2nd Mortgage Charged Off - Need Help with Settlement

OneHugeMess

LoanSafe Member
May 30, 2016
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the second is an equity line through Bank Of America for 90k...we have not gotten statements for a long time. It shows up on one of our credit reports but not the other 2 (not sure why that is). We never modified on our house so we are paying 6% on the original 1st mortgage.
The way I see it - you've got a few options.


Do you know if your first mortgage is owned by Fannie/Freddie?
https://www.knowyouroptions.com/loanlookup
https://ww3.freddiemac.com/loanlookup/

If it is - you may be able to get a streamline - HARP refinance. That would get you some relief on the interest rate. It's almost worth a try and you might be able to get a successful subordination. If that doesn't work... you've got one other option.

A Cash Out Refinance - where you combine the charged-off HELOC & your existing mortgage, into a new loan. Although - you'd have to have at least 10 to 15% equity remaining to pull this off. I don't think there is enough available cash in your home to do it.

Which brings me to your third option. You could ignore this issue and hope nothing happens. Right now - a lot of homeowners seem to be pulling this one off. But I'm not entirely sure it'll last forever. In some states like NY, Statue of Limitation guidelines are going to come into play though.

I think the biggest thing you can do - destroys your Zillow & Realtor.com estimates by changing the facts of your home. Think Construction Year, Square Footage, Attached Garage, Indoor Plumbing, Central Air. Eliminate and change all of it, until you knock off a good $130k or so. It sounds really silly, but a lot of Loan Servicers rely on Zillow & Similar Sites to check the value of a home. They also hire independent contractors & realtors who try to issue a Broker Price Opinion but... a lot of footwork is done by agents in India who use online tools like Street View & Zillow to evaluate homes in these 2nd Lien Trusts.

Your Fourth & Last Option - is to try and negotiate a settlement. This might not go completely well - but it's worth a shot. They are likely going to hire an agent to try and obtain a real BPO before they'll accept any offer. Once they realize, the 2nd is not completely underwater... they may be unwilling to accept a huge reduction in the payoff amount. But it really is a gamble. You never know unless you try - but... I wouldn't hold my breath.


@Erik Sandstrom would be able to advise you on some of your Cashout/Refinance options and would be a very reputable broker to talk to.

The thing I'm curious about - is even though your 2nd has charged off, I think Interest is still accruing monthly. And if it is - it's compounding like crazy. Sorta like a PayOption ARM, where Interest is being charged on Capitalized Interest. If that's the case, a $96k balance not paid since 2010, could be almost $140k. But... a $96k loan that is truly charged off would be quite manageable and easy to refinance.

Find out what's going on. Look for those statements from the servicer. If NO interest is being accrued monthly, I'd just leave it alone until push comes to shove. Deal with it in a year or two.
 

Lory

LoanSafe Member
Apr 2, 2016
18
2
3
48
Thank you AGAIN OneHugeMess. Every month the charge off has shown on our credit, it has only shown the original charged off amount. Once the account was charged off, we never received another statement. If it was compounding interest, would it show on the credit reporting? If not, there is no way for us to know unless we call and start talking.
 

OneHugeMess

LoanSafe Member
May 30, 2016
596
53
28
Thank you AGAIN OneHugeMess. Every month the charge off has shown on our credit, it has only shown the original charged off amount. Once the account was charged off, we never received another statement. If it was compounding interest, would it show on the credit reporting? If not, there is no way for us to know unless we call and start talking.
Eh... I really hate to tell you to poke the fire. But you could request a "pay off" statement for the 2nd from whoever is servicing it, and see if the Interest is still accruing. It wouldn't always show up properly in Credit Reporting.

Is Real Time Resolutions the servicer?
 

Lory

LoanSafe Member
Apr 2, 2016
18
2
3
48
We have never received anything other than from Bank of America...nor does it show up as any other company on the credit report..it is not showing up at all on Transunion but it is on the other 2....both as BOA.
 

OneHugeMess

LoanSafe Member
May 30, 2016
596
53
28
We have never received anything other than from Bank of America...nor does it show up as any other company on the credit report..it is not showing up at all on Transunion but it is on the other 2....both as BOA.
Interesting that it's only Bank of America. Does your Online Banking login still work for them? Can you see anything when you log in. I would not call just yet.

Also - take a quick look at the Register of Deeds/Clerk of Court for your county. You should get a link like this. http://198.140.240.30/or_web1/or_sch_1.asp

Search your name, and see what is recorded against the house. See if the loan has been assigned to anyone else. In some extremely rare cases, the lien may even be released. Usually, you'd know if the latter happened (DOJ Settlement) ... but it's worth a quick look.
 

