2nd mortgage charged off by original creditor/can debt collector foreclose

nonsibi

LoanSafe Member
Hi all. This site is a wealth of information, but I couldn't find anything relevant to my situation.

I had a first & second mortgage with HSBC/Beneficial. Stopped paying on second and they eventually charged it off around 2010/2011. Balance was about $7500. First mortgage was eventually transferred to Fay Servicing collecting for New Rez. That is current and will be paid off in less than 5 years.

A few years ago, started receiving collection notices from Ditech, then Greentree and most recently Shellpoint. The last collection notice from Shellpoint was about 2 years ago. Shellpoint, I understand, is now a part of New Rez. My question is can they foreclose on the second mortgage. I can't figure out if it is with a 'legit' mortgage company or debt collector. Second mortgage is not reporting to any CRAs. Is there a statute of limitations on this (either as a mortgage or debt collection)?

Thanks in advance.
 

HelenCr

LoanSafe Member
I don't think second mortgages are a debt that falls off of a property with a charge off. I'm not a professional by any means but I have been following foreclosures and have seen many, many foreclosures lately with Shellpoint in the Plaintiff section of the Notice of Defaults as sort of a 'second' in the description. Yes, 2nd mortgages can foreclose on a property even if the 1st is being paid on time. However, that being said, per state and federal law, notices must be sent to the property owner and/or publicized if a property is being foreclosed upon regardless of lien position. And eventually, a notice of foreclosure posted directly on the structure. Two ways to find out if there is a second lien/mortgage on your property is to either have a title company or attorney run a simple title search which would cost a few hundred dollars, or go to the courthouse yourself and look at what is on record as a second mortgage/lien. I don't think I would try and contact the entities that sent those notices because that would give them official notice that you received the notice and allow them to legally start action if that makes sense. If you try to sell the property, the second mortgage would pop up if there is one. I hope this helps.
 

Survivor_IN

LoanSafe Member
Yes, they can foreclose, but typically seconds do not. You likely have a defense of the Statute of Limitations if they do sue for FC. This SOL is dependent on your State law. (can be anywhere from 5-15 years but average 5 in most States) With that said, all they (2nd lienholder) have to do is wait for you to sell and then take the money as a part of that transaction. You might consider an attempt at pay-off or settlement. Otherwise, the second will continue to accrue interest.

PS - makes a difference if your State is a judicial foreclosure State or not - I'm assuming it is
 

JohnFL

LoanSafe Member
Can they legally charge interest if they made no attempt to collect on 2nd and the SOL has run its course? This could be a significant amount if interest has accrued for 10 years.
 

moretrouble

LoanSafe Member
Hi all. This site is a wealth of information, but I couldn't find anything relevant to my situation.

I had a first & second mortgage with HSBC/Beneficial. Stopped paying on second and they eventually charged it off around 2010/2011. Balance was about $7500. First mortgage was eventually transferred to Fay Servicing collecting for New Rez. That is current and will be paid off in less than 5 years.

A few years ago, started receiving collection notices from Ditech, then Greentree and most recently Shellpoint. The last collection notice from Shellpoint was about 2 years ago. Shellpoint, I understand, is now a part of New Rez. My question is can they foreclose on the second mortgage. I can't figure out if it is with a 'legit' mortgage company or debt collector. Second mortgage is not reporting to any CRAs. Is there a statute of limitations on this (either as a mortgage or debt collection)?

Thanks in advance.
I am in the exact situation. My HELOC from HSBC was charged-off in 2011 balance 50K, sold to Greentree for less than 2 pennies on the dollar (per its own financial documents filed with the SEC), to WAC, then to Ditech. New Rez bought Ditech’s assets. They can not collect because of the SOL but telling me they can enforce the lien when I sell, questionable though? That is how these debt buyers make money, buying charged-off debts for pennies on the dollar then try to collect on the whole amount. A few years ago, I asked Greentree to provide the proof of the transfer of the note, they couldn’t. I question whether they can foreclose without the note, judicially. They can still try to do it non-judicial . It would not hurt for them to try though because nobody holds these crooks responsible for forging documents or misrepresentation, even the courts buying their stories.
 

Jzone

LoanSafe Member
Hi all. This site is a wealth of information, but I couldn't find anything relevant to my situation.

I had a first & second mortgage with HSBC/Beneficial. Stopped paying on second and they eventually charged it off around 2010/2011. Balance was about $7500. First mortgage was eventually transferred to Fay Servicing collecting for New Rez. That is current and will be paid off in less than 5 years.

A few years ago, started receiving collection notices from Ditech, then Greentree and most recently Shellpoint. The last collection notice from Shellpoint was about 2 years ago. Shellpoint, I understand, is now a part of New Rez. My question is can they foreclose on the second mortgage. I can't figure out if it is with a 'legit' mortgage company or debt collector. Second mortgage is not reporting to any CRAs. Is there a statute of limitations on this (either as a mortgage or debt collection)?

