Re-finance With Charged Off 2nd Mortgage

Mimi313

LoanSafe Member
May 18, 2016
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We purchased our home on 4/1/2006 with an 80/20 loan (80 loan was an ARM with balloon payment) (20% = $28000). Once the mortgage crashed we went underwater on our second loan and stopped payments on 6/2008. We received a few letters from Ocwen but never received anything else and never contacted by collection agency. We received some sort of settlement from a class action against Ocwen, it was a couple thousand but I do not have the paperwork on this, it may have even been a part of the Debt forgiveness. We had zero equity in our home, like many others. Fast forward to 2016, we are stuck in this ARM that is now going up to almost 7% from 6.6% but we have been unable to refinance for many years. I've worked on our credit and have ZERO collections, no negative, no late payments, etc. The homes values in my area have sky rocketed and we are at about 50% equity. Good time to refinance but our lender needs something showing this lien is forgiven or released. I've searched the county records and the only paperwork is the original work from 2006. I'm at a loss of what to do. Should I contact Owen? I'd hate to stir them up and have them come after us now for the debt. We are willing to settle with them if necessary. Any insight is truly appreciated. We have now tried to refinance twice and are on the verge of losing another appraisal $450, down the drain.

Below is what our credit report shows:

transunion
Last Reported Jul 05, 2011
Creditor Name OCWEN LOAN
Account Type Second Mortgage
Account Status Closed - Derogatory
Opened Date Apr 04, 2006
Closed Date Jul 05, 2011
Limit --
Term 360 Months
Monthly Payment $0
Responsibility Individual
Balance $0
Highest Balance $28,350
Payment Status 120-149 Days Late
Worst Payment Status 120-149 Days Late
Date of Last Payment May 21, 2010
Amount Past Due $0
Times 30/60/90 Days Late 0/1/11
Remarks Settled - less than full balance

Equinox
Last Reported Jun 10, 2014
Creditor Name OCWEN LOAN SERVICING
Account Type Second Mortgage
Account Status Closed - Paid and Closed
Opened Date Apr 01, 2006
Closed Date Jul 01, 2011
Limit --
Term --
Monthly Payment $0
Responsibility Individual Account.
Balance $0
Highest Balance $28,350
Payment Status Collection/Charge-Off
Worst Payment Status --
Date of Last Payment May 01, 2010
Amount Past Due --
Times 30/60/90 Days Late 0/0/0
Remarks Account paid for less than full balance
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
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Loan Safe Mortgage
Jan 14, 2011
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San Diego, California
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Hi Mimi,
Thanks for sharing your situation with us and I would be happy to help answer your question here.

Unfortunately what your current lender is telling you is accurate. When we do a new loan we have title research any liens associated with the property and that may have been when that came up. The only way to get around it would be to obtain a lien release or satisfaction of lien. If you are to settle the 2nd mortgage it would be treated as a short sale and short sale seasoning periods would apply.

All in all there are no options at this time, I would not waste any more money on an appraisal until you have a loan commitment from a lender. Meaning you have the loan approved and this has been addressed. That lien will however remain on your property (from my knowledge) until something is done to satisfy it.
 

Moe Bedard

Call 1-800-779-4547
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Aug 10, 2007
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Hello Mimi,

I agree with Erik. These mortgage companies should have told you this rather than you wasting money on appraisals. They were either not truthful with you and or did not know what they were doing.

Your only best bet here is to settle with the 2nd mortgage. That should be your main focus right now. You should not even think about refinancing until you get that 2nd settled and the lien released. If any lender and or loan officer tells you any different, they are lying or they simply do not know what they are talking about.
 

Mimi313

LoanSafe Member
May 18, 2016
26
1
3
37
Hi Mimi,
Thanks for sharing your situation with us and I would be happy to help answer your question here.

Unfortunately what your current lender is telling you is accurate. When we do a new loan we have title research any liens associated with the property and that may have been when that came up. The only way to get around it would be to obtain a lien release or satisfaction of lien. If you are to settle the 2nd mortgage it would be treated as a short sale and short sale seasoning periods would apply.

All in all there are no options at this time, I would not waste any more money on an appraisal until you have a loan commitment from a lender. Meaning you have the loan approved and this has been addressed. That lien will however remain on your property (from my knowledge) until something is done to satisfy it.
I'm not sure what short sale seasoning periods mean, can you clarify please? We do not plan on moving from this home. It's a last resort to sell the home if we are never able to refinance. Our balloon payment is $68,000! We were young and not very smart when we bought this home in our early 20s. 80/20 ARM balloon payment loan over 40 years!!! Insane.
We did receive a notice saying that the debt was forgiven due to a bail out but nothing was ever filed. It was a law Obama passed at the time, I believe.
 

Mimi313

LoanSafe Member
May 18, 2016
26
1
3
37
Hello Mimi,

I agree with Erik. These mortgage companies should have told you this rather than you wasting money on appraisals. They were either not truthful with you and or did not know what they were doing.

