Jumbo Chase 1st And Heloc Quandry

Bordeauc Cir

LoanSafe Member
Apr 8, 2016
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We live in the state of Florida and below is our Chase mortgage quandary.Est Home Value $480,000 (recent Chase evaluation…not a full appraisal)Total mortgage debit $794,100 (purchased near the peek in 2005 at 103% financing...yes we got cash back)

Est negative equity $314,000
Chase 1st mortgage balance $624,000
Chase 1st mortgage old $2249.75 (IO...includes taxes $422.63 and insurance $138.00)
Chase 1st mortgage new $4258.32 (P&I...includes taxes $422.63 and insurance $138.00)
Chase HELOC balance $170,900
Chase HELOC old $476.42 (IO)
Chase HELOC var new @3.65% $1237 (P&I)
Old total payment $2726.17
New est total payment $5495.32
Est total payment increase $2769.17
Monthly Gross Income $20,940
Est Monthly Housing Expense $5684 (1st +2nd +taxes ($422.63) + Ins ($138)+HOA (188.69))
Est Housing Ratio 27.1%

The new payments are due 06/01/2016 and we do not intend to make the new payments. We would like to stay in the house and hoping Chase (1st mortgage and HELOC) would work together and to work with us. We simply cannot afford the new monthly payment that’s doubled. We have three young kids with activities and expenses this new payment puts us way over the top.

We have an 10 year interest only 1st mortgage and HELOC of which both are adjusting and moving to a principle and interest 20 year mortgage. We have assets in our 401K, IRA and 529 but no taxable account assets. We’re not about to drain our retirement assets to pay for the mortgage.
We recently applied for mortgage assistance via Chase and we’re denied. Their housing ratio calculation for us was 23%...not that it really matters but their est payment figures were not accurate. We were told we were eligible for either a short sale or deed-in-lieu of foreclosure via their form letter.

We have talked to one attorney and she recommended that we continue to pay the HELOC. This shows Chase that we are making an attempt and once we go past due on the 1st we could start the conversation with Chase to see if they would work with us. I thought this was interesting because if anything is going to go our direction the HELOC would be gone at the end of the day…it has no equity supporting it. If it doesn’t go our way we’re still at a loss. The situation would be that the 1st mortgage would be past due but the HELOC would be current? How would Chase look at this?

We understand going past due will destroy our credit but our options are limited at this point. Either direction we’re going to have financial challenge. If we move do a short sale then the bank will send us a 1099 for $300,000…we’re looking in the area of a $120,000 taxbill on top of our normal taxbill L.

This can’t be the best alternative for Chase either. I’m hoping we can meet somewhere in between. My dream scenario would be to give us a mortgage base on the current value of the home. I’d be willing to split the negative equity as long as they we’re able to place it at the end of our new mortgage…and they can write off the other half.

What should be our ideal game plan for the scenario above? Any input would be greatly appreciated?

Thank you,
Brian
 
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Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,796
456
1,000
47
Southern California
www.loansafe.org
Hello Brian,

I have seen this type of scenario about a thousand times over the last 8 years. Each and every time, the mortgage servicer had denied the loan modification and refused to work with the homeowner. The reason being is that you can afford the payment and are choosing to strategically default. You have given them your financials which shows this to them and now they have the ammo they need in case you deiced to walk away.

I think it don't matter what mortgage you pay and do not pay because Chase probably owns both mortgages. Banks like Chase do not care and have billions and billions of dollars in backing.

With that said, I'm not saying this to be pessimistic, but realistic and just be prepared to be rejected. Hope for the best, but definitely plan for the worst.
 
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Bordeauc Cir

LoanSafe Member
Apr 8, 2016
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Hi Moe,

Thank you for your response and I do appreciate your candor.

Good advice to hope for the best and plan for the worst but at the same time I want as informed as I can me ahead of time on our best options. If the ship sinks, the ships sinks but I’m not going down without a fight.

Confident both loans are with Chase.

What about this scenario…we keep the 1st mortgage current with the new terms and stop paying the HELOC. It would be a financial reach but maybe possible and we would have a negative equity variable 1st mortgage.

With no equity supporting the HELOC would you expect the CHASE HELOC division would do?

What route would you recommend based on the information provided?

