Citi Mortgage Settle Second And Release Lien After Bankruptcy

Jzone

LoanSafe Member
Jun 20, 2017
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Decided to close the post on my original thread and start a new one on getting the lien released.

Background: Filed bankruptcy 2012 and discharged 1st and 2nd mortgage. Did not reaffirm and continued to make payments to stay in house.

Still current on first but stopped paying on second in May 2017. No contact from Citi until Oct 2017. Letter gave contact info for homeowner support team, phone and email.

Decided to email an offer letter.

I emailed citi mortgage today. Offered 5% to settle. Will see what happens.


Here's a copy of the letter just in case others want to use something similiar:

Dear CitiMortgage Homeowner Support Team,
[email protected]
855-843-2549

This is in response to your letter of 10/20/17.

My loan number is -------.

I am asking for a settlement and release of the lien on my second mortgage.

As you are aware, this loan has been discharged in Chapter 7 bankruptcy.

I continued to make payments to stay in the house and continued to be current until May 2017.

I have done everything possible to make ends meet. Unfortunately, I realize now that it will be impossible to repay this loan, maintain the house and keep property taxes and utilities current.

My total payments to this mortgage since bankruptcy, now total over $22,000.00.

My payments of $22,000 is much more than you would have received from any discharged loan.

I made repeated calls after bankruptcy, in 2012, 2013 and 2014 to settle this loan and release the lien. Since I was not behind on payments, I was told each time that there was nothing available.

I would like to settle this loan for 5% of the May 2017 balance $47,375, or approximately $2,400.00.

My offer to settle is based on my payments after bankruptcy and the fact that this loan has been discharged. Again, you have recieved over $22,000 in payments from me for a loan I am not legally responsible for.

I would appreciate your consideration to accept this proposal for settlement and release of lien.

Please contact me in writing or email only.

Sincerely,
 

Jzone

LoanSafe Member
Jun 20, 2017
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Well, that didnt take long. Citi has assigned me to the Executive Response Unit. Somehow they must of still had my phone number because she left a message today also with an email. I emailed back to contact only by letter or email.

Her email focused on refinancing my second mortgage through Making Home Affordable program. Also asked for paystubs, last two years tax returns, etc... No plans on filling any of that out. Sticking to the plan of settling the second mortage and release the lien.

I kept my reply email short and to the point: "Thank you for your attention to this matter. Please review my settlement offer and reply by mail or email only".
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
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www.loansafe.org
Thanks for sharing your settlement story and opening a new thread to educate other LoanSafe members. I wish you the best of luck!
 
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Jzone

LoanSafe Member
Jun 20, 2017
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Thanks for sharing your settlement story and opening a new thread to educate other LoanSafe members. I wish you the best of luck!
So far, I have used the recommendations for settling and nothing negative has happened. I know thats not always the case, as I have read some horror stories on here too.

Since my loan was already discharged in bankruptcy, I figured I had nothing to lose if I stopped paying. Only took about 6 months. I never received any other correspondence from Citi until October.

I would think this loan may be on the low priority list for them, since its discharged and they cant sell the debt to a third party. My goal is to settle for 10%-20% of balance.
 

Jzone

LoanSafe Member
Jun 20, 2017
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Well, I might be getting closer to a settlement offer from Citibank.

Received letter in the mail that said "You may be eligible for a settlement on your mortgage" . Still had name of contact person at Citi, who has left me a message also. Citi did not make an offer in the letter, just said I may be eligible.

Tried to upload copy of letter, but looks like this forum doesnt allow it.
 

Jzone

LoanSafe Member
Jun 20, 2017
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Well, here's a little twist in the process. Recieved letter today from Citi that my mortgage loan servicing will be transferring to United Guaranty Services. I had to look that up because I thought it was maybe a collection agency. In a way, I guess they are, but looks like their main business is loans and servicing other banks loans for them.

The letter had the following info:
  • the following notice is required by the Real Estate Settlement Procedures Act
  • To the extent this obiligation has been discharged, this notice is for informational purposes only.
  • If you have any questions, please contact United Guaranty Services.
So, not sure exactly what to make of this. It states all payments are to be made to the new servicer, but I havent made any payments since last May. Also says the servicing of your mortgage has changed but nothing else about your mortgage has changed.

Have done a little internet research and it looks like a new servicer still can negotiate a settlement. Im thinking Citi must of realized that since the loan has been discharged through bankruptcy chances were pretty slim of them recieving any more payments.

Any one have any similiar experiences with chapter 7 discharged 2nd mortgage?
 

Jzone

LoanSafe Member
Jun 20, 2017
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Here's what has happened in the last two weeks. I recieved my last statement from Citimortgage and it showed a $34,000 payment to principle in December taking my balance to just over $12,000!

I was extremely happy but confused when I opened the statement. We had never discussed any dollar amounts and the last letter from Citi was basically stating that the loan was being transferrred to United Guaranty. The only letter i recieved from Citi was the letter in late December which said I "may be eligible for a settlement".

So I called Citi and they said the account was transferred on Jan 18th. This $34,000 payment was made on Dec 29th and shows on their end as a "balance offset". On my statement is says "additional principle applied". However they did say my ending balance was $12,000 and my account was closed. (remember, this is a chapter 7 discharged debt). Citimortgage couldnt tell me for sure, but it looks like the balance transferred to United Guaranty is only the $12,000, not $47,000!

United Guaranty has not sent me any statements, just one letter stating that any future payments need to go to them. I have not called, emailed or sent any letter to them.