Thanks in advance.
Some good replies so far, and I will give you my experience. Always check your state laws about foreclosure because they are not the same in every state. My experience is in Michigan. I filed Chapter 7 bankruptcy and continue to pay on the first but not the second mortgage. I haven't made payments in 10 years on the second with little to no communication with the current lien holder.

Mortgages are a secured loan. Secured by a lien on the property. The lien will not go away until it is settled/discharged/paid etc. You can check who the lien holder is at your county register of deeds. This is a legal document and is recorded with your county clerk. Fraudulent recordings do happen, but are very rare.

Simply not paying your mortgage/Heloc and having it "written off" means nothing to you. It's an accounting procedure that shows its "uncollectable". This is where state laws vary on what can happen next.

In Michigan, after you stop paying, you are still legally liable for the debt. This is "secured debt" like a home, and not "unsecured debt", like a credit card. In Michigan, there is no statue of limitations for a debt secured by a mortgage. A lien holder can keep that lien for 20, 30 , 50 years or more and it is still valid. Check your state since some states only allow a secured lien holder 7-15 years to enforce the lien.

Have you filed bankruptcy? In Michigan, this would release you from the debt, but not release the lien. In other words, you could walk away from the home and not owe any money. If you don't file bankruptcy, you can still walk away, but are still liable for the debt.

Even if you haven't filed bankruptcy, the original lien holder can assign, transfer or sell your debt and lien. It's perfectly legal and it will be in your loan documents that you signed.

Most states will allow a second lien holder to foreclose, but unlikely. A second lien holder must also pay off the first lien holder to complete the foreclosure. If you owe $25,000 on a second and $150,000 on a first mortgage, the second would need $175,000 to complete the foreclosure. Unlikely, but could happen if you have enough equity in the home.

In my situation, I filed bankruptcy 9 years ago and continue to pay on the 1st only. My second was sold/transferred. I get a notice probably once or twice a year with a balance owed to release the lien. The wording is very specific, since it would be illegal for them to attempt to collect on a debt that has been discharged in bankruptcy. They are trying to "enforce a lien', not collect a debt. I respond in writing reminding them of the bankruptcy and make an offer to release the lien. I never get a response back.

Now, if I ever want to sell or refinance the lien will need to be taken care of somehow. But, I'm in no hurry to sell so Im just waiting it out. So, check your state laws on this because it will vary greatly on what can happen after you stop paying. Good luck.
 

moretrouble

LoanSafe Member
Some good replies so far, and I will give you my experience. Always check your state laws about foreclosure because they are not the same in every state. My experience is in Michigan. I filed Chapter 7 bankruptcy and continue to pay on the first but not the second mortgage. I haven't made payments in 10 years on the second with little to no communication with the current lien holder.

Mortgages are a secured loan. Secured by a lien on the property. The lien will not go away until it is settled/discharged/paid etc. You can check who the lien holder is at your county register of deeds. This is a legal document and is recorded with your county clerk. Fraudulent recordings do happen, but are very rare.

Simply not paying your mortgage/Heloc and having it "written off" means nothing to you. It's an accounting procedure that shows its "uncollectable". This is where state laws vary on what can happen next.

In Michigan, after you stop paying, you are still legally liable for the debt. This is "secured debt" like a home, and not "unsecured debt", like a credit card. In Michigan, there is no statue of limitations for a debt secured by a mortgage. A lien holder can keep that lien for 20, 30 , 50 years or more and it is still valid. Check your state since some states only allow a secured lien holder 7-15 years to enforce the lien.

Have you filed bankruptcy? In Michigan, this would release you from the debt, but not release the lien. In other words, you could walk away from the home and not owe any money. If you don't file bankruptcy, you can still walk away, but are still liable for the debt.

Even if you haven't filed bankruptcy, the original lien holder can assign, transfer or sell your debt and lien. It's perfectly legal and it will be in your loan documents that you signed.

Most states will allow a second lien holder to foreclose, but unlikely. A second lien holder must also pay off the first lien holder to complete the foreclosure. If you owe $25,000 on a second and $150,000 on a first mortgage, the second would need $175,000 to complete the foreclosure. Unlikely, but could happen if you have enough equity in the home.

In my situation, I filed bankruptcy 9 years ago and continue to pay on the 1st only. My second was sold/transferred. I get a notice probably once or twice a year with a balance owed to release the lien. The wording is very specific, since it would be illegal for them to attempt to collect on a debt that has been discharged in bankruptcy. They are trying to "enforce a lien', not collect a debt. I respond in writing reminding them of the bankruptcy and make an offer to release the lien. I never get a response back.

