Home Loans and Support

Settle second mortgage and stay in my home...

Discussion in 'Stop Foreclosure and Tell Us Your Story' started by Jon & Katie, Jan 18, 2012.

  1. Jon & Katie

    Jon & Katie LoanSafe Member

    Hello,
    My wife and I purchased our home in Vallejo California in 2004. We are underwater on our loan and we are starting the process of trying to settle our second mortgage, while avoiding forclosure. Our plan is to continue paying the first mortagage and taxes, and stop paying the second. We will take the payment of the second mortgage, $1050, and put it in a savings account. We currently have around 13,500 in this account and figure the process may take a year, which should result in around 25K that could be used to settle. Our goal is to settle for 15% or less. Any help or guidence would be appreciated. Here are the key information:
    • Purchase Price in 2004- 500,000
    • Financed with 0 down 80/20 loan
    • First- with B of A- current rate 3.0 (floats 2.25% over libor). Current on payrments. Monthly payment including tax/insurance= 2150. Balance 366,000.
    • Second- Charter One (CCO)- fixed at 6.6%. Current, but we will not make the next payment due on 2/6. This, I assume is a recourse loan, as we refinanced the original purhchase money loan, for home improvements. The balance is 136,547
    • Current Home value: Zillow estimate is at 270,000. OUCH! :worried:
    We contacted Charter One in the loss mitigation department. We explained that we could no longer afford our second payment and wished to settle, not modify the mortgage. The phone # is 877-745-7366. The represanative said they would send out a packet that would include: DOD frank form, 4506T, include 2 months bank statements, 1 month pay stubs and sign all the docs. Also include a hardship letter with my offer.

    Thank you in advance for any advice. I understand I have a tough road ahead!

    Best Regards,

    Jon & Katie
  2. TomEason

    TomEason LoanSafe Guide Staff Member

    Jon & Katie

    Thanks for your post and welcome to the community.

    Your 2nd is a non-recourse purchase money loan, and is seriously underwater. Therefore, there's nothing they can do except wait and watch. They won't FC and you have a very long time horizon in which to eventually settle. You're to be commended for planning to stop paying on your 2nd.

    Before you do anything further, I recommend you visit this thread and read the strategy guide at post #1. And, BTW, as you'll soon discover, you don't
    at all. It's really pretty easy because you'll be doing nothing (except exercising patience).

    http://www.loansafe.org/forum/debt-settlement/37996-strategy-settling-your-2nd-94.html


    Good luck to you.
  3. Jon & Katie

    Jon & Katie LoanSafe Member

    Thanks Tom! That is helpful. Based on this stategy, would you fill out the initial forms that CCO is sending out, or just ingnore them? You mentioned that the second may be non-recourse. The orignial second was with b of a for around 105K. When we refinanced it with CCO we took the full amount they offered, which was about 150K. We did use the extra money for home improvements. I thought because of this refinance, the newer loan would be considered recourse? If so, does this change any of the stategy mentioned?
  4. TomEason

    TomEason LoanSafe Guide Staff Member

    Jon & Katie

    Thanks for your post. Your 2nd is recourse but that has no bearing on your strategy.

    Again, according the the strategy guide, don't ever communicate with your 2nd lender or any CAs. That is, until your 2nd lender eventually makes you a settlement offer, which won't be any time soon.
  5. Jon & Katie

    Jon & Katie LoanSafe Member

    Hi Tom,

    I received the first call from the mortgage company. I told her I was busy and would have to call back. I saved the number in my phone, so I can better avoid the calls in the future. My question is around wage garnishment. As this is a recourse loan, are lenders going to court to file a lawsuit for the balance that would result in a wage garnishment? And if so, can they do this prior to a home foreclosure. I would assume that if they have to foreclose first, they would not do this because on the first being underwater, and therefor I think I would be ok?
  6. TomEason

    TomEason LoanSafe Guide Staff Member

    Jon & Katie

    Thanks for your post. I recommend you continue to follow the strategy and do nothing.

    Your 2nd is non-recourse. In our state a secured lender must FC first before they can sue a lender. It's called the Security First rule, CCP Section 726. But in your case, you needn't even rely on that statute, since your 2nd is non-recourse.

    While I realize you may think you should be doing something, nothing could be further from the truth. Just remain patient.
    Last edited: Feb 28, 2012
  7. meggood

    meggood LoanSafe Member

    I think Tom means that your second loan IS recourse (you did refinance it), but as he said in #4, it doesn't matter. You have many concerns that early defaulters have about "wage garnishment" but in CA, the bank cannot "sue on the note." CCO MUST foreclose first, (seek "security first") which they won't do b/c they'd get nothing from it, and it'd cost them a lot to do it.

    You're in a great position for success but you'll need to suffer a little first (some calls and minor credit fall). But I found that it really wasn't that bad. Since everything else will be current, once they charge off your 2nd, your debt/credit ratio will improve and your score will come back.

