Re-finance With Charged Off 2nd Mortgage

bkakca

LoanSafe Member
Jul 5, 2013
189
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thank you. I guess you are right. We are so deep into this re-finance it's such a disappointment. :( But what can you do.
I'm sorry about the refi Mimi, it surprises me that the loan officer did not see this as an obstacle as soon as he got permission to pull credit, and saw this account on your report. Any mortgage in default is a large obstacle/red flag. It is too bad he/she went ahead and ordered the survey/appraisal and you are out that fee.

On the bright side, you are settling that 2nd for 5% and getting that done is huge! Guess we just need to forge ahead with a fistful of daisies and our faces to the sun, and count our blessings as we go. ;)
 

MyGirl922

LoanSafe Member
Mar 29, 2009
16
1
1
Hey Maurice I had a question for you with regards to a similar situation with Nationwide Credit as well. I am looking to sell my home and have a 2nd that was closed as a charge off with OCWEN with a balance of 45K back in 2014. Now not knowing and thinking of settlement, I had been making payments every month to NCI at the same amount as the original 2nd mortgage payment. Since we were looking to sell, I looked into the county records and found out that 2nd mortgage has since, 10/2014, been considered "Satisfied" with the county and the 2nd mortgage lien was released, unbeknownst to me, since I was actively paying NCI. NCI in my last phone call to them asked ME if I would consider a settlement on the account, my current balance is 39.8K (original when it was handed to them was 47K). If I can get this new mortgage and sell my current home, would it be more inclined for NCI to settle with me since OCWEN already released the lien 2 years ago? I have not seen this issue where the lien was released on the 2nd, with a Closed - Charge-off account on the credit report, but I have been paying consistently for the last 2.5 years to NCI. This whole situation is weird.
 

Lancer

LoanSafe Member
Nov 20, 2013
24
1
3
Here is my situation - Rock and a Hard Place.

I have reached settlement with BofA on my 3rd HELOC. I will pay about 25% of what is owed. We have not signed the paperwork yet. There is a provision that states it will be reported as "settled for less than full amount" - so akin to a short sale.

At the moment, I qualify for a refi on my 1st and 2nd, but with the problem 3rd my loans were to high against the equity in the house. With the 3rd HELOC gone now, I am in good shape from a LTV, but my credit will now take a hit due to the "settled for less than full amount".

Is BofA required to file a report, or do they have the option to do nothing (i.e. they are not misrepresenting anything, just not saying anything at all)? I am wondering if I can negotiate in the agreement that they won't report anything, only respond if asked.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,042
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San Diego, California
www.loansreduced.com
Hey Maurice I had a question for you with regards to a similar situation with Nationwide Credit as well. I am looking to sell my home and have a 2nd that was closed as a charge off with OCWEN with a balance of 45K back in 2014. Now not knowing and thinking of settlement, I had been making payments every month to NCI at the same amount as the original 2nd mortgage payment. Since we were looking to sell, I looked into the county records and found out that 2nd mortgage has since, 10/2014, been considered "Satisfied" with the county and the 2nd mortgage lien was released, unbeknownst to me, since I was actively paying NCI. NCI in my last phone call to them asked ME if I would consider a settlement on the account, my current balance is 39.8K (original when it was handed to them was 47K). If I can get this new mortgage and sell my current home, would it be more inclined for NCI to settle with me since OCWEN already released the lien 2 years ago? I have not seen this issue where the lien was released on the 2nd, with a Closed - Charge-off account on the credit report, but I have been paying consistently for the last 2.5 years to NCI. This whole situation is weird.
This is quite the interesting scenario! Have you tried to qualify for a new loan with all the documentation and support you have including making payments on the loan? I would advise you have someone send the file completely through underwriting to determine any obstacles or hurdles you have to jump through before you sell right away.

I wouldn't think it would help much if you were to sell the home by settling the debt because the lien is already released. I would be curious if you could get the credit bureaus to update your credit report with the documentation you have.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,042
161
63
San Diego, California
www.loansreduced.com
Here is my situation - Rock and a Hard Place.

I have reached settlement with BofA on my 3rd HELOC. I will pay about 25% of what is owed. We have not signed the paperwork yet. There is a provision that states it will be reported as "settled for less than full amount" - so akin to a short sale.

At the moment, I qualify for a refi on my 1st and 2nd, but with the problem 3rd my loans were to high against the equity in the house. With the 3rd HELOC gone now, I am in good shape from a LTV, but my credit will now take a hit due to the "settled for less than full amount".

