Not Paying Second Mortgage Consequences

[Joana]

I do have one property in Tahoe, California with 2 mortgages on it (both with Wells Fargo). The second mortgage was not taken out at the same time as the first one but a couple of years later. The property in Tahoe was a second home and the mortgage was taken for a secondary residence on that property. In January 2008 I received a bankruptcy discharge (Chapter 7). I surrendered the primary residence that I owned in Florida and decided to keep the one in Tahoe because it's value was not going down as fast as the value of the property in Florida.
I signed a reaffirmation agreement for the first mortgage on the Tahoe property but for the second mortgage, for some reason, there is no reaffirmation agreement recorded in the county records.
I have made my payments without interruption since I received those 2 mortgages and throughout the bankruptcy process, never late.
At this time the property value dropped to about 230k which is roughly what I owe on the first mortgage. The value of the second mortgage is 50k.
The second mortgage is an interest only loan and the rate is aprox. 10%. I wrote a hardship letter to Wells Fargo asking them to lower the rate for the second mortgage, make it fixed and possibly come up with a plan for me to be able to pay some of the principal back. They declined the application because of affordability even though I am paying regularly on this mortgage since I took the loan.
I decided to stop paying this loan and see if they will start negotiating.
What are the chances that the bank will start a foreclosure process on this property if there isn't any equity in it to cover the second mortgage?
If they charge it off does that mean that they sell the loan to a collection agency?
Would the lien on the property be transferred to the collection agency and those would be the people that I have to deal with?
I am not familiar with collection agencies because when I decided to file for bankruptcy all my payments were up to date, never late on anything.On the date of filing I stopped paying and moved right away into a rental.
If I filed for bankruptcy and have been discharged is there any foreclosure protection for me? Even though I live in Florida, wouldn't the property in Tahoe become my primary residence because I do not own anything else?
I need to keep the property in Tahoe but I am not willing to pay the second mortgage under the current terms.
Does anybody know roughly what precentage of the total loan value would the collection agencies settle for?
Any advice is greatly appreciated.
Thank you.

[snapple candy]

Joanna,
I think you might want to seek advice from an attorney on the whole reafirmation thing.
I believe if they carhe it off, that yest it could be sold to a debt collector. It could most definately come back to haunt you.
I am not sure I understand why WF declined your application. Because of "affordability"? Do you have too much income? Stopping the payments may get you some where and they might negotiate in 3-6mths. Do you somehow qualify to modify the first under the HAMP program? If so, you could then use that as leverage on the 2nd. Good luck.

[Liz Medrano]

We have a similar situation and we were told by our lawyer that we needed to pay the second mortgage or that they could foreclose. Since we are so underwater,I don't think they would, but is it worth the chance?

[caldwellb02]

I was told by a lawyer that the second probably won't foreclose, as they are basically now an "unsecured loan" since the property value has tanked.

[faith]

Originally Posted by Joana

I do have one property in Tahoe, California with 2 mortgages on it (both with Wells Fargo). The second mortgage was not taken out at the same time as the first one but a couple of years later. The property in Tahoe was a second home and the mortgage was taken for a secondary residence on that property. In January 2008 I received a bankruptcy discharge (Chapter 7). I surrendered the primary residence that I owned in Florida and decided to keep the one in Tahoe because it's value was not going down as fast as the value of the property in Florida.
I signed a reaffirmation agreement for the first mortgage on the Tahoe property but for the second mortgage, for some reason, there is no reaffirmation agreement recorded in the county records.
I have made my payments without interruption since I received those 2 mortgages and throughout the bankruptcy process, never late.
At this time the property value dropped to about 230k which is roughly what I owe on the first mortgage. The value of the second mortgage is 50k.
The second mortgage is an interest only loan and the rate is aprox. 10%. I wrote a hardship letter to Wells Fargo asking them to lower the rate for the second mortgage, make it fixed and possibly come up with a plan for me to be able to pay some of the principal back. They declined the application because of affordability even though I am paying regularly on this mortgage since I took the loan.
I decided to stop paying this loan and see if they will start negotiating.
What are the chances that the bank will start a foreclosure process on this property if there isn't any equity in it to cover the second mortgage?
If they charge it off does that mean that they sell the loan to a collection agency?
Would the lien on the property be transferred to the collection agency and those would be the people that I have to deal with?
I am not familiar with collection agencies because when I decided to file for bankruptcy all my payments were up to date, never late on anything.On the date of filing I stopped paying and moved right away into a rental.
If I filed for bankruptcy and have been discharged is there any foreclosure protection for me? Even though I live in Florida, wouldn't the property in Tahoe become my primary residence because I do not own anything else?
I need to keep the property in Tahoe but I am not willing to pay the second mortgage under the current terms.
Does anybody know roughly what precentage of the total loan value would the collection agencies settle for?
Any advice is greatly appreciated.
Thank you.