    I, too, have a 2.25% over 6mo LIBOR on my first. It looks like the forecast for the LIBOR is to remain under 1 point for the nxt 2-3 yrs. I am crossing my fingers!

    good luck
  8. TomEason

    TomEason LoanSafe Guide Staff Member

    meggood

    Thanks catching that mistake! In my haste I didn't review all the prior posts here. You offer great advice.
  9. Brickell

    Brickell LoanSafe Member

    Need subordinate letter from 2nd mortgage

    Mr.Eason I was hoping for advice on my situation. I have been making HAMP payments since July 2011 and our negotiator has notified us that it would be approved if not for our 2nd mortgage. Our Citi mortgage was sold to a law firm which we were making monthly payments to, but now has been sold again. Our negotiator at ASC says they cannot determine who now has our loan and is stating that with out a subordinate letter we can not proceed. How can a loan be sold and no one has contacted us for payment or settlement? Can you please advise me? Should I file for protection to discharge the 2nd or will it mess with the financials of my HAMP agreement? Thank you for any advice you can give me.
  10. TomEason

    TomEason LoanSafe Guide Staff Member

    Brickell

    Welcome to Loansafe and thanks for your post.

    To clarify, have you achieved a perm HAMP mod, or have you been making trial payments?

    I'm fairly certain a subordinate loan cannot be used in the HAMP underwriting standards. I believe your ASC negotiator may either clueless or "blowing smoke."

    I recommend you visit the MHA site, download, and refer to the appropriate section of the Handbook for Servicers of Non-GSE Mortgages Version 3.1 of May 2011
  11. DismalDays

    DismalDays LoanSafe Member

    Jon and Katie

    Please follow the excellent advice on this thread...no contact! Especially please be very careful not to get ****ered in to any loan mod since it'll just give the bank the opportunity to get your financial info. There is nothing CCO can do.
  12. Brickell

    Brickell LoanSafe Member

    Thank you for responding so fast! This is not a permanent HAMP mod, I started making trial payments in July 2011 until now. Yesterday I was told that the stipulation of stay of judgement I had made with Citi and sent to ASC in leiu of a subordinate letter is an issue of being approved for HAMP. ASC can not find out who owns the loan since it has been sold several times since Citi, and according to Citi the loan has been paid. When I was told by ASC that all I needed was the final signature to be done I thought this was over, but I just received today a fed ex letter stating I needed to send them papers on the title loan issue. What does that mean? How can I give them something when I don't even know who has the loan? What could ASC be blowing smoke about? Do you think they are trying to purposefully not qualify me for HAMP?
  13. TomEason

    TomEason LoanSafe Guide Staff Member

    Brickell

    Thanks for your followup. Sounds to me as if ASC may believe the lien has already been reconveyed, which would be good news for you.

    I might recommend you ask a friendly local title company to perform a title search on your property.
    1 person likes this.
  14. Brickell

    Brickell LoanSafe Member

    Thank you Jon and Katie for your advice, but this has been going on since 2009. I have been working with ASC sending them my financials for a long time and luckily out of the blue last year I qualified for the HAMP. I never thought I would qualify so I feel very lucky and since I want to stay in my home I need to continue contact with my negotiator.
  15. Brickell

    Brickell LoanSafe Member

    What does reconveyed mean? And if I perform a title search do you think that is what ASC wants when they ask for documents on the "title loan issue" as stated in the letter today? Thank you again for your advice!
  16. TomEason

    TomEason LoanSafe Guide Staff Member

    Why don't you ask your title company those questions? FYI, I'm not in the title business.
  17. meggood

    meggood LoanSafe Member

    Brickell--

    Reconveyance in this context is when the lien on the property is satisfied (usually when the loan secured by the property is paid off) and that lien reconveys to you. Tom was thinking ASC might be thinking that this may have already happened (which would be astoundingly good news for you). And you could find this little detail out by going down to the county recorder to see. Or contact a title company.
    1 person likes this.
  18. meggood

    meggood LoanSafe Member

    And BTW, Brickell,

    Jon and Katie were not addressing you. Dismal Days was addressing THEM (J&K). This thread was started by them. LoanSafe etiquette is that you start your comment to the person you are addressing. So as to avert the confusion you made earlier. Just FYI!! and good luck!
  19. Brickell

    Brickell LoanSafe Member

    Thank you meggood for clearing that up for me, but do I have to a title search? I had believed all Miami-Dade county title changes would be recorded and seen on-line? If this is not the case, I will be going to a title company tomorrow. I just do not understand how ASC can not find out who has my loan from Citi? I was initially paying an agreed monthly payment to a law firm but last year they stopped accepting my payment. Stateing they were no longer servicing Citi loans, and that I should wait for further info. on where to make my payments. But I have been waiting since May 2011 to make another payment, hoping they lost my info.
  20. TomEason

    TomEason LoanSafe Guide Staff Member

    Brickell

    I suggested having the property record run by a title company because they won't miss anything, which you are liable to do if you conduct your own search.

    A title run of your property record isn't expensive, and is what I'd do if I were in your situation. But you should do whatever you think's best.

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