Now, if I ever want to sell or refinance the lien will need to be taken care of somehow. But, I'm in no hurry to sell so Im just waiting it out. So, check your state laws on this because it will vary greatly on what can happen after you stop paying. Good luck.
Very well explained, thank you. If you wait long enough, the value of money will be pretty much worthless.
 

luckiestarr

LoanSafe Member
we are in the same situation with all of you . trying to refinance and beneficial/shellpoint or whoever they may be now hav popped up and delaying, most likely stopping our refinance efforts. I am just about to give up on this country and how the laws work especially in financing. They win, we always lose.
 

cookiemom

LoanSafe Member
In michigan, with 2nd in chapter from 2008. Kept home with an approved loan mod on 1st. 2nd line has been transferred multiple times (accruing interest). I've sent random letters requesting to settle on lien...fast forward to today...some came to my door requesting an inspection. Wtf
 

Survivor_IN

LoanSafe Member
Mortgages are a secured loan. Secured by a lien on the property. The lien will not go away until it is settled/discharged/paid etc. You can check who the lien holder is at your county register of deeds. This is a legal document and is recorded with your county clerk. Fraudulent recordings do happen, but are very rare.

Simply not paying your mortgage/Heloc and having it "written off" means nothing to you. It's an accounting procedure that shows its "uncollectable". This is where state laws vary on what can happen next.

In Michigan, after you stop paying, you are still legally liable for the debt. This is "secured debt" like a home, and not "unsecured debt", like a credit card. In Michigan, there is no statue of limitations for a debt secured by a mortgage. A lien holder can keep that lien for 20, 30 , 50 years or more and it is still valid. Check your state since some states only allow a secured lien holder 7-15 years to enforce the lien.
From what I've found Michigan has a couple of options, both judicial and non-judicial. Requirements on non-judicial need to be reviewed because no one wants a surprise notice on the door with a sale date or sale notice that such foreclosure is complete (but alas a right of redemption but such requires one to allow access for inspection.)
It does appear that the SOL on a contract/mortgage is 10 years which is something worth fighting in a judicial foreclosure. Michigan Legislature - Section 600.5807
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Hi Team,
I do have a situation recently in the state of California where a company called Linear Mortgage that held an old charged off 2nd lien that was literally about to foreclose (see pictures). I was able to stop the foreclosure by refinancing the lien and convincing the 2nd lien holder to postpone the sale.

1649872147873.png

1649872244669.png

Please be careful with these 2nd lien holders especially right now with the potential slowdown in the market. They will most likely start to be extremely active because of the amount of equity people have gained.

If you have any questions regarding this please don't hesitate to reach out.

Erik Sandstrom
619-379-8999
[email protected]
www.LoansReduced.com
 

Pay It Forward

LoanSafe Member
Hello Loansafe Members….I am the individual that Erik Sandstrom is referencing in California. I cannot stress enough how foolish I was to ignore my charged off 2nd mortgage. Same situation as most everyone on this sight…stayed current on my 1st mortgage, the 2nd went unpaid, charged off, changed hands, received letters every few years reminding me that they were there. I twice over the years attempted to settle the debt to get the lien released, they wanted financial information etc., and I was following the old “never give financials” advice so I would politely refuse, and they would politely tell me to kick rocks. My God, they had even offered to settle for around 10% at one point, but I didn’t have the funds at the time. I was underwater on the 1st and 2nd combined for many years (the 2nd charged off somewhere around 2012), so I foolishly mostly ignored them. They couldn’t or wouldn’t foreclosure on me, right? They’d have to pay off my 1st mortgage, why would they pay a lot of money to foreclose? In what seems like the blink of an eye, I’m 10 years down the road, gained equity, have good credit, decent income, etc. Starting to have grandkids, really living a fantastic life. A registered letter (with multiple copies) arrived in October 2021 and sh&t got real. The 2nd mortgage, through an attorney’s office, had started foreclosure proceedings. That got my ass in gear. I communicated with them, the rep was extremely nice, but firm. Either I pay them off or I was going to lose everything my husband and I had worked so hard for. I thought well, the time has come. I cannot ignore this any longer. It sickened us that they negotiated only a little on the amount they wanted to stop the foreclosure and release the lien. Most of that equity I had built would now be gone. There were a number of snags I hit looking for a lender to refinance my 1st to settle the 2nd. Most lenders just didn’t understand how a charged off 2nd that doesn’t appear on my credit report was foreclosing. They were hesitant to lend to me because that’s not really something that makes me sound like a good risk does it? My 90 days to foreclosure was approaching fast. I was sick to my stomach, losing sleep, a real emotional mess, and it was embarrassing to say the least. One day I said to myself: what about that guy from the Loansafe forums I used to read all the time? I would lurk and read the forums here for years. What was his name? Erik Sandstrom. I contacted him via email, explained my situation and begged for his help. I knew he would immediately understand my situation and prayed that he could help me. Erik responded immediately and we arranged to talk by phone the next day. This wonderful man went to work for me immediately. He contacted the 2nd, told them that he was working with me and bless his heart, got them to postpone the foreclosure (multiple times!). About a week ago, my loan closed and the 2nd was paid off. I’ve told Erik that I don’t know him personally, but I love him. I have never dealt with anyone so caring and professional in my life. This was the hardest lesson of my life to learn. To come so close to losing everything I own, and all of it my own doing. Ignoring something for so long until it was almost too late. We can finally breathe now. Yes, it’s sickening to think about the equity we had to use to pay them off but we will live with no regrets. It’s done and we’re grateful. You can take my advice and be proactive, reach out and attempt to settle your 2nd before it’s too late, or do like I did for so long and think it will never happen to you. I’m not preaching. You do what‘s best for you. But the reality is that the 2nd can and will foreclose on you. And Erik, if you read this….God Bless you…..KM
 

