How to settle a 40,000 second loan with BofA?

[kdtran08]

I am undergoing a 3 month trial for mha program for my first loan with CW ( now BofA). I can afford the new payment but the second is killing. My first loan is 360,000 and my house is worth 200,000 now. I'd like to settle my 2nd loan because my sister will loan me some money soon to come up with a lump sum. How do I start? I called BofA but got a run around with a no answer. Any suggestion welcome. Thank u!

[cahomeowner]

you are upside down quite a bit. unless the bank does a principle reduction I am not sure it would make a lot of sense to keep the house.

you could lien strip the 2nd mortgage through a chapter 13. I would recommend taking a hard look if you really want to keep paying into a loan that you are upside down and by almost double.

you could surrender the home in a deed in lieu of course you will take a credit hit at least you could buy another home in a couple of years. a home that would be more in line with the current market values.

[kdtran08]

Originally Posted by cahomeowner

you are upside down quite a bit. unless the bank does a principle reduction I am not sure it would make a lot of sense to keep the house.

you could lien strip the 2nd mortgage through a chapter 13. I would recommend taking a hard look if you really want to keep paying into a loan that you are upside down and by almost double.

you could surrender the home in a deed in lieu of course you will take a credit hit at least you could buy another home in a couple of years. a home that would be more in line with the current market values.

Thank you for your suggestions but we love the house and we already put a 20% down payment into this house. It is a 4 bed- 4 bath house and we do not want to walk away. We think if it will come back to the same level in 10 years (or how many years it takes) because we can afford the new payment of 1st loan now. I already rent out the bedroom downstairs to a friend for $500. So, the new payment of $2,263.00 (including tax +insurance) - rent = about 1,500.

So, as long as we can take care of 2nd loan, we can afford this house. This house is under my name. And, we are thinking of buying another house under his name a few years later 'cause I'll be graduating from Nursing School next year.

Another question, for my first loan MHA modification, my first payment is August 1st. Will they ask for updated documents once the trial is done and they're ready to issue a permanent mod? The reason I asked is because my husband might need to take time off around that time for his back surgery so his income will be much less.

Thank you.

[cahomeowner]

Originally Posted by kdtran08

Thank you for your suggestions but we love the house and we already put a 20% down payment into this house. It is a 4 bed- 4 bath house and we do not want to walk away. We think if it will come back to the same level in 10 years (or how many years it takes) because we can afford the new payment of 1st loan now. I already rent out the bedroom downstairs to a friend for $500. So, the new payment of $2,263.00 (including tax +insurance) - rent = about 1,500.

So, as long as we can take care of 2nd loan, we can afford this house. This house is under my name. And, we are thinking of buying another house under his name a few years later 'cause I'll be graduating from Nursing School next year.

Another question, for my first loan MHA modification, my first payment is August 1st. Will they ask for updated documents once the trial is done and they're ready to issue a permanent mod? The reason I asked is because my husband might need to take time off around that time for his back surgery so his income will be much less.

Thank you.

I can appreciate your position. It is a very difficult one and you need to separate your emotional ties and step back to view the picture from a financial perspective.

does it make sense to keep paying into a home that is that far under water? will the housing market rebound in 10 years? what kind of savings are you building each month?

people that were upside down used to be able to buy another home at half the price and just walk away from their first home. that practice is no longer accepted because the banks caught on to what people were doing.

this is a real tough one. if you look at Obamas HAMP program that is suppose to save millions of people from losing their homes, only 325,000 applications for loan mods were approved. this gives you an idea how fast the banks are moving on loan mods. I was on a trial mod plan for 4 months. after the months when they go to approve you for a formal modification, it can take months and you need to show a surplus every month to qualify.

you may want to explore the lien stripping option if your loan mod does not work. if you can't get the loan modification then it might be time to look to walk away. I know it's not what you want to hear but I look at from a financial perspective.

what would you rather be house rich but cash poor? or cash rich and buy another like or bigger house in a couple of years (after you short sale or deed in lieu this one) at half the price?

it's time to start crunching numbers. the state of our economy I think everyone is stock piling as much cash as possible.

[kdtran08]

Thanks for your detailed reply. You're absolutely right and I can see your point. However, at this time, I prefer to stay in this home. I have a good process on my 1st and I can comfortably afford it as my husband will be promoted beginning next year.