Hello,
You do not settle with collection agencies. When they send you a letter demanding to pay the unsecured loan of the 2nd mortgage, you tell them to not to call you anymore and you would like to settle the accounts with the original creditor/lender. Never negotiate over the phone, in fact if a creditor contact you by phone, hang up. All of your correspondence should be conducted by mail. Record everything, keep letters, numbers and dates. Never expect that an agency will remember what was agreed on or keep their word without proof. Keep copies of every letter that you send to the credit agency and make sure to use registered mail or mail that has to be signed for. You need to have proof that the other party has received your correspondence. Never seem to be ytoo eager to settle the debt too soon never accept the first or seoond settlement offer and above all, never let the agency think that it has the upper hand.

Another useful approach is the good old threat of bankruptcy. If the creditor believes that you are about to file a bankruptcy they will be often be more than willing to settle for anything they can before you file and they loose all hope of ever getting anything out of you. Proceed with caustion if you acquire any more debt after telling a creditor this. Then you may not be able to get rid of this debt should you file for bankruptcy.

I check Florida and it is listed as a non recourse state. Therefore if you have purchase money mortgage and never refinance you are protected by Florida's anti deficiency judgment law. You can do Short Sale or ask your lender to accept a deed in lieu of foreclosure. That way you can negotiate the 2nd mortgage with your lender and offer to pay 5% to 10% of the balance owed, payable in 10 or 30 years with no interest.

I will look on my file about how to negotiate debts and if I find it I will add the information in your thread. Do not be afraid, be courageous and patient. Eerything will be alright.

God bless you and take care.

[faith]

Originally Posted by faith

Hello,
You do not settle with collection agencies. When they send you a letter demanding to pay the unsecured loan of the 2nd mortgage, you tell them to not to call you anymore and you would like to settle the accounts with the original creditor/lender. Never negotiate over the phone, in fact if a creditor contact you by phone, hang up. All of your correspondence should be conducted by mail. Record everything, keep letters, numbers and dates. Never expect that an agency will remember what was agreed on or keep their word without proof. Keep copies of every letter that you send to the credit agency and make sure to use registered mail or mail that has to be signed for. You need to have proof that the other party has received your correspondence. Never seem to be ytoo eager to settle the debt too soon never accept the first or seoond settlement offer and above all, never let the agency think that it has the upper hand.

Another useful approach is the good old threat of bankruptcy. If the creditor believes that you are about to file a bankruptcy they will be often be more than willing to settle for anything they can before you file and they loose all hope of ever getting anything out of you. Proceed with caustion if you acquire any more debt after telling a creditor this. Then you may not be able to get rid of this debt should you file for bankruptcy.

I check Florida and it is listed as a non recourse state. Therefore if you have purchase money mortgage and never refinance you are protected by Florida's anti deficiency judgment law. You can do Short Sale or ask your lender to accept a deed in lieu of foreclosure. That way you can negotiate the 2nd mortgage with your lender and offer to pay 5% to 10% of the balance owed, payable in 10 or 30 years with no interest.

I will look on my file about how to negotiate debts and if I find it I will add the information in your thread. Do not be afraid, be courageous and patient. Eerything will be alright.

God bless you and take care.

P.S.

You can find more about how to negotiate your debts by clicking on this link:

Those worrying about "who will rent to us now?"

[faith]

Originally Posted by Liz Medrano

We have a similar situation and we were told by our lawyer that we needed to pay the second mortgage or that they could foreclose. Since we are so underwater,I don't think they would, but is it worth the chance?

Liz,
If the second, and not the first mortgage foreclose, THE ONE ACTION RULE says they cannot sue you for any deficiency or shortfall after the foreclosure. The first mortgage will be paid in full,.

The 2^nd mortgage will not gain anything if they foreclose your home especially if there is no equity in that house. When a house is sold through foreclosure all sale proceeds will go towards payoff of the first mortgage, the 2^nd mortgage might get something from the 1^st and will buy out the 2^nd.

BUT WHAT IF THE SECOND MORTGAGE DOES NOT FORECLOSE? This is GOOD because the FIRST ACTION rule will prevent the second mortgage from suing you until after they foreclose. This means you get to stay in your house as long as you can make your first mortgage payment but you don’t have to make your second mortgage payment. But note: THE SECOND MORTGAGE WILL EVENTUALLY FORECLOSE when you pay down your first mortgage enough or the value of your home goes back up above the balance of the first mortgage.

