2nd Mortgage Charged Off But Won't Settle

Carlita

LoanSafe Member
Jan 4, 2017
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I apologize in advance if this is lengthy or convoluted!

Background: Purchased a home in 2006 in Nevada using two mortgages. First mortgage was ASC and was an ARM, 2nd was SLS and fixed. Eventually successfully modified 1st in 2014. This is when I found out that the 2nd was charged off in 2012. Everyone at ASC told us to "not worry" about the 2nd since it is charged off. That worked fine until Nov 2016 when the 1st mortgage was sold to SLS. Now they hold both the 1st and 2nd mortgages. There was a principal reduction done with the modification but the property is still underwater. We have moved to Florida and need to sell this house quickly. We have been approached by an investor to buy the property but not for the amount still owed (underwater = no profit). We have contacted SLS to try to negotiate on the 2nd mortgage but they aren't budging. The county recorder still has the ORIGINAL banks on the Deed. We can't find where SLS has changed anything at the county recorder's office, so we don't know WHO holds the lien on the property. The 1st mortgage is current, never late, and well below market value. The 2nd mortgage makes us underwater.

Questions: How can we find out who holds the lien? Should we contact them if it is not SLS? If SLS won't budge, what are our options? If we buy a new house, can we do a Deed in Lieu on the old one? If not a Deed in Lieu, can we do a short sale? If SLS won't budge on the 2nd mortgage, can we still sell the house? Can they block the sale? How likely are they to do that?

Thank you for ANY help you can offer.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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San Diego, California
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I would reach out to title and have them pull the records, they should know who currently holds the lien.

Yes you can sell the home, you have to determine if the lien affects title - which it sounds like it does so they would want to be paid back and then it would be considered a short sale. This may hinder your ability to qualify for a traditional loan product (we do have portfolio available) if you're seeking to obtain financing on another property.

They can say that they don't agree to an offer (better question to ask a realtor) but it is unlikely as you can technically hold the property for however long you would like as they have deemed the debt bad debt and uncollectable (charge-off).
 

payur

LoanSafe Member
Feb 12, 2010
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0
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Hi Erik

My first mortgage has been transferred from WF to SLS recently(02/2018) and I am up to date on the payments. The second mortgage was with credit union, and they charged off in 2011, but did not receive 1099C from them. WF and credit union are lien holders on my property. Now, I am trying to refinance on my first loan, and was told by the new lender that the credit union should have been notified about the loan transfer, but when I called the credit union, they never got any request or communication about it from WF or SLS. The only request they got was from the new lender requesting lien release, and I was told that the credit union was working on it, but they mentioned that I still owe the charged off amount. Please clarify below questions:

1) Can WF transfer the loan to SLS when I have credit union as a lien holder?
2) Credit union said that something was not done right during charge off, but they are working on lien release now. They are saying , I still owe the balance. If they are working on lien release then, do I still owe the charged off amount? Something is fishy here.
3) The new lender whom I am working with has a title company, that found out the credit union is still on the deed, and they have requested a lien release. How can the new lender request a lien release if I still owe the amount to credit union?

Thanks for your time!
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,101
181
63
San Diego, California
www.loansreduced.com
Hi Payur,
Thanks for sharing what you're going through and sorry I haven't been able to respond sooner, I was away for the weekend.

1) Can WF transfer the loan to SLS when I have credit union as a lien holder? - Yes typically that is just transferring the servicing rights, not necessarily changing who the actual investor of the loan is.

2) Credit union said that something was not done right during charge off, but they are working on lien release now. They are saying , I still owe the balance. If they are working on lien release then, do I still owe the charged off amount? Something is fishy here. - If there is a lien release they are releasing the lien from title therefore you should be able to refinance the 1st mortgage alone which is fantastic (even without having to subordinate). The lien would no longer affect title and may only be considered a debt/liability/revolving debt.

3) The new lender whom I am working with has a title company, that found out the credit union is still on the deed, and they have requested a lien release. How can the new lender request a lien release if I still owe the amount to credit union? - The new lender aka someone like us would request the lien release from title and if there is no lien release that is when we wouldn't be able to move forward with the transaction unless the borrower wants to pay off the lien entirely. I'm not entirely understanding your question on this one so forgive me if I answered it incorrectly.

Hope this helps,
Erik Sandstrom
[email protected]
 

kindness

LoanSafe Member
Mar 26, 2014
63
2
8
60
Hi Payur,
Thanks for sharing what you're going through and sorry I haven't been able to respond sooner, I was away for the weekend.

1) Can WF transfer the loan to SLS when I have credit union as a lien holder? - Yes typically that is just transferring the servicing rights, not necessarily changing who the actual investor of the loan is.

2) Credit union said that something was not done right during charge off, but they are working on lien release now. They are saying , I still owe the balance. If they are working on lien release then, do I still owe the charged off amount? Something is fishy here. - If there is a lien release they are releasing the lien from title therefore you should be able to refinance the 1st mortgage alone which is fantastic (even without having to subordinate). The lien would no longer affect title and may only be considered a debt/liability/revolving debt.

3) The new lender whom I am working with has a title company, that found out the credit union is still on the deed, and they have requested a lien release. How can the new lender request a lien release if I still owe the amount to credit union? - The new lender aka someone like us would request the lien release from title and if there is no lien release that is when we wouldn't be able to move forward with the transaction unless the borrower wants to pay off the lien entirely. I'm not entirely understanding your question on this one so forgive me if I answered it incorrectly.

Hope this helps,
Erik Sandstrom
[email protected]
Hi Erik. I've tried reaching you twice. Perhaps you're busy but could really use an answer if you can.

I've read your article here on Loansafe as to the common thought that one needs to wait the full two years from the foreclosure date for a VA loan was incorrect whereas it is actually two years from BK assuming the property was including in that BK. So....

I’ve been told by another VA loan dept that a VA loan (100%) $45-$70K needs to wait until 2 years until after the date of the official foreclosure.

My bankruptcy w/home included was discharged in 2013 and it took the bank until Nov 2016 for the sheriff sale/foreclosure.

By what I’ve read in your thread I’m ok for a VA loan 2 years after the discharge. 2015? True? (No eviction, credit score around 700 depending on the source, well established credit, approx $33K w/ only about $1.5 used and will be paid off by April)

I live in a retirement community, presently pay $900 per month in rent and a purchase in this same community would cut my mortgage almost in 1/2.

Thank you for your help.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,101
181
63
San Diego, California
www.loansreduced.com
Hi Kindness,
I received your e-mail as well but wanted to send a reply here:

In regards to the property included in BK there guidance is to reach out to your local VA RLC (Regional Lending Center) to confirm how they will view seasoning requirements. In all cases that I have personally reviewed VA is ok with properties included in BK and will go by BK seasoning.

On a side note, without prop included in BK - the guidelines are below:

Foreclosures:
2 years seasoning is required

Less than 2 years(greater than a year), requires:
  • Downgrade to a manual
  • Letter from Borrower
  • Documents supporting beyond the borrower’s control(Job loss or serious illness)
  • Sufficient re-established credit
  • Less than 1 year is not eligible
  • If the foreclosure is on a VA loan, the applicant may not have full entitlement available for the new loan. Check COE to confirm

Phoenix RLC:
If Foreclosure was on an FHA loan, date to be used for eligibility is based on trustee sale, NOT when the claim was paid; please contact your Regional Loan Center to determine if they will follow Phoenix RLC and include in loan submitted to UW.