Lory

LoanSafe Member
Apr 2, 2016
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2
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48
Nothing shows as recorded against our property other than the original from BOA and our 1st. Unfortunately, I am not able to sign into my account
 

OneHugeMess

LoanSafe Member
May 30, 2016
596
53
28
Fascinating. So your HELOC is still stuck somewhere in Bank of America. It was probably originated by Countrywide, right? None of this necessarily matters, but usually, BofA sends these particular accounts to RTR. I have a feeling Countrywide was holding this in a portfolio, and now Bank of America has the loan on its balance sheet. This information could be useful when searching for information about a short payoff.

What's also interesting - is there has been no Assignment of Mortgage recorded or anything for that matter after the 2nd lien was recorded. Usually, they would do that to transfer it to another Servicer, or to pursue collection (foreclosure).

Like I said - I'd destroy your Zillow Estimate and just leave things alone. No one at BofA has realized the 2nd lien is even partially above water, and the account is probably notated as a total loss. The best advice I can give you is to continue hanging on and wait until they approach you. Knowing if the lien is still accruing Interest would be helpful, so maybe you could try playing around with the automated phone tree at BofA and see if the system spits out any information, or looking for any old statements they have sent you. I'd really try not to talk to someone.

But if you end up on the phone with them - just request a Payoff Statement, and don't say a lot.

You can always refinance this mess in a couple of years if you really want to. It's just something you and your partner will have to discuss. I would try to see though - if you can get anything done about the 6% interest on your first. Maybe through a Modification or Streamline Refi.

Another Thing - Worth Noting. Since they haven't brought an action against you for this 2nd Mortgage, the SOL is running out. In most states, they are required to bring an action for foreclosure within 5 years, of the Date of First Default. After that... some states have considered the lien "not enforceable" for foreclosure. What this means is -- they can't pursue foreclosure, but you can't sell until they record a satisfaction, or it's stripped using a Quiet Title Lawsuit. You'd be able to pass the home down to your children, and as long as the 1st loan is kept current, you'd be fine. Lookup your state laws, and try to follow some of the decisions on this. In the state of NY, a lot of judges are dismissing these suits for SOL.
 

Lory

LoanSafe Member
Apr 2, 2016
18
2
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48
Thank you for time on this OneHugeMess. We originally got the HELOC through BOA...Countrywide was never part of it as far as we know. I really want to get the first refinanced but I was under the impression you can't do anything with that as long as we are dealing with this equity line so we never pursued it. We'll look into that and see if it's a possibility. Again,
Thank you!
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,111
182
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San Diego, California
www.loansreduced.com
Hey Lory,
Most people that you're going to talk to in the finance world aren't going to know exactly what to tell you in regards to your situation. It isn't something that is ran across often and they would have to ask their underwriting department. What the problem comes down to with refinancing the 1st is subordinating the 2nd lien. The 2nd will not subordinate and will then turn into the 1st position. Any 1st lien refinance can't have that, they (or we let's just say) would always want to make sure we are in 1st position.

Only option that I am personally aware of would be combining the two liens together. I think you may already know this but just wanted to put in a couple cents from a lenders perspective. This thread is becoming a hot topic, I'm very curious what the outcome is going to be. Please keep us in the loop as you have been.
 
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Lory

LoanSafe Member
Apr 2, 2016
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Ok Erik...that makes sense. I just thought maybe there was something I didn't know about. I think we'll be contacting you at some point to see what can be done about refinancing both. I know you said it has to be in default for 4 years so we have to wait...should we contact you before that just to make contact and get a full understanding on both ends or just wait?
 

pamzam

LoanSafe Member
Mar 29, 2010
40
2
8
I'm glad I found this thread, and was wondering if @OneHugeMess or @eriksandstrom could chime in...?

Brief background.
Current on 1st with Wells Fargo - owe $129,910.
WAY behind on 2nd (DiTech) - owe $61,295. *Haven't paid DiTech since June 2011, following the settling strategy found here.
Current (Zillow) value - $218k (however, homes around here are selling for $180-$200k).

Filed BK (Ch 7) in 2009 - 1st wasn't reaffirmed (if I remember correctly), and 2nd was (or vice versa, I'm sorry, I can't remember. All I remember is the 2nd is still on us).

Over the years, we received things from GreenTree, who later sold to DiTech, saying "this an informational notice and not any attempt to collect debt. If you have a complaint about the way we are communicating, please call..." We get these about every 3 months.

Yesterday, we received a letter of "Suspension of Payments and Notice of Charge Off." It reads: "If the mortgage account has been charged off and no additional fees or interest are being charged on the account, different requirements apply. This notice and the accompanying Mortgage Statement are being provided in accordance with the provisions for charged off accounts.

"The account identified above has been charged off and Ditch will not charge any additional fees or interest on this account. Ditch will not, or will no longer, provide a periodic statement for each billing cycle. Please note that the lien on the property remains in place, subject to applicable BK and non-BK law. Subject to applicable BK law and applicable orders of the BK court, and unless your debt obligation has been discharged:
a - you remain responsible for obligations related to the loan or the property, which may include property taxes;
b - the balance may become due in connection with a sale or other disposition of the property;
c - the balance on the account is not being canceled or forgiven; and
d - the loan may be purchased, assigned or transferred.