Yhis is for your information only.

Thanks and God bless.

[Liz Medrano]

Thank you Faith for the info. That is my issue-we are doing a HAMP mod on the first mortgage so sooner or later we will have to deal with the second mortgage. I am thinking sooner is better-since our home is way underwater right now, maybe they will be more willing to negociate with us.

[Garry]

Liz, I'm in the same situation as you with both mortgages. I was told by the first bank that they will not let the second foreclose because I am on a MHA trial period. You need to stay away from your second until you have a completed mod from your first. Then you can get in the new second lien program and they may even extinguish to second totally. You need to read up on the second lien program, it's good.

[Liz Medrano]

Garry,

Thank you for the info. I will read up on the second lien program-our second mortgage is with Key bank - I don't think they are in the program. Does anyone know anything about Key banK???

[ladyfijiana]

Originally Posted by faith

Liz,
If the second, and not the first mortgage foreclose, THE ONE ACTION RULE says they cannot sue you for any deficiency or shortfall after the foreclosure. The first mortgage will be paid in full,.

The 2^nd mortgage will not gain anything if they foreclose your home especially if there is no equity in that house. When a house is sold through foreclosure all sale proceeds will go towards payoff of the first mortgage, the 2^nd mortgage might get something from the 1^st and will buy out the 2^nd.

BUT WHAT IF THE SECOND MORTGAGE DOES NOT FORECLOSE? This is GOOD because the FIRST ACTION rule will prevent the second mortgage from suing you until after they foreclose. This means you get to stay in your house as long as you can make your first mortgage payment but you don’t have to make your second mortgage payment. But note: THE SECOND MORTGAGE WILL EVENTUALLY FORECLOSE when you pay down your first mortgage enough or the value of your home goes back up above the balance of the first mortgage.

Yhis is for your information only.

Thanks and God bless.

Hi Faith,

What if the mortgage the first and second are both with the same lender. And first is modified with no equity in fact the house is now worth 100,000 or so less then original purchased price. And second is not modified yet.
If we stop paying on second, will the lender be able to foreclose or would they be willing to negotiate. Right now we are not getting anywhere with them on second. Second is 70,000. Indy Mac is lender.

[ladyfijiana]

Originally Posted by ladyfijiana

Hi Faith,

What if the mortgage the first and second are both with the same lender. And first is modified with no equity in fact the house is now worth 100,000 or so less then original purchased price. And second is not modified yet.
If we stop paying on second, will the lender be able to foreclose or would they be willing to negotiate. Right now we are not getting anywhere with them on second. Second is 70,000. Indy Mac is lender.

Is there anyone in this forum who is dealing with second through IndyM

[faith]

Originally Posted by ladyfijiana

Hi Faith,

What if the mortgage the first and second are both with the same lender. And first is modified with no equity in fact the house is now worth 100,000 or so less then original purchased price. And second is not modified yet.
If we stop paying on second, will the lender be able to foreclose or would they be willing to negotiate. Right now we are not getting anywhere with them on second. Second is 70,000. Indy Mac is lender.

Ladyfijiana,
Hello and welcome to this forum
If the lender owns the 1st and 2nd, it will be easy for them to make a decision as to whether foreclose your home or not. It also depends on the terms of your loan. Normally if mortgage payments are not received within 150 days, the lender can proceed with the foreclosure process. The 2nd mortgage would be repaid after the first mortgage is paid in full. If the sale price is less than the value of the mortgages held against it then in some state could still owe an unsecured balance called a deficiency balance which can be wiped out in bankruptcy.

You need to contact your lender as far as your 2nd mortgage is concern and ask if they can modify the 2nd also, since they have modified the first loan. Actually, lenders don't like to foreclose on mortgages. Foreclosure is very expensive process, the lender might cost them at least $50k, hiring a lawyer, court fees and other expenses. Lenders foreclose only as a way of limiting losses on a defauled loan. If homeowners is behind on their mortgage payments, lenders most likely will work with them, but you have to to be honest and let them know and prove to them that you are in financial hardship, in your case, you have already done so by having them modified your first loan.

The only contact person I found in this forum for Indymac is

Brandon Latman, First Vice President
IndyMac Mortgage Services
email: brandon.latman@indymac.com

Email him and ask for his help regarding your 2nd mortgage.

You can also email one of their negotiators at:

brandy.york@indymac.com

phone- 626-535-5043



Please take care and God bless.


