Idi Tests And Second Loan Charge Offs

Mike Carey

LoanSafe Member
Oct 22, 2015
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#1
Thank you so much for your site, it is truly appreciated to have an advocate we can look to !

My primary questions are in two areas. First, does an IDI test with a primary lender ever consider a secondary loan payment that originated at the same time as the first ? I have “failed the IDI test” with 2 different banks because they ignore my second payment – I have just sent an appeal.

Secondly, some specific questions with regard to the ramifications of letting a second mortgage go to chargeoff. The existing forums have already been very helpful ! Specifically, can they freeze funds in my existing checking account ? Would it be wise to move these funds to another bank ? I’m sure they can lower the credit limit on my credit card which would block future charges. Can they also increase my minimum payments ?

Of course, any other suggestions would be welcomed !

Now some history that may help. We are in North Carolina. Our initial “piggyback” loans were taken out in 2008 when we closed on the purchase of our home, $417,000 on primary, $134,000 on secondary. As I understand it, the primary was owned by FNMA, the secondary by Suntrust, both serviced by Suntrust. We were able to refinance the primary in 2012 (HARP ?) with the same lender to a rate of 4 3/8%. The primary mortgage was transferred effective July 1st to Seterus. PITI on the first is $2,365 and on the second, payment is $960. Home value has depreciated significantly from $586,000 construction/purchase price to under $445,000 currently.

We applied for a loan modification in August 2014 with Suntrust because significant drops in our income beyond our control threatened us with the very real possibility of not being able to keep making our combined mortgage payments. We have no desire to leave our home.

In August 2014 my wife lost her job with an annual salary of $72,837 and has only been able to find employment until recently at $44,432 per year. With one exception, my annual income has dropped steadily since 2008, ($20,000 drop from 2011 to 2012) due to the economy, my average annual salary for the last 3 years is $13,000 lower than the annual average for the prior 3 years. I was able to secure a second job late in 2013 but this income is significantly less and there is no guarantee that this will be able to be maintained.

We were current when we applied for a loan modification and after finally getting all the paperwork “just so”, were denied due to failing the IDI test despite our ratios including both loan payments exceeding 31% gross income. (Second payment not considered) Even though they owned the second loan, they still would not look at modifying it, despite its 7.75% rate, since the primary loan mod had been denied.

It became apparent that no positive results were going to occur as long as we were current.

In July, my wife has started a full-time position through this same employer at an annual salary of $73,000. Combined with my current income, we can see making COMBINED mortgage/escrow payments of $2,888, (30%), or even $2,985 (31%), down from our current $3,325, looking also at our other expenses and net income. Our desire is to make this happen, ideally without lengthening our loan period, which already runs through our age 85.

With the passing of time and delays caused by the transfer of the primary loan to Seterus, we had missed our April through July primary payments and our July secondary payment. We filed a loan modification request with Seterus in August 2015 after my wife had the 30 days worth of paystubs at her new income level.

Now it appears that even though we have fallen behind, the IDI test still haunts us because they do not consider the secondary loan payment and the secondary mortgagor will not do anything to help us without a primary loan modification approval.

Our credit scores have of course taken a hit from the high 700s to 500s so along with the underwater valuations, traditional refinancing obviously continues to not be an option. I still do not see making both payments being a sustainable achievement going forward, therefore I am now considering allowing the second mortgage to fall even further behind hoping for greater leverage or perhaps a charge-off followed by a settlement.
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
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Southern California
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#2
Hello and welcome to the forum Mike. We appreciate you telling your story and thank you for the kind words.

I have found that most homeowners simply do not get help from their mortgage servicers until they are late on their payments. Even after they are late, it is still difficult to obtain a loan modification and or a settlement once a loan is charged off. But it is definitely a heck of a lot easier to work out some type of resolution that is satisfactory to the point that it become more like 50-70% odds you will find a solution to your home loan woes.

But just remember that this is "all about business," and making money and profits for the mortgage servicer who is really just a debt collector for the investor/bank/investors. In the end, all they care about is making money and maximizing profits on each and every loan regardless of the pain someone might be in.

With that said, be prepared for a long hard fight with no guarantees other that that they will play games with you like you have already experienced. So my suggestion is to prepare yourself mentally for a long tough road and do not take things personal and know they will play games and sometimes lie. It is what it is.

Be kind to the employees you encounter and be professional stating your case proving you are right. Think positive and visualize success. Most likely it will happen if you just get these basics of business and human behavior down to a simple science.
 

Mike Carey

LoanSafe Member
Oct 22, 2015
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#3
Hello and welcome to the forum Mike. We appreciate you telling your story and thank you for the kind words.