I have another question: My first loan is under MHA trial program. I just made my first trial payment for August 1st. BofA is reviewing our file for my second. I am thinking of asking for a settlement (like 10% or st) using money from our 401K account or modify it to a more affordable monthly payment. The last time I made payment for this loan was March 24th (my due date is the 24th) so I just hit 120 days behind. I don't have fund to bring the account current at this time but I can afford to pay one month (for April). Should I make the payment or wait for a reply? I am extremely underwater (owe $350,000 on 1st loan and $40,000 on 2nd loan and my house is worth $200,000). Will they forclose or do anything to me during this process? I heard somewhere that I should not be more than 90 days in CA? Thank you for any input.

[cahomeowner]

yes there is a 90 day moratorium before foreclosure proceedings. it's the first that will initiate the foreclosure.

I was thinking about your situation and can truly appreciate wanting to stay in the home. if you can work something out with the banks then that is great. the banks have been sooooo slow in getting loan mods worked out. the 9 million homes that obama's housing rescue plan was suppose to save has resulted in only 325,000 loan mods being approved despite the 75 billion dollars in bailout money. something just doesn't seem right does it?

what if the market does take 10 years to rebound? the financial picture is what I am trying to impress upon you. let's say you do work something out that allows you to stay in the home and you pay into the home for the next 10 years....how much equity will you have?

what if you moved to something more affordable...how much equity or savings would you have built up in that 10 years? a lot of us are in the same boat we are house rich but cash poor. I would rather be cash rich and have some security.

do what you can to work something out but know your options. prepare for the worst and hope for the best as they say. if you can get something permanent worked out with the lenders then go for it. see if they have a 30-40 year fixed option.

[Diesel]

Since your at the 120 day mark you still have some time. Once they file a Notice of Trustee sale then your leverage will decrease. I would approach the problem like so:

Call BofA and tell them you are thinking of walking away, AND filing BK. Tell them the only reason for the BK is because of the $40,000 2nd.
The attorney you talked to wants $2,500 to start the BK proceeding, but offer them $2000 if they will remove the lien and liability, and show PAID IN FULL status on your credit.

I know you are not thinking of walking, but your only true leverage is BK, or the THREAT of BK.

Make sure you get any agreement in writing, and review it with an Attorney BEFORE signing any agreement.

I have seen and heard of 2nd settling for 2% of the outstanding balance. Its worth a shot. Good Luck

[Diesel]

Ooops, I meant 5% not 2% never heard of a 2nd settling for less than 5%

Let us know if your successful.

[kdtran08]

Originally Posted by Diesel

Ooops, I meant 5% not 2% never heard of a 2nd settling for less than 5%

Let us know if your successful.

Thank you so much. I will try it tomorow and keep you all updated.

[daytona1]

The 2nd is not going to foreclose...they have no reason to. If they did they have to payoff the first and you are underwater...a lot...on that loan.

[kdtran08]

Originally Posted by Diesel

Ooops, I meant 5% not 2% never heard of a 2nd settling for less than 5%

Let us know if your successful.

I forgot to ask one more question. What number and/or department should I call? The last time I called, they asked for my expenses and income and told me to wait for 60 days. Thank you.

[BillB]

I am also in the process of doing something similar with my 2nd mortgage as that is what's basically keeping my home under water but have made all my payments on time thus far. I am hiring an attorney this week to execute.

My goal would ideally be to threaten them with the bankruptcy, show that they more than likely can't produce the note to foreclose anyway and even if they do the home is worth about what I owe on the first mortgage so it would be pointless for them to do so, and that once I have an attorney file the QWA and stop paying the can't report me to the credit bureau while in process and that is when I will stop making my payments. They've made roughly 25k on just the second mortgage alone (the first is alot worst) from me thus far over the few years I've had the place and only less than 2k of which has gone to principle so they have made money off me and now they have an opportunity to make a little more in form of a lump sum settlement if they cooperate. If they don't then they can knock themselves out trying to foreclose on me when they are already up for fraud charges from their predatory lending and note selling activities and most likely can't foreclose anyway.

They want money and I want to have a fair loan, keep my home, and keep my excellant credit rating so if they cooperate everybody wins. Please keep me posted on your settlement attempt on the second.