting arms at the banks for brutizing the "homeowners"....I don't know about "investors" .

Glad to hear things are going smoothly for you, I'm going to give my lenders a call. They seem to be sending nice letters to me to discuss short sales/deed in lieu/forebearance. the tone has really changed lately. I hope Geithner is twisting some arms for tarp cash and executive pay....

cheers.

[AZChick]

Dog,

You should move into the rental. I'm sure the payment at the rental is very workable.

[dogatemy]

Originally Posted by markmc2000

Dog,
thanks for the response that helps. However, looks like the first lender offered a "died in lieu" with a second in line? How does that work?

No. I only spoke with the first long enough to confirm there is nothing they will do until the loan is 3 months late. Chase suggested that I contact the first for a DIL to help save my credit score. I have not crossed that bridge because I am still waiting until I am >3 months behind so I can get Citi to discuss a modification. They did indicate there was nothing they could do unless I was a hardship. We'll see when 'push comes to shove' and they are ready to foreclose.

Originally Posted by markmc2000

Also, was this your primary residence? My house is an "investment property" which has done nothing but loose me money

The house is my primary residence. I own an investment property (bought a foreclosure) but the mortgage payment is so low and I have so much equity in the house that I would not consider letting it go. I assume Chase could try to attach a lien to the investment property? I would not care if they did. It would just cost them money to get a judgment and they wouldn't see a dime for many years.

Does anyone know if the second in Arizona could attach a lean to my investment property? I would be curious.

[dogatemy]

Originally Posted by AZChick

You should move into the rental. I'm sure the payment at the rental is very workable.

That is the plan assuming they foreclose and leave me no other choice. The mortgage is only about $500/month compared to the $1500/month i'm paying on my principal residence.