I have found that most homeowners simply do not get help from their mortgage servicers until they are late on their payments. Even after they are late, it is still difficult to obtain a loan modification and or a settlement once a loan is charged off. But it is definitely a heck of a lot easier to work out some type of resolution that is satisfactory to the point that it become more like 50-70% odds you will find a solution to your home loan woes.

But just remember that this is "all about business," and making money and profits for the mortgage servicer who is really just a debt collector for the investor/bank/investors. In the end, all they care about is making money and maximizing profits on each and every loan regardless of the pain someone might be in.

With that said, be prepared for a long hard fight with no guarantees other that that they will play games with you like you have already experienced. So my suggestion is to prepare yourself mentally for a long tough road and do not take things personal and know they will play games and sometimes lie. It is what it is.

Be kind to the employees you encounter and be professional stating your case proving you are right. Think positive and visualize success. Most likely it will happen if you just get these basics of business and human behavior down to a simple science.
Thanks Moe !

So have you ever seen a primary lender on a FNMA loan consider a secondary loan payment that originated at the same time as the first in the IDI test ? (or any other test)

Secondly, if I continue to not pay my second lender, can they freeze funds in my existing checking account ? Would it be wise to move these funds to another bank ? I’m sure they can lower the credit limit on my credit card which would block future charges. Can they also increase my minimum payments ? Any other precautions to take ?
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,794
455
1,000
46
Southern California
www.loansafe.org
#4
You are welcome Mike.

Yes I have seen them consider the 2nd mortgage.

No creditor can do that without a court ordered judgment against you stating that is ok for them to garnish your bank account. But if I were you, I would probably move it.

Your credit card may have provisions that state they can raise your interest rate or limit your credit at their discretion. So, that may happen.
 

Mike Carey

LoanSafe Member
Oct 22, 2015
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#5
You are welcome Mike.

Yes I have seen them consider the 2nd mortgage.

No creditor can do that without a court ordered judgment against you stating that is ok for them to garnish your bank account. But if I were you, I would probably move it.

Your credit card may have provisions that state they can raise your interest rate or limit your credit at their discretion. So, that may happen.
Latest update and question !
Expec
You are welcome Mike.

Yes I have seen them consider the 2nd mortgage.

No creditor can do that without a court ordered judgment against you stating that is ok for them to garnish your bank account. But if I were you, I would probably move it.

Your credit card may have provisions that state they can raise your interest rate or limit your credit at their discretion. So, that may happen.
Latest Update and Questions ! 2-12-16
I just talked with my primary lender (Seterus) who said a 3 month trial offer letter is enroute and he discussed the terms. The good news is monthly payment is reduced about $300. The disappointing news is that after 16 months of back and forth all they did was extend my mortgage from 30 years to 40 years so instead of saving money overall with a reduced interest rate, (presently 4.375%), we'll be making payments till age 95 instead of just 85 :). Supposedly they tried to qualify us for a lower interest rate via HAMP but were unsuccessful, I think because our original loan of 2008 was refinanced in 2012. So I assume we should accept the modification and consider making extra payments when possible? My arrears amount does not have to be brought current but is just included in the new amount to be paid down.

Perhaps my bigger area of question is my secondary loan with Suntrust. I have neither paid them nor communicated with them since July when I advised them I was still in the process of trying to get a loan modification with the primary lender. It was clear they were not going to do anything to help us unless we got a successful modification with the primary lender. Today I received a letter containing the following verbage:
"This letter is to inform you that Sun Trust Mortgage, Inc has made the decision not to pursue foreclosure of the above referenced loan and will be releasing our lien interest on this property. Although Sun Trust is releasing its lien, this does not mean that you are being released from liability on this debt. Collection efforts may be pursued on this otherwise invalid debt. You have the right to continue to occupy the property until a sale or other title transfer action occurs. You will also be responsible for maintaining the property, insurance and paying for all real estate taxes due."

SO, I assume I should still not contact them or make payments and see if some collection agency contacts us to negotiate a settlement ? We are not in any danger of losing our home because of action they may take ? Advice ??

Last I knew our appraised value was down to about $429,000 with $375,000 due on the primary mortgage and $123,000 due to Suntrust on the secondary mortgage. Original loan amounts due were $417,000 and $134,000. I think the site/home construction costs were around $586,000 with an appraisal even higher.

Thank you in advance !!
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,794
455
1,000
46
Southern California
www.loansafe.org
#6
Hello mike,

In my opinion, this is good news. Rarely do they EVER release the lien. Are you sure it says that?

