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Letter from Chase stating that they are releasing the 2nd mortage lien

Discussion in 'Chase Mortgage - Tell Us Your Chase Story' started by windnwaves, Nov 14, 2012.

  1. windnwaves

    windnwaves LoanSafe Member

    I stopped paying my second mortgage with Chase on a rental property in March and today I received a letter from Chase stating: "We are writing to let you know that, at the instruction of your loan investor, we are releasing the lien on the mortgage loan referenced above. This means you are still responsible for the debt on your mortgage, but you can now explore your options to sell or refinance. You don't need to sign or return anything for this to happen." What does it mean? Any input would be most appreciated and welcome.
  2. windnwaves

    windnwaves LoanSafe Member

    Just an update to say that I checked my credit report and the Chase second mortgage is reported as closed and as "Paid, was a charge-off". I have not received calls from Chase or attempts to collect. I don't know if this means that it's over or whether I will need to settle at a later point.
  3. selfemployedmodder

    selfemployedmodder LoanSafe Member

    Thanks for the update! Out of curiosity, who owner the first, what loan and home values are you working with, and what state is the prop in?

  4. windnwaves

    windnwaves LoanSafe Member

    The first is owned by a different lender (not Chase), the property is very much underwater, and the property is in Florida. On my credit report, Chase has reported the loan as closed and the balance as $0. I checked with the recorder's office and Chase did remove the lien from the property. I'm wondering if this will come back to haunt me in the future. If it does, then I will need to settle it down the road.
    Last edited: Mar 18, 2013
  5. mollywoof

    mollywoof LoanSafe Member

    did this ever come back? i got an identical letter from Chase in Texas but can't find out any information.
  6. windnwaves

    windnwaves LoanSafe Member

    It hasn't come back up. I haven't heard from Chase or a collection agency about it. Because the loan balance is $0 on my credit report and because Chase removed the lien, I think the debt was extinguished.
  7. Fredonia

    Fredonia LoanSafe Member

    Sorry to bother you again, windnwaves. It's been over 2 months since we heard from you on this. Has there still been no attempt to collect from you? Still no contact from collection agency?

  8. windnwaves

    windnwaves LoanSafe Member

    No attempts to collect and no contacts from Chase or anyone else about it. Since Chase removed the lien and the loan balance is reflected as $0 on my credit report, I'm considering the debt extinguished. I'm not anticipating collection efforts on it in the future.
  9. TomEason

    TomEason LoanSafe Guide Staff Member


    Congratulations on that full extinguishment settlement with Chase. Although reconveying a lien doesn't automatically extinguish a debt, I would seriously doubt you'll need to deal with Chase ever again
    Last edited: Jul 28, 2013
  10. mollywoof

    mollywoof LoanSafe Member

    same with me but i got a letter from Chase saying "paid in full" it has been removed from my credit report so i consider it done with. yay!

  11. duderino

    duderino LoanSafe Member

    Interesting. I am 3 months into this roughly. Daily phone calls, letters etc. I have not communicated once as Im following the strategy. I would love by the end of the year to have this happen to me. Interesting though that most folks get collections calling to collect the debt and thats where the whole negotiate for 5-10% comes from.

    To the Mods, if this happens to us how can we guarantee as property values rise they cant come back and foreclose.How do we insure the lein is completely gone? Do we hire a title company and do a title search or something?
  12. duderino

    duderino LoanSafe Member

    I was doing some more research on this and replying to my own post. I'm thinking these few posts I have seen recently have to do with the DOJ settlement right? Mods do you agree?
  13. zelda

    zelda LoanSafe Member

    I also received a letter from Chase in December 2012 stating: "We are writing to let you know that we are cancelling the amount you owe Chase on the loan referenced below, totaling $xxxxx, as a result of a recent mortgage servicing settlement reached with the states and federal government."

    However, here is the rub. Chase sent IRS form 1099-C (cancellation of debt) to me and the IRS for 2012. This loan was a 2nd mortgage not used for purchase money or home improvement, so does not fall under the exemption of the mortgage forgiveness act of 2007. Consequently, this cancellation of debt had a serious impact on my 2012 taxable income. When I realized what I owe the IRS it was close to April 15th, so I filed an extension.

    In the meantime I got a copy of the recorded "Substitution of Trustee and Full Reconveyance" from the county recorder's office.

    Not surprisingly, the Banksters are still up to their old tricks. The final paragraph in the recorded reconveyance document says: "This reconveyance is solely for the purpose of releasing the real property described above from the lien created by the Deed of Trust and not a release of the obligation under the Note as said obligation has not been fully paid."

    So here is the BIG question: Why should I pay taxes at regular income level rates on "cancelled debt" as reported on form 1099-C if in fact, I still owe the debt?

    It seems to me that Chase cannot have it both ways. My assumption is that many other folks that received the same letter and a 1099-C form from Chase did not request a copy of the recorded reconveyance, and consequently are not aware that they may have paid a tax bill that is possibly not warranted.

    I sent an email to the California Monitor under Joseph Smith along with a copy of my recorded reconveyance, but have not had a response. I have also requested help from the IRS taxpayer's advocate, but also have no response as of this writing.

    If anyone else here knows how this should be addressed when filing an income tax return for 2012, I would greatly appreciate hearing your input.
  14. driftwood

    driftwood LoanSafe Member

    This also seems underhanded to me since to get credit for providing the relief under the mortgage settlement agreement the bank had to completely forgive the loan, at least that is how I read it. Then again I am not surprised by these banks, when they are never really held accountable what makes anyone think they will ever follow the laws or their agreements.

    More specifically to your case, the fact they they issued a 1099-C should be enough proof if they ever tried to collect in the future. Its likely if they issued you a 1099 they also showed it as a loss on their tax return and took a tax credit or cashed in some insurance to cover the debt.

    Were it me, I would keep copies of everything in a safe place but never worry about it again. If they tried to contact me and collect down the road I would ignore them and let them try to take it to court. If they did I would use the one action rule in Ca as my defense and since they released the lien and can no longer FC they have no standing no matter what note they add to the reconveyance. I am no lawyer but seems to me they voided the agreement.
  15. zelda

    zelda LoanSafe Member

    Thank you for your detailed and articulate response. I'm not worried about Chase trying to collect on this debt, my concern is the IRS Tax bill. Adding the amount of cancelled debt to my ordinary income more than doubled my Federal and State income tax liability. I am considering either not sending the 1099-C in with my return and waiting for the IRS to ask my why I didn't, or sending an explanation with my return pointing out the blatant contradiction by Chase. It would seem to me that Chase cannot have it both ways. The debt is either cancelled or it is not.
  16. driftwood

    driftwood LoanSafe Member

    Keep in mind if the bank sent you the 1099-c they sent a copy to the IRS. So if you don't include it, this might be a red flag. Have you researched the insolvency clause with regard to cancellation of debt income? Perhaps you can avoid the tax hit by going that route.
  17. zelda

    zelda LoanSafe Member

    Thanks again Driftwood. Yes, I have all ready calculated my level of solvency using the IRS insolvency worksheet, form 4681. Unfortunately, in this instance, I was not insolvent at the time of debt forgiveness. Consequently, I am facing a sizable tax liability.

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