When does a 2nd mortgage become unsecure?

[Mike Jones]

Here's my question. I have a first mortgage of $500k and a home equity line of credit worth $97K. Both are through BOFA.

Im dealing with the first mortgage and they have pre-approved a loan modification and I'm dealing with that now.

But regarding the home equity line of credit, they won't buldge to help. All they offer is to go down 3% from 7.9% fixed APR and that would only save me $180/month (Payment is $780 right now).

I asked if I could pay cents on the dollars to settle it, and they told me they want 85% of the balance!

So now, I'm waiting for a call from BOFA tomorrow because the guy I was speaking with said that he would have to have his boss approve the APR drop. Then, after I bring the account current, I could go and drop the fixed rate to the current variable rate of 3.49% and drop my payment down to $500. Still, that's $500 I'd rather not have to spend.

So my question is, is this line of credit unsecured due to the house value dropping? The house is worth $400k or so. The first mortgage and line of credit bring up the total to $600.

How does that line of credit become unsecured? They maintain that the credit line is secured on the house and that even if I'm current on the first mortgage, they could still foreclose on the line of credit.

They said the only time it would be unsecured is if the house sells and there isn't enough money to pay for it, then they could only send it to collections.

Anyone know what's up?

Thanks.

[HopingtoFind]

If the value of your property is less then what you owe on the 1st then 2nd is definitely unsecured. If 2nd forecloses they will get nothing because they would have to pay off 1st.

[Mike Jones]

But they could see do a foreclosure on the 2nd then? I guess I want to know what I can do to get some leverage on the 2nd to obtain a cent on the dollar settlement.

[HopingtoFind]

Why would the 2nd foreclose if they have nothing to gain and more to lose?

In my mind the only leverage you can get over 2nd is not paying... can't see any other leverage.

[Mike Jones]

Originally Posted by HopingtoFind

Why would the 2nd foreclose if they have nothing to gain and more to lose?

In my mind the only leverage you can get over 2nd is not paying... can't see any other leverage.

I agree with you. When I called today regarding the 2nd, they immediately asked me what the house was worth. I said about $400 and that I have a 500k first and that near 100k 2nd. I told them that this was then unsecured and to go pounce b/c I'll just file BK and what are you gonna do. Then I told them, but I want to make good on it and pay, what can you do for me, and that's when they gave me these BS options.

[~Jess~]

I'm curious as to how you would come up with the lump sum to settle? I'm sure they'd wonder the same thing. If you can come up with $50k (or however much) to pay them off, why can't you make your payments to them, kwim?

Other than that, they're not going to foreclose. Foreclosure costs a lot of money in fees (looking at thousands of dollars). If they won't recoup any of their money from foreclosing, then they won't spend the money on foreclosure proceedings, it doesn't make business sense. Yes, you may anger a CSR or collections rep so much that they'd WANT to foreclose anyway, but they don't have any say over it, the investor does, and no investor is gonna okay that.

Anyone know if they can garnish wages if you don't pay though??? I'm just curious on this point, my 2nd gave me a great mod and I fully intend to pay it, I'm just wondering if their only option is foreclosure if you don't pay.

[Mike Jones]

I can't come up with a lump sum more than cents on the dollar. I'd give them $3k to go away, but they want 85% of $97K! That's not happening! I suppose collections efforts may garnish wages, but in this case, there aren't any to garnish.

[HopingtoFind]

I think if you keep your house.. in other words keep paying on your 1st, there is no way BofA would settle for that low a payoff. I wish they would because we have several Helocs with them that I wouldn't mind settling.

Unless a house goes in foreclosure (1st forecloses) they will just do nothing hoping that at some point the values will go up, or they may sell to collections for cents on the dollar...

There is another poster on this board that described his experience with BofA on his Heloc, and they are definitely not willing to go that low...

Keep us posted if you're able to negotiate something reasonable with them.

[Mike Jones]

Can they foreclose on the 2nd if the 1st is current?