What is the benefit of settling a 2nd mortgage? (California)

[allcash]

We have 1st and 2nd purchase money loans with Chase and Citi, respectively. Have not paid either since 8/1/11. Citi (2nd) has moved our loan to a collections dept [LTD Financial Services]. From reading Tom Eason's Strategy for Settling Your 2nd info, I learned that I can ignore the collections agent and that eventually the recovery dept will contact me hoping for a "workout". Thank you for that very helpful information!

As California is a non-recourse state, why would I settle with my 2nd at all? As I understand it, after the 1st forecloses the 2nd is just out of luck. Do people settle out of a sense of obligation or is there a real benefit to settling with the 2nd that I'm missing?

Thank you!

[puppyted]

I'm in California too. Both our loans were with Indymac. Our house sold at auction on March 9th, 2012. We've received one bill since then for the 2nd. Right now the only address Indymac has for us is a P.O. Box. So far things have really gone smoothly over all.

Will be interested to see answers to your question.

Right now we have no intention of contacting, or paying, Indymac. Only thing we need from them is the 1099. Not sure when we should expect that.

[jbutterfly3]

The strategy for settling second is for those who want to remain in their homes.
The benefit is that once you settle, the lien is released and you are in a better situation to recover and sell one day if the market allows.

[Evan Bedard]

I definitely agree with Jbutterfly. Settling your second is a wise choice if you are underwater on your second mortgage but your first mortgage is affordable.

[allcash]

Thank you! We want to leave the house! In that circumstance is there any benefit to settling the 2nd? How long after foreclosure before the 2nd stops trying to collect/deal?
ETA: home is worth far less than half the purchase price if that makes a difference.

[zawedx]

We have 1st and 2nd purchase money loans with Chase and Citi, respectively.

From what I understand if they are both purchase money you don't have to worry about it. But someone else can correct me if it's different if your second is different servicer. Are you sure they are both purchase money - how did they end up from different banks?

[allcash]

The loans were set up that way when we first bought the home -- 80% chase, 10% citi, 10% cash. I've looked over the docs and there doesn't appear to be anything tricky, just straight up 1st and 2nd mortgages.

[Evan Bedard]

I agree with zawdex, since both mortgage are purchase money loans and you are in CA your second mortgage holder cannot pursue you for a deficiency judgement since they are almost 100% likely to use the non-judicial foreclosure process..