Home Loans and Support

Second Mortgage Settlement Offer Letter

Discussion in 'Loan Modification' started by prikes123, Dec 1, 2009.

  1. prikes123

    prikes123 LoanSafe Member


    Is there a sample settlement offer letter available which I can use as a draft. Do we need to mention specifically that lender will not come after the loan is settled and lender will not report this settlement as a bad credit?

    Let me know how it is normally done.

  2. HopingtoFind

    HopingtoFind LoanSafe Member

    Are you talking about a letter that you would send to your lender to offer to settle your debt or are you talking about a letter that you sign when the lender agrees to settle debt?
  3. caldwell02

    caldwell02 LoanSafe Member

    I think it's the first kind of letter being talked about here. It's an interesting question. I will soon be in a position (hopefully) to write a similar letter. My first and my second are owned by the same lender and serviced by the same servicer. I'm starting a HAMP for my first. I haven't seen any sample letters on the forum, but I'll look.
  4. prikes123

    prikes123 LoanSafe Member

    I am talking about the first letter we need to send them for an offer
  5. HopingtoFind

    HopingtoFind LoanSafe Member

    There is no such standard letter that I am aware of, as each situation is different.
    What I would suggest is that you just write them a letter stating how much is owed, how much you think the value of the property is, how much you're offering to settle your 2nd and explain why this would be the best way to go given your current situation and of course consequences if it is not settled.
  6. duchess

    duchess LoanSafe Member

    For my settlement I used the hardship letter outline for a mod and included some verbiage regarding the benefits to the investor if they settled. It probably doesn't hurt to mention bankruptcy, even if you say that your trying to avoid it.
  7. domingo

    domingo LoanSafe Member

    did you get a settlement offer or have you settled on a second mortgage?

    If so what of percetage of the balance was your settlemet?
    Im getting ready to make an offer on a second as soon as I get a little farther along with the first mortgage modification so im just wondering what kind of deals are being made with second lien holders.

  8. duchess

    duchess LoanSafe Member

    I settled my second mortgage last week. The final price was $98k to pay off roughly $250k. My situation is unique because the second was only underwater by $67k (home appraised for $790k and first mortgage was $607k).
  9. goldgem

    goldgem LoanSafe Member

    Congratulations.. great job in paying off your 2nd for only 39%.. Looks like you still have equity after first mortgage (790 less 607) of approx 183k and yet you settled your 2nd for only 98k.. what's the secret? would you mind sharing? what's unique? do you have same lender for your 1st and 2nd? Which bank? Mine is GMAC.. not sure if they will do the same. I am requesting for forbearance right now and will apply for 1st mod then will plan on settling the 2nd if things go well..thanks for sharing..
  10. calgirl67

    calgirl67 LoanSafe Member

    I have a good one:

    To Whom It May Concern:

    I am writing this letter to explain my unfortunate set of circumstances that have caused us to begin to become delinquent on our 2nd mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to settle our loan in full.

    As I am sure you are aware, we have been discharged in Chapter 7 bankruptcy and are free to just walk away from this obligation.

    I also have back taxes and a student loan that have to be paid. Due to a reduction in income I had to use retirement and college savings funds in 2009 as well.

    At this time, I am writing to you to offer to settle this HELOC loan for 10% of the current outstanding balance. We have the means to obtain a partial amount of our settlement offer now, and paying the balance over 24 months.

    10% of outstanding balance
    $3000 payable within 30 days
    3rd mortgage lien released immediately
    2nd mortgage lien to be released upon final payment


    $6000 payable over 24 months with no interest

    3rd mortgage lien released immediately
    2nd mortgage lien to be released upon final payment in 24 months time.

    attorney, if we were to just foreclose, your chances of receiving any payment at all is non-existent at most due to the fact that the 1st Lien Holder is approximately 20% underwater and the 2nd and 3rd held by WF Home Equity is totally unsecured.

    We would appreciate your consideration to accept our proposal for settlement.