Your only best bet here is to settle with the 2nd mortgage. That should be your main focus right now. You should not even think about refinancing until you get that 2nd settled and the lien released. If any lender and or loan officer tells you any different, they are lying or they simply do not know what they are talking about.
We explained this situation after locking in our rate, as it pulled up on our credit report. The loan processor said she didn't see why it would be an issue and immediately ordered an appraisal for the next day. We are okay with taking another loss on appraisal but do you know if Ocwen could come after us now that there is more equity in the home? We have not communicated with them in 8 years.
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
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Southern California
www.loansafe.org
We explained this situation after locking in our rate, as it pulled up on our credit report. The loan processor said she didn't see why it would be an issue and immediately ordered an appraisal for the next day. We are okay with taking another loss on appraisal but do you know if Ocwen could come after us now that there is more equity in the home? We have not communicated with them in 8 years.
Yes, that is a definite possibility to consider. It is all about profit or recouping costs and math with businesses and mortgages. If they can make some money or break even, they may foreclose. You never know.

By the way, what Erik means they would consider a settlement just as if you had done a short sale. To qualify after a settlement on your mortgage, you would probably need anywhere from anywhere of 1 day or one or more years to buy a home, and 2 or more years to refinance. You may be able to get a hard money lender if you wanted cash out, but it would be a higher rate and not worth the costs in the long run.

Erik is the pro on these type of mortgage questions. He will respond shortly when he gets some time.
 
Last edited:

Mimi313

LoanSafe Member
May 18, 2016
26
1
3
37
Yes, that is a definite possibility to consider. It is all about profit or recouping costs and math with businesses and mortgages. If they can make some money or break even, they may foreclose. You never know.

By the way, what Erik means they would consider a settlement just as if you had done a short sale. To qualify after a settlement on your mortgage, you would probably need anywhere from anywhere of 1 day or one or more years to buy a home, and 2 or more years to refinance. You may be able to get a hard money lender if you wanted cash out, but it would be a higher rate and not worth the costs in the long run.

Erik is the pro on this type of mortgage questions. He will respond shortly when he gets some time.
We owe $105,000 on our first mortgage with Carrington and $28,000 is with Ocwen (charge- off). Our appraisal came in at $205,000. I'm at a loss on what to do.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,094
174
63
San Diego, California
www.loansreduced.com
I think the situation here is that you're trying to obtain a more affordable payment on your existing mortgage. We've already made a determination that you won't qualify via conventional or FHA due to having the 2nd still out there.

What is your current interest rate?

The reason I ask is that the portfolio options that would be available once you do physically settle the 2nd lien may be higher than what you have now. In regards to the 2nd mortgage and them coming after you, I believe that may depend on whether or not you filed bankruptcy and are in bankruptcy protection. If you have just simply not paid the 2nd in years, I would say absolutely they may end up wanting their money back and come after you. But....I am not a foreclosure expert, more a new home loan expert.
 

Mimi313

LoanSafe Member
May 18, 2016
26
1
3
37
I think the situation here is that you're trying to obtain a more affordable payment on your existing mortgage. We've already made a determination that you won't qualify via conventional or FHA due to having the 2nd still out there.

What is your current interest rate?

The reason I ask is that the portfolio options that would be available once you do physically settle the 2nd lien may be higher than what you have now. In regards to the 2nd mortgage and them coming after you, I believe that may depend on whether or not you filed bankruptcy and are in bankruptcy protection. If you have just simply not paid the 2nd in years, I would say absolutely they may end up wanting their money back and come after you. But....I am not a foreclosure expert, more a new home loan expert.
Current interest rate just went up to 7.0% effective 6/1/16. It is reviewed every 6 months and this is the first time it has went up in a very long time. We were working on a cash out, 15 year loan, 3.5% interest. We did not file Bankruptcy. This was the only debt that went underwater after unsuccessful modification, HARP or HAMP and refinance denial.
 

Mimi313

LoanSafe Member
May 18, 2016
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Is it strange that we have never received any collections or offers of settlement on this?
 

Moe Bedard

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How does it show on your credit report?
 

Moe Bedard

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Sorry, I missed that....

It looks like it has been already charged off as of 2011 and your Equifax report seems to reflect this. You will have to work out a settlement and or repayment plan to get the 2nd lien removed in order to refinance.
 

Mimi313

LoanSafe Member
May 18, 2016
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Does this change anything? Could they come after me for my home due to the fact they bought the 2nd mortgage debt from Ocwen?
 

Moe Bedard

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Loan Safe Mortgage
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Once they charge the loan of, it becomes a personal debt which means they can come after you personally. The lien will still remain until it is paid off, you reach a settlement on the debt or you sell the home.
 

Mimi313

LoanSafe Member
May 18, 2016
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I'm assuming there is a SOL on collecting? Nationwide isn't reporting on our credit any longer either
 

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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Yes, its four years in Texas. But the lien will remain...
 

Mimi313

LoanSafe Member
May 18, 2016
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So really we have nothing to lose in negotiations at this point? We need to get the lien released and are prepared to pay a small percentage, maybe we can use the SOL as leverage?