If so, then all you have to deal with is a personal liability on the debt. Meaning instead of being attached to the property, it is attached to you and they can still try to sue and or collect from you. Most likely they will sell the debt to a debt collection agency.

It may be best to just sit back and see what happens next.
 

Mike Carey

LoanSafe Member
Oct 22, 2015
6
2
3
60
#7
Hello mike,

In my opinion, this is good news. Rarely do they EVER release the lien. Are you sure it says that?

If so, then all you have to deal with is a personal liability on the debt. Meaning instead of being attached to the property, it is attached to you and they can still try to sue and or collect from you. Most likely they will sell the debt to a debt collection agency.

It may be best to just sit back and see what happens next.
Back to the primary "modification" - do you see any benefit to not accepting the modification or any other desirable recourse for me ? (Since in essence mostly all that has been accomplished is increasing the total cost of the loan over its life with accumulated late fees and inspection fees and now an extended life.) We have been able to save enough to cover the arrears and maybe even make our regular payments, especially with the suspended payments on the secondary loan. Again, was really hoping for a reduced interest rate that would help us pay off the mortgage earlier.

BTW yes, the wording in the letter from the secondary lender was exactly as I typed it.
 

Mike Carey

LoanSafe Member
Oct 22, 2015
6
2
3
60
#8
Back to the primary "modification" - do you see any benefit to not accepting the modification or any other desirable recourse for me ? (Since in essence mostly all that has been accomplished is increasing the total cost of the loan over its life with accumulated late fees and inspection fees and now an extended life.) We have been able to save enough to cover the arrears and maybe even make our regular payments, especially with the suspended payments on the secondary loan. Again, was really hoping for a reduced interest rate that would help us pay off the mortgage earlier.

BTW yes, the wording in the letter from the secondary lender was exactly as I typed it.
Credit report seems to indicate the secondary loan is in collection/chargeoff and a derogatory report was filed by Suntrust. Suntrust Mortgage website where I used to go to make payments shows a zero balance. Is it likely I will receive a 1099C and need to prepare for paying taxes on an extra $125,000 of income ? (Approximate balance). When would I likely receive that 1099 C ?

Is there any benefit to me trying to contact the bank to see what their intention is ? Or to request a settlement ? I'm concerned about possible civil complaints or judgments being filed against my wife or I.
 
Likes: Richard Baker

loansuccess

LoanSafe Member
Aug 7, 2013
42
2
6
#9
Hello mike,

In my opinion, this is good news. Rarely do they EVER release the lien. Are you sure it says that?

If so, then all you have to deal with is a personal liability on the debt. Meaning instead of being attached to the property, it is attached to you and they can still try to sue and or collect from you. Most likely they will sell the debt to a debt collection agency.

It may be best to just sit back and see what happens next.
Hi Moe,

Based on my recent conversation with my attorney, this (lien release) seems to be happening more and more. I literally just received (3 weeks ago) a "Certificate of Release" from Deutsche Bank for an investment property that I own. I was absolutely blown away. In the middle of the foreclosure process, they dismissed the complaint, charged the loan off ($108k) and recorded the lien release with the local county recorder. I was in shock for two days and finally talked to my attorney about it and she told me I now own the property free and clear. The debt was uncollectable if sold to a collection agency, because it was included in a 2010 bankruptcy.

One of the greatest lessons that I've learned about the foreclosure is to NEVER just sit down and let them take the property. Out of pure ignorance, I allowed that to happen once. Never again - I read an excellent book that was written by Robert M. Janes ("Fighting The Foreclosure Machine") that gave me the courage and information needed to fight the process. And, of course the forums on this site is full of great information.

I prayed for a miracle and God gave me one!!!!
 

Mike Carey

LoanSafe Member
Oct 22, 2015
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2
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#10
Well it has been a little over a year and a half since I last posted. I continue to get calls from Suntrust, somewhat sporadically, which I have ignored. I just today got a letter dated 9/13/17 offering to settle $122,000 for $62,000 if I pay full $62,000 in 30 days. I do not have that amount so plan to wait out for a better offer. With your advice, I moved funds out of my Suntrust account but still carry a balance on Suntrust Visa with no issues with charges or payments. I continue to set aside amounts in savings as I can to hopefully take advantage of a much better offer. At this time, I do not intend to replay to their offer in any form.

Any new thoughts or recommendations ? Thank you !
Mike
 
Likes: Moe Bedard

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,794
455
1,000
46
Southern California
www.loansafe.org
#11
Thanks for the update.

You can counter and I suggest you do if you have the ability to pay 5-15%. Also, I think if you hold out, they may come back with a better offer sooner or later.