Foreclosure - Second Mortgage Is Charged Off - Not Sure What To Do

mando

LoanSafe Member
Nov 27, 2011
10
0
1
My husband lost his job back in 2010 and through a series of bad luck, we ended up foreclosing on our home. The actual foreclosure occurred in 2013 and we haven't really received much information since then. However, we are in a better financial situation now and would like to come up with a plan for how to move forward.

First Mortgage - listed on our credit report as Foreclosure Redeemed. Last payment made on 1/3/2012 and Closed on 3/20/15.

Second Mortgage - listed as Charged of as Bad Debt - Profit and loss write-off. Last payment on 1/2/12 and Closed on 2/28/13. The amount past due is around $50,000.

Other than receiving a privacy notice from the second mortgage company (Ditech), we have heard nothing from them. We are in the process of repairing our credit so that we can eventually buy a home, but we don't know what to do about this second mortgage. We don't have the $50,000 to pay it off, but not sure about settling. And the house was located in Ohio (we live in another state now) and I know they have a much longer SOL.

I have looked at credit repair companies and even called a few attorneys, as I just want to know how to move forward here. No one has been able to help me though (I haven't found a credit repair company that I felt comfortable working with). Any suggestions or advice? Any thoughts on what we might expect if we continue to do nothing (which I really don't want to do...I just don't know what to do)?

Thanks!
 

Jzone

LoanSafe Member
Jun 20, 2017
206
28
28
70
My husband lost his job back in 2010 and through a series of bad luck, we ended up foreclosing on our home. The actual foreclosure occurred in 2013 and we haven't really received much information since then. However, we are in a better financial situation now and would like to come up with a plan for how to move forward.

First Mortgage - listed on our credit report as Foreclosure Redeemed. Last payment made on 1/3/2012 and Closed on 3/20/15.

Second Mortgage - listed as Charged of as Bad Debt - Profit and loss write-off. Last payment on 1/2/12 and Closed on 2/28/13. The amount past due is around $50,000.

Other than receiving a privacy notice from the second mortgage company (Ditech), we have heard nothing from them. We are in the process of repairing our credit so that we can eventually buy a home, but we don't know what to do about this second mortgage. We don't have the $50,000 to pay it off, but not sure about settling. And the house was located in Ohio (we live in another state now) and I know they have a much longer SOL.

I have looked at credit repair companies and even called a few attorneys, as I just want to know how to move forward here. No one has been able to help me though (I haven't found a credit repair company that I felt comfortable working with). Any suggestions or advice? Any thoughts on what we might expect if we continue to do nothing (which I really don't want to do...I just don't know what to do)?

Thanks!
Not exactly the same situation as I'm in, but I would see if your second mortgage holder still has a lien on the house. If first mortgage foreclosed, second mortage holder got nothing except the lein.

Is anyone living in the house now? If so, then there probably isnt a lien anymore since new owners would have to have a title search done to finance the purchase.

I think the only thing you need to focus on is asking second mortgage holder to settle the mortgage/lein. Follow the advice in this forum and see if you could settle for 10% of the balance.

My situation is similiar, but I filed chapter 7 bankruptcy. Stayed in house, did not reaffirm either mortgage, but still trying to get second mortgage holder to release/settle lien. I plan on selling in 5 years or so, and I dont want any surprises coming up as that second lien would be a problem
 

mando

LoanSafe Member
Nov 27, 2011
10
0
1
Thank you! How will settling affect our credit in regards to purchasing a home in the future (maybe two years)? Also, since no one from Ditech has contacted us, I am nervous that trying to settle may be like waking a sleeping bear. But I just can't tell you how wonderful it would be to have this taken care of and put in the past.

I've read threads on here about people settling second mortgages, but most of the time it seems like the second foreclosed but they still have the first and still live in the home. If there are past threads more like my situation that anyone could direct me to, I'd certainly appreciate it.

Jzone, I hope things work out for you!
 

Jzone

LoanSafe Member
Jun 20, 2017
206
28
28
70
Thank you! How will settling affect our credit in regards to purchasing a home in the future (maybe two years)? Also, since no one from Ditech has contacted us, I am nervous that trying to settle may be like waking a sleeping bear. But I just can't tell you how wonderful it would be to have this taken care of and put in the past.

I've read threads on here about people settling second mortgages, but most of the time it seems like the second foreclosed but they still have the first and still live in the home. If there are past threads more like my situation that anyone could direct me to, I'd certainly appreciate it.

Jzone, I hope things work out for you!
Did you recieve a 1099-C when the second was charged off? Its treated as income if its a foreclosure. Thats one of the reasons I filed bankruptcy, because the debt is discharged. Theres a big difference between "forgiven" debt and "discharged" debt.

"The Internal Revenue Service considers a lender's forgiveness of a mortgage loan to be a cancellation of the loan borrower's debt. By IRS rule, mortgage loan debt canceled by lenders is taxable as ordinary income to borrowers of those canceled loans. The IRS also requires lenders forgiving or canceling borrowers' debts of more than $600 to file Form 1099-C and to give borrowers a copy as well. So you might have to pay taxes on your lender-forgiven second mortgage."

Before waking any sleeping bear, I would check with your former home county clerk and see if there is still a lein on the property. And run a current credit report if you havent in the last 6 months.

You must be renting now? But have you been able to get another loan like a car loan?
 

mando

LoanSafe Member
Nov 27, 2011
10
0
1
No, we have not received a 1099-c, so I don't believe the debt was forgiven. We do check our credit and that is where we see that the loan has been charged off. I understand that to mean that we still owe the money, which is why I wonder if we should try to settle. You bring up a good point though, if we do settle, do we have to pay taxes on the rest? I really need to understand how this works.

We have not attempted any other loans since our foreclosure, so I don't know if we could get a car loan or not.