2nd Mortgage 1099-c

spritchett

LoanSafe Member
Sep 6, 2017
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0
1
I had a second mortgage charge-off in 2010 that I received a 1099-C twice on. In 2010 & again in 2012 from a new servicer that bought the old company. Thankfully the mortgage forgiveness act was in place and I didn’t have to pay taxes on that amount. However, I did have to claim it as income and they never released the lien.

It’s now been 7 years and I’m trying to refinance. How can I get them to release the lien? I’ve seen many threads on the loansafe website but they’re not always clear on the process. Aren’t there statute of limitations on collecting this debt? How can they make me claim it as gross income twice and still not release the lien?

My title company is currently requesting a recoveyance but I'm wanting to be prepared if they don't get it. I've seen some success stories on here. The new servicer is Ocwen. Didn't they get in trouble for performing unethical acts against borrowers? I tried for 2 years to get my second mortgage modified.

I successfully did my 1st with WF but Saxon at the time would never work with me. Then they just sent me a 1099-C out of nowhere right in the middle of another modification request. Any sample letters I can use or advice would be greatly appreciated.
 
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raymar90

LoanSafe Member
May 8, 2008
3
0
1
I had a second mortgage charge-off in 2010 that I received a 1099-C twice on. In 2010 & again in 2012 from a new servicer that bought the old company. Thankfully the mortgage forgiveness act was in place and I didn’t have to pay taxes on that amount. However, I did have to claim it as income and they never released the lien.

It’s now been 7 years and I’m trying to refinance. How can I get them to release the lien? I’ve seen many threads on the loansafe website but they’re not always clear on the process. Aren’t there statute of limitations on collecting this debt? How can they make me claim it as gross income twice and still not release the lien?

My title company is currently requesting a recoveyance but I'm wanting to be prepared if they don't get it. I've seen some success stories on here. The new servicer is Ocwen. Didn't they get in trouble for performing unethical acts against borrowers? I tried for 2 years to get my second mortgage modified.

I successfully did my 1st with WF but Saxon at the time would never work with me. Then they just sent me a 1099-C out of nowhere right in the middle of another modification request. Any sample letters I can use or advice would be greatly appreciated.
 

raymar90

LoanSafe Member
May 8, 2008
3
0
1
did you ever obtain a lien release? I am kind of in the same situation. I have a second lien with Ocwen and they just charge it off last year on 9/2017. I still did not get a 1099C.
 

OneHugeMess

LoanSafe Member
May 30, 2016
589
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28
If they issued a 1099-C you no longer owe them anything, and they will never foreclose. Getting a Lien Release will be tricky, but you do not have to worry about foreclosure.

If you reach out to the Servicing Department and offer to pay the recording fees ($150 max) they may be more receptive to doing it.

Also Raymar, when was last payment on your 2nd? Are you sure it did not charge off before 2017?
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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San Diego, California
www.loansreduced.com
Great advice! I have been dealing with this situation quite often recently. I have a client that received a 1099C on an old 2nd CitiBank loan. We're in communication with Citi right now to get a full re conveyance. The best department to reach out to is the payoff department of either the servicer or investor and request a payoff demand and/or explain your situation.

When you received a 1099C it usually related to the banks receiving the bailout funds back a few years ago, they had to provide proof of where they utilized the billions they received from the government. They did that by showing they forgave a large majority of 2nd liens, we saw this on a large scale with Bank of America second liens. With that being said as OneHugeMess mentioned above, you should technically no longer owe anything but without getting that lien release or full reconveyance you're going to have a lien encumbering your property.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,107
181
63
San Diego, California
www.loansreduced.com
I had my legal team look into this also and here is what they said:

Main Question: In California, if a lender charges off a lien and issues a 1099, are they able to collect after this? This charge off was in 2009.

Whether a 1099-C actually releases a debtor from a debt remains a somewhat open question, largely because the language in the tax code is too fuzzy to mandate that a creditor filing a 1099-C must abandon collection of the debt. Making the issue even more convoluted where a debt is secured by a lien against property are the instances (bankruptcy being a prime example) where the outcome to the person owing the debt, and the property securing the debt, do not necessarily move in lock-step. Once you further include secondary debt purchasers in the mix, determining whether a party is or is not still owed anything becomes complicated.

Having said all that, given that here the original creditor filed the “Cancellation of Debt” secured by this property, (again, rather than a downstream debt collector), my recommendation is that the borrower retain counsel to explore what, if any, options they may have to address the demand.

Earlier response:
I am assuming the 1099-C was issued to this borrower, on this property, but please correct if either assumption is mistaken. I am also curious whether it was Schools First Credit Union that issued the 1099-C originally or simply bought the debt from the original lien holder. However, depending on the facts the 2nd lien may still be validly recorded against the property, regardless of whether the 1099-C released the borrower from the debt (which is a question unto itself).

Has title weighed in on this question yet? I ask because whether they consider the unreleased prior lien an issue will dictate, in large part, our stance on the matter.