    Last edited by a moderator: Apr 14, 2014
  11. amyinflorida

    amyinflorida LoanSafe Member

    Here is the letter that we are sending to GMAC. We are currently 120 days past due.

    To Whom It May Concern:

    I am writing this letter to explain the unfortunate circumstances that have caused us to become delinquent on our 2nd mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and ask that you to consider to settle our loan in full.

    The majority of the funds borrowed from the HELOC were used to purchase and start up a business in 2008. Due to the shortfall of our local economy, I could no longer keep my business open and had to closed our doors permanently in September 2009.
    At this time, I am writing to offer a settlement for $4500.00 to fully release the lien from the property located at (your property address). We have the means to obtain this amount for our settlement offer now.

    Obviously, if the property would foreclose, your chances of receiving any payment at all are bleak at most due to the fact that the 1st mortgage balance is more than the property value.

    Additionally, we have a 2nd mortgage with Flagstar Bank. Leaving the HELOC held by GMAC in third position.

    Furthermore, we have consulted an attorney on two separate occasions regarding our options and we are aware that Chapter 13 Bankruptcy and or challenging the note are viable options for us.

    We personally, want to make a good faith effort to pay GMAC the $4500.00 that we are offering. However, if the settlement offer is not accepted we have no other choice but to take one of the options mentioned previously.
    We appreciate your consideration to accept our proposal for settlement.

    Sincerely, Mrs Mortgage Holder
    Last edited by a moderator: Apr 14, 2014
  12. duchess

    duchess LoanSafe Member

    My situation was pretty simple. My income had dropped to the point that I couldn't afford any payment on the heloc. When I could no longer make the payments I asked to settle. After 90+ days of non-payment they agreed to an amount that would make them better off than if they foreclosed. This did leave me with equity, but it also mitigated the potential loss to the investor on the HELOC.
  13. calgirl67

    calgirl67 LoanSafe Member

    Great letter - but in my opinion I would not mention Ch 13 bankruptcy. I would mention Ch 7.

    Reason being Ch 13 - they know they would still get payback - probably a lot more than if you settled.

    Banks get very nervous when you mention Chapter 7.... They get NOTHING..
  14. amyinflorida

    amyinflorida LoanSafe Member

    Thanks for pointing that out! : )
  15. HopingtoFind

    HopingtoFind LoanSafe Member

    Well... you can strip 2nd completely and still keep the house with Ch 13 BK, which you can't do with Ch 7.
  16. amyinflorida

    amyinflorida LoanSafe Member

    Yes, that is why we discussed the chap. 13 with the attorney. We do want to keep our home. I just want to call their bluff in the letter more than anything. So which ever would make them possibly decide in our favor would work for me!
  17. goldgem

    goldgem LoanSafe Member

    Thanks Duchess for the info.
    Mine is worst.. I was laid off and totally lost my income. I will be collecting unemployment once my severance is gone and thats merely a max of 2k a month so I will not be able to afford my second mortgage. Hubby is on disability so that won't help.. I am hoping I can settle it too.. will see when I attend the NACA event this week end..
  18. shasta

    shasta LoanSafe Member

    Hmmm...so what would I write? We already filed for 7 last Wednesday and are underwater so the second is completely unsecured.
  19. wolfman

    wolfman LoanSafe Member

    Banks are at a better position than the borrower to recover from a Chapter 7. Trust me they do not get that nervous. The one who gets the short end of the stick is the borrower who has that Chapter 7 hanging over there heads.
  20. wolfman

    wolfman LoanSafe Member

    If you already filed and it is in the courts, unless you get a Motion for Relief, that is if the lender wishes to request one, you will have to wait until the Bankruptcy discharges or gets dismissed. By law banks cannot accept to settle on a Chapter 7 unless an MFR is granted by the court or the Trustee. However, the Bank may or may not file for an MFR.

    To the person who settled for 39% of the loan. You put forth better offers than most. I have read where people will put some god awful low amount, say barely 5% of the balance and expect the bank to settle. Most banks I found out, are not obligated to do a settlement. You did the right thing and with an offer that was above and beyond.

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