So now Im in a wait and see mode for a while. At least I have a statement from Citi saying what my ending balance is. Now Im just waiting for my first letter/phone call from United Guaranty to see what they have to say.

Since this second mortgage debt was transferred, I wonder if United Guaranty knows that it was discharged in bankruptcy?

I hope this is what it seems as I would be happy to just pay the $12,000 and have the lien released. That would be about a 25% of the original balance settlement.
 

Jzone

LoanSafe Member
Jun 20, 2017
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February came and went and I recieved one letter from from United Guaranty. It stated that they would send statement and payment notices to me starting February 20th. I sent a letter on Feb 22nd that the loan was discharged in chapter 7, but I could be contacted by mail or email to discuss a settlement. No response yet from them.

Also, attached is the "you may be eligible" for settlement letter from citi.
 

Jzone

LoanSafe Member
Jun 20, 2017
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I contacted Citi and have a letter that states my balance was $12,000 on date of transfer. I have sent copies to UG, but they claim balance was transferred in December and was $47,000.

They contacted me again and said balance was now over $50,000 because of interest and no settlement offer was available, but I could make interest free payments until paid off. I replied with a simple "no thank you" and to please send me copies of the Citi documents showing my balance on date of transfer.

Never recieved any documents from UG showing a $47,000 balance.

Two days later, UG emailed me that they would consider a settlement and release of the lien.

I made an offer settlement of $3,200 and about an hour later, they counter offered with $17,500. So in 2 days it went from no settlement and a balance of $50,000 to their settlement offer of $17,500. I counter offered with $4,500.

Have not heard from UG in 3 weeks and don't plan to contact them at this point.
 

Jzone

LoanSafe Member
Jun 20, 2017
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No contact from UG in almost 2 months now. I do not plan on contacting them. They have all my contact info anyway if they need to contact me. Not sure if no contact is good, bad or otherwise. But, I'm in no hurry to settle and I have my documents that shows exactly what my balance was on the transfer date.
Looks like this may turn in to one of those "2 years later" scenarios. Will update when I hear something!
 

Jzone

LoanSafe Member
Jun 20, 2017
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Another 3 months has gone by and one phone call this week from United Guaranty. Message said to call them about "urgent matter". I didn't respond.

I did go to our county register of deeds about a month ago and found out that Citi did assign the lien to United Guaranty. The mortgage has been discharged in bankruptcy, but of course the lien remains.

At this point, I'm just waiting it out. Its a lien on a second mortgage, and in Michigan, the second cannot foreclose unless they pay off the first mortgage. My first is current. I doubt that they would pay off the first to get to the second, but you never know.

I never did recieve a copy of the mortgage or request for verification of debt from United Guaranty. I doubt if they have it. I do have a copy of the letter from Citi stating a balance of $12,000 when lien was transferred. UG says it was $50,000.

Will update when I know more.
 

OneHugeMess

LoanSafe Member
May 30, 2016
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United Guaranty is a Mortgage Insurer. They didn't originate your loan, but very likely paid out a claim to the investor for the defaulted principal balance. Your original second mortgage came bundled with an insurance policy, in case you defaulted - and that is why they are now in contact with you.

Curious - is your first lien underwater at all? Do you have any equity in the property?
 

Jzone

LoanSafe Member
Jun 20, 2017
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1st mortage is current and not underwater. Balance is $120,000. value is probably around $180,000.
 

OneHugeMess

LoanSafe Member
May 30, 2016
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In this particular case, I'd start looking into state SOL's, and possibly consulting an attorney or Google. You've got enough equity that they could very well consider foreclosure to make a recovery.
 

Jzone

LoanSafe Member
Jun 20, 2017
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In Michigan there is no SOL on real property. So they could hold the lien forever. They could foreclose, but in Michigan, the second lien holder must also pay off the first and I doubt that would happen, but you never know.
I contacted my bankruptcy attorney and he recommended a real estate attorney to look into the matter. He has seen ZERO second mortgage holders initiate foreclosure proceedings.

At this point since the debt was discharged and technically the balance is 0, it seems I'm really not looking for a debt settlement, but looking to negotiate a lien release.

I believe the only way they can enforce the lien is when I sell the home. And I dont plan on doing that anytime soon. So maybe I just need to wait it out.
 

OneHugeMess

LoanSafe Member
May 30, 2016
459
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They could foreclose. And the keyword is could. You have $60k in EQUITY remaining after your first lien. That is enough to make a FULL Principle Recovery for the loan. In most cases, servicers are interested if they can make a 15-25% percent recovery for the investor. The attornies fees are only $2-$5k max, and there is ample equity to recover the full amount due.

You'd have to really speak with an attorney, but you don't exactly have protection in terms of the lien situation. This is a clear case for a recovery for the investor. There is no reason not to foreclose. Things would be different if your home was worth $190k, and your first mortgage was for $212k, and you had a 2nd for $50k. You are not even underwater anymore.
 

Jzone

LoanSafe Member
Jun 20, 2017
151
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Update March 2019. Talked to my bankruptcy attorney and he advised just to sit and wait. I have no desire to sell right now and United Guaranty sent a standard followup letter back in January 2019. I followed up with them again stating I would offer $2000 on the $12000 balance when they were assigned the debt.

Have not heard back from them and its been more than 3 months now. Just looks like I am in a wait and see what happens phase.

So now Im going on 3 years of no payments from the time I stopped paying Citimortgage and then the lien being transferred to United Guaranty.