Survivor_IN

LoanSafe Member
View attachment 206

Please be careful with these 2nd lien holders especially right now with the potential slowdown in the market. They will most likely start to be extremely active because of the amount of equity people have gained.
Good to know some way out on the lending and finance end. Would be helpful to know how credit scores affect this one in today's market and the fact that the "1st lien loan was current" is how people have been handling the Great Recession fall out all these years (and confused over what the write-off status actually means on the second.) Some folks have already gone through bk many years ago and allegedly these old bad accounts and BK are not incorporated into current credit. BUT. Don't underwriters find that stuff and re-calc the loan based on those past bad things??? Curious if you can explain this underwriting or if it matters.

Yes, many lenders are poised to recoup old seconds in the current climate. We have inflation of the housing market.

Folks! Notice the assignment and NOD always precedes the action. Don't EVER ignore the NOD mailing. The subsequent legal filing (official foreclosure) will be delivered within days of the expiration of the repayment demand. This legal action that MUST be answered or you lose by default. Default Judgment is easiest route for foreclosing, and they bank on it. Literally. Even if you answer with blanket denials and defenses on your own paper and in crayon if you have to, answer it. Definitely better to negotiate a prompt payoff if you got the ability rather than lose your house or almost worse, spend years in court dealing with it.

It's a bit extortionate in my opinion but perfectly legal to wait to collect on the lien until values appreciate. Just be aware that this may be a sudden surprise to deal with after so many years of nothing burger transfers.
 

Survivor_IN

LoanSafe Member
It is also worth mentioning, as I have in the past... that the second lender DOES run out of time to demand payment and collect the debt. THIS IS A VALID DEFENSE. You *can* quash the foreclosure action and get it dismissed in this circumstance. BUT. Do you think they aren't going to manipulate the process and legally fight you on such claims when then see full value PLUS FEES paid if they win against you??? Oh yeah. Expect them to Lie in court. Make false claims. Enlarge the debt. Fabricate evidence. Kickbacks to judges and attorneys. All that jazz happens.
 

moretrouble

LoanSafe Member
Pioneer Investment Group, LLC probably paid $500 for your collection right, now you paid them 44K, what a deal for them. I would take them to court, bleed them with legal fees. I have an old 50K HELOC from HSBC, now with Shellpoint, waiting for them to sue me.
It is also worth mentioning, as I have in the past... that the second lender DOES run out of time to demand payment and collect the debt. THIS IS A VALID DEFENSE. You *can* quash the foreclosure action and get it dismissed in this circumstance. BUT. Do you think they aren't going to manipulate the process and legally fight you on such claims when then see full value PLUS FEES paid if they win against you??? Oh yeah. Expect them to Lie in court. Make false claims. Enlarge the debt. Fabricate evidence. Kickbacks to judges and attorneys. All that jazz happens.
 

cookiemom

LoanSafe Member
Ok my intellectual group, explain this to me. I did and 80/20, 1st at $170k 2nd at $42k.
I Somewhat understand the differences between a loan mod and refinance.
My 1st was approved for a HAMP loan mod with BOA but at the time (2010) 2mp program was not offered. Ok fine...What I'm struggling with is, the loan mod financed total for the 1st increased. Yes the interest rate structure changed...but the amount went from original $170k to $190k. Can a loan modification actually increase the total financed amount with still not having to recognize the secondary? This seems like it would be more of a refi. How is the second not part of this is the same bank holds both. There was definitely not equity to hold up. Also, I have the payment history from the 2nd that shows no interest accruing but when they send letters there is $60k added to the original $42k. Shouldn't the interest accrual amount be shown on that ledger?
 
Top