Questions, please call..."

Also attached was a 'statement-looking' form with the payment amount ($61, 295) and a thing to 'detach and return this portion with remittance.' It further reads "If you are a debtor in BK or have discharged personal liability for your mortgage account in BK, this is not an attempt to collect a debt against you."

SO - what exactly does all of this mean? What are our next steps?

We were thinking of a short sale; however, we haven't had a loss of jobs or anything like that. We are struggling - we've kept the first current (at $1700/month), and that's been killing us. My husband works full time, and I'm now working 2 jobs. We repeatedly have to take money out of our savings (which isn't much to begin with) to supplement our income and pay bills with. If we are able to short sell (or even sell, and try to pay the difference), I guess we'd have to rent because our credit is probably in the toilet now...it was about 650 and now, with this charge off, I don't even want to know now...

We've also thought of filing (yet again) for BK, and almost started the process last year, and then didn't. Is it still possible to file with this charge off now? And if so, can we knock the 2nd out, or no?

So, please, if anyone can give me some tips and advice, I'd really appreciate it. Thank you so much!!!!!

Pam
 

pamzam

LoanSafe Member
Mar 29, 2010
40
2
8
I'm glad I found this thread, and was wondering if @OneHugeMess or @eriksandstrom could chime in...?

Brief background.
Current on 1st with Wells Fargo - owe $129,910.
WAY behind on 2nd (DiTech) - owe $61,295. *Haven't paid DiTech since June 2011, following the settling strategy found here.
Current (Zillow) value - $218k (however, homes around here are selling for $180-$200k).

Filed BK (Ch 7) in 2009 - 1st wasn't reaffirmed (if I remember correctly), and 2nd was (or vice versa, I'm sorry, I can't remember. All I remember is the 2nd is still on us).

Over the years, we received things from GreenTree, who later sold to DiTech, saying "this an informational notice and not any attempt to collect debt. If you have a complaint about the way we are communicating, please call..." We get these about every 3 months.

Yesterday, we received a letter of "Suspension of Payments and Notice of Charge Off." It reads: "If the mortgage account has been charged off and no additional fees or interest are being charged on the account, different requirements apply. This notice and the accompanying Mortgage Statement are being provided in accordance with the provisions for charged off accounts.

"The account identified above has been charged off and Ditch will not charge any additional fees or interest on this account. Ditch will not, or will no longer, provide a periodic statement for each billing cycle. Please note that the lien on the property remains in place, subject to applicable BK and non-BK law. Subject to applicable BK law and applicable orders of the BK court, and unless your debt obligation has been discharged:
a - you remain responsible for obligations related to the loan or the property, which may include property taxes;
b - the balance may become due in connection with a sale or other disposition of the property;
c - the balance on the account is not being canceled or forgiven; and
d - the loan may be purchased, assigned or transferred.

Questions, please call..."

Also attached was a 'statement-looking' form with the payment amount ($61, 295) and a thing to 'detach and return this portion with remittance.' It further reads "If you are a debtor in BK or have discharged personal liability for your mortgage account in BK, this is not an attempt to collect a debt against you."

SO - what exactly does all of this mean? What are our next steps?

We were thinking of a short sale; however, we haven't had a loss of jobs or anything like that. We are struggling - we've kept the first current (at $1700/month), and that's been killing us. My husband works full time, and I'm now working 2 jobs. We repeatedly have to take money out of our savings (which isn't much to begin with) to supplement our income and pay bills with. If we are able to short sell (or even sell, and try to pay the difference), I guess we'd have to rent because our credit is probably in the toilet now...it was about 650 and now, with this charge off, I don't even want to know now...

We've also thought of filing (yet again) for BK, and almost started the process last year, and then didn't. Is it still possible to file with this charge off now? And if so, can we knock the 2nd out, or no?

So, please, if anyone can give me some tips and advice, I'd really appreciate it. Thank you so much!!!!!

Pam
 
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Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,111
182
63
San Diego, California
www.loansreduced.com
For everyone looking to refinance a charged off 2nd lien, here is a recent review from one of our members:

"Erik was amazing. I e-mailed him about the challenge I was having with an old charged off HELOC. He called me immediately and we were off. He knows his stuff and is super responsive.

You guys filled a niche I needed to resolve. The old charged off HELOC. This is very smart. There are a lot of good people negatively affected by the economic downturn who have now recovered and can be good mortgage clients. Erik Sandstrom is the reason I did business with you. He called me immediately after I e-mailed him about my situation. He was knowledgeable and professional. He was also super responsive 24/7. He is a great mortgage officer. Jennifer was very responsive as my processor as well. Great team you have there. Keep it going. I will absolutely look Erik up next time I purchase or re-finance." - Catherine A, Seattle WA