Information given is not legal advice but for your information only

[ladyfijiana]

Thanks faith,

We are not late and we are paying only thing is all our saving is gone and we are now living paycheck to paycheck which is just very depressing.

I will post in the forum on our second as soon as it starts processing.

[mintdeer]

I just a NOD from my second ( Citimortgage) and I am only one month behind, at least IndyMac waited till I was 2 months behind. They want a double payment sent by certified funds by 10-30-09. I am going to file chapter 13 but am still waiting to get 6 months of pay stubs and bankstatements from my husbands work and by the bank. They threaten they will foreclose and accelerate the loan BLAH BLAH BLAH. Should I pay them? I may not be able to file BK till the begining of Novermber, or are they usually slow to accelerate stuff. In bankruptcy I may get them totoally wiped out since we owe more on our first mortgage than our home is even worth. Thanks for any tips!

[snapple candy]

Mintdeer,
Only 1 mth late and already threatening you? Thats pretty quick. Did they ever even send you a late notice? If it were me, I would ignore the NOD. I would doubt they would move all that quickly.

[daglo]

Originally Posted by faith

Ladyfijiana,
Hello and welcome to this forum
If the lender owns the 1st and 2nd, it will be easy for them to make a decision as to whether foreclose your home or not. It also depends on the terms of your loan. Normally if mortgage payments are not received within 150 days, the lender can proceed with the foreclosure process. The 2nd mortgage would be repaid after the first mortgage is paid in full. If the sale price is less than the value of the mortgages held against it then in some state could still owe an unsecured balance called a deficiency balance which can be wiped out in bankruptcy.

You need to contact your lender as far as your 2nd mortgage is concern and ask if they can modify the 2nd also, since they have modified the first loan. Actually, lenders don't like to foreclose on mortgages. Foreclosure is very expensive process, the lender might cost them at least $50k, hiring a lawyer, court fees and other expenses. Lenders foreclose only as a way of limiting losses on a defauled loan. If homeowners is behind on their mortgage payments, lenders most likely will work with them, but you have to to be honest and let them know and prove to them that you are in financial hardship, in your case, you have already done so by having them modified your first loan.

The only contact person I found in this forum for Indymac is

Brandon Latman, First Vice President
IndyMac Mortgage Services
email: brandon.latman@indymac.com

Email him and ask for his help regarding your 2nd mortgage.

You can also email one of their negotiators at:

brandy.york@indymac.com

phone- 626-535-5043



Please take care and God bless.


Information given is not legal advice but for your information only

I have e-mailed, written, and called both of these people at Indy Mac. I received a mod on the first, but they are refusing to do anything on my second. They hold both. Brandy was downright nasty to my husband, telling him that she is done discussing this with us, and that we must pay. Indy is not participating in the Second Lien Program they told me. I am filing a Chapter 13, and they will get nothing. Our attorney said that the second will be stripped away, as we don't even have enough equity as we do first mortgage!

[daglo]

Here are the e-mails I have written to. John Olinski answers promptly. Eric Friedman didn't even read the entire e-mail. I thanked him for modifying my first, then proceeded to tell him about my second, how it is delinquent, and how I need a mod on the second to make the first one work. His reply was-"glad it all worked out." So, Good Luck but don't give up!! I am behind on my seond for three months, current on the first. We are underwater also, the first is more than what the house is worth, so the second is worthless!!


terry.laughlin@imb.com, eric.friedman@imb.com, mailto:michael.perry@imb.com john.olinski@imb.com tony.ebers@imb.com david.pereira@imb.com drew.buccino@imb.com frank.sillman@imb.com

[daglo]

I received a letter from President Terry Laughlin from One West stating that he could not modify my second because " Unfortunately, the HAMP program does not cover modification of HELOCS/second mortgages. As a result One West is unable to re modify your existing HELOC." This is a direct quote from the letter he sent us. Does he not know that the Second Lien Program was insituted on April 28, 2009? Doesn't he know that his bank (which took FDIC money, which equals tax payer dollars) should have this program in place 6 months later? HE DOESN'T EVEN KNOW ABOUT IT!!!! Wait until I tell the Office of Thrist Supervison this. I can't believe it!!!!!!

[davephx]

Sorry to say the 2nd mortgage 2MP has no participants. It is voluntary unlike the 1st which is required of TARP receiptants.

A few weeks ago Treasury announced it was in discussion with 2nd mortgage companies to negotiate better compensation to get them to participate. Have heard nothing new other than the program is GREAT but useless since it is voluntary with so far no participants.