Did I make a mistake by showing our financials at this point in the process?

Thanks,
Brian
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,796
456
1,000
47
Southern California
www.loansafe.org
Hi Brian,

You're welcome.

Yes, but what can you do when you apply for a loan modification. You have to give up financials.

If I were you and dead set on strategically defaulting, I would default on my HELOC first like you had mentioned. If they make a deal with you, you are set. If they stone wall you, then they may foreclose or come after you personally.

The only three things they can do are

1. foreclose and pay off the first which they would be paying themselves if they own both loans

2. charge off the loan and go after you personally, but the lien would remain

3. make a deal with you such as a loan modification
 

Bordeauc Cir

LoanSafe Member
Apr 8, 2016
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48
Hi Moe,

An update, we're 5 to 6 months late on our 2nd. I get an occasional call from Chase and I've yet to answer or return a call.

Today we received a FEDEX envelope with a Trial Period Plan. Three months of payments similar to what a our payment was before the adjustment. Verbiage is that a modification agreement would be sent following the third payment.

I don't have any intention of responding however would be interested in a settlement if they were to decide to go that direction.

1st...$620,000 mortgage with $500,000 home value. My best estimate.
2nd...$171,000 HELOC with NO equity to support.
Credit score went from 750 to 620...expected

Should I reach out to them or continue to wait them out? Any additional thoughts or advice?

Thanks,
Brian
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,796
456
1,000
47
Southern California
www.loansafe.org
Hi Brian,

Most members who have settled just ignored these offers and waited until they were willing to settle the debt. However, there have been some members who did not wait it out and initiated settlement talks themselves and were successful as well.

If it was me, I would just wait it out as long as possible.
 

bankwhipped

LoanSafe Member
Apr 11, 2011
161
8
18
Florida
Just some thoughts, I may be wrong but Since your credit scores are already shot and your retirement accounts are protected in bankruptcy and no other assets why don't you speak with a bankruptcy attorney to see what your options are? Unless you can't qualify to file because of your high income. you may be able to stay in house till they settle with you or foreclose.
if they foreclose they won't be able to sue you for deficiency nor will you be liable tax wise.
 

despritfreya

LoanSafe Member
Sep 8, 2011
369
53
28
1st...$620,000 mortgage with $500,000 home value. My best estimate. 2nd...$171,000 HELOC with NO equity to support. Should I reach out to them or continue to wait them out? Any additional thoughts or advice?
Just some thoughts. . . why don't you speak with a bankruptcy attorney to see what your options are?
Second quote - not a bad idea as it relates to the 2nd. You apparently have no equity after consideration of your 1st mortgage. If an appraisal will show this (and the lender can't get one that shows there is equity) then the 2nd is subject to a strip-off in a Chapter 13. Go see a bk attny if you really want to get rid of that 2nd.

Des.
 

Bordeauc Cir

LoanSafe Member
Apr 8, 2016
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Dear Moe,

It's been north of a year and have yet to return a call to Chase related to the HELOC. This whole time we've kept the 1st mortgage (with Chase) current and still underwater on the 1st by $25,000 plus or minus. We got a letter from Chase today with one time payment amount of $25,000 and they will release the lien. That's .15 cents on the $1. I plan to negotiate this number down further. With any scenario taxes are going to hurt. They're going to be more then we have available. I plan to call a CPA and/or a Tax Attorney to see what our options would be with the IRS.

We're making progress!

Any insight, advice, thoughts, next step recommendations would be greatly appreciated.

Thank you,
Brian
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,796
456
1,000
47
Southern California
www.loansafe.org
Hello Brian,

Yes, you are making progress but as you said, there will be tax issues if you do settle. There is not much you can do there other than talk with a CPA which you already have planned.

In regards to settling, I would just come to them at 5% or so of what is owed and hope they take it or somewhere close.

There is also the option that Des mentioned above and that would be a chapter 13 bankruptcy 2nd mortgage lien strip which could wipe out your 2nd mortgage completely.

This is supported by the Bankruptcy Code, specifically Section 506 in which it is declared that a lien can only be considered to be secured based on the value of the collateral. Therefore, for the amount that can no longer be covered by the equity of the home, the second mortgage is considered to be unsecured.

I'm not a lawyer and I encourage you to speak with one about this if you are interested.