Is BofA required to file a report, or do they have the option to do nothing (i.e. they are not misrepresenting anything, just not saying anything at all)? I am wondering if I can negotiate in the agreement that they won't report anything, only respond if asked.
You can definitely negotiate with them to report the debt as "Paid as agreed" - that's what you would want. The "Settled for less than owed" reporting may affect your ability to refinance, having a 3rd mortgage outstanding is going to come up through the mortgage process anyhow I would think, it's good you're taking care of it.
 

MyGirl922

LoanSafe Member
Mar 29, 2009
16
1
1
This is quite the interesting scenario! Have you tried to qualify for a new loan with all the documentation and support you have including making payments on the loan? I would advise you have someone send the file completely through underwriting to determine any obstacles or hurdles you have to jump through before you sell right away.

I wouldn't think it would help much if you were to sell the home by settling the debt because the lien is already released. I would be curious if you could get the credit bureaus to update your credit report with the documentation you have.
So we wind up not being able to obtain a new mortgage because even with the lien released on this portion of the mortgage, the loan was listed as a charge-off and a 180 day late payment and therefore was considered a foreclosure. The conventional mortgages you need to be at least 4 years post charge off and FHA was 3 years.

Oddly enough 2 weeks ago I decided to start settlement discussions with OCWEN/NCI providing a 5% settlement offer and within 36 hours they came back with a counter offer at 10%. I am going to come back at 7.5% and hope they accept. Fingers crossed.
 

Mimi313

LoanSafe Member
May 18, 2016
26
1
3
36
Here is an update on our situation:
Our 2nd lien was released as promised last summer by Ocwen (NCI). We approached 7 years of our last payment this month. Two of the credit bureaus automatically deleted the account and on TU I disputed the account as too old to be on my file. It was deleted 2 days later. Now we are working with a lender on refinancing again and so far everything looks good!! Don't lose hope guys, there is light at the end of the tunnel.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,042
161
63
San Diego, California
www.loansreduced.com
Keep us in the loop as things progress with your situation, this is a very common circumstance that many are going through right now.
 

Mimi313

LoanSafe Member
May 18, 2016
26
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36
Okay guys. I need more advice. We filed taxes as normal and got a letter from the IRS stating that they received a 1099c from Ocwen that we did not claim. Well, we never received that so we had no idea. Now we owe over $7,000 to the IRS. I remember (vaguely) getting a letter years ago regarding Obama’s loan forgiveness and not having to pay taxes in these circumstances. We filed an amended return but that wasn’t good enough. We need to file a 982 which I thought was filed by our tax person but it was not. I need to double check. Any input?
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,042
161
63
San Diego, California
www.loansreduced.com
Typically you would receive the 1099c in the mail. Not sure why you didn't receive this earlier. Unfortunately this enters into an entirely new realm when it comes to the options you have. Even though you received a 1099C we have seen that the lenders still hold liens against the property. In my personal opinion I think it's unfair...Why would you have to pay taxes on a debt that has been cancelled but yet there is still a lien against the property that would prevent you from refinancing or would need to be paid off upon the sale of the home.

This is happening way more often than it should be and I think needs to be addressed with the consumer financial protection bureau. I have already sought out advice from our in house attorney here and they mentioned that the rules are so unclear which has given these lenders the ability to keep the lien against the home.
 

Mimi313

LoanSafe Member
May 18, 2016
26
1
3
36
Typically you would receive the 1099c in the mail. Not sure why you didn't receive this earlier. Unfortunately this enters into an entirely new realm when it comes to the options you have. Even though you received a 1099C we have seen that the lenders still hold liens against the property. In my personal opinion I think it's unfair...Why would you have to pay taxes on a debt that has been cancelled but yet there is still a lien against the property that would prevent you from refinancing or would need to be paid off upon the sale of the home.

This is happening way more often than it should be and I think needs to be addressed with the consumer financial protection bureau. I have already sought out advice from our in house attorney here and they mentioned that the rules are so unclear which has given these lenders the ability to keep the lien against the home.
Okay so my lien was released. There isn’t a lien any longer. If I’m reading correctly I need to file a form 982 but I’m having trouble and was hoping others may have filed and had advice. We are still in our home and successfully refinanced after settled the 20% loan.
 

Jzone

LoanSafe Member
Jun 20, 2017
153
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I havent read anything more than your last two posts, so not sure if you filed bankruptcy or not.

However, if your debt was simply "forgiven", yes, you are responsible to include that as income on your tax return. Then your tax preparer needs to explain why they didnt do this for you.

Was your "tax person" actually a paid tax preparer or just someone you know who did your taxes? It will make a differance if you have to defend this with the IRS. A paid tax preparer will be asked to explain how they did your taxes for that year, someone who simply helped you with taxes and wasn't paid, has zero responsibility.

Now, if your debt was discharged in bankruptcy, its not reported as income. If it is and you recieve a 1099, you simply file form 982 as an exclusion to income.

I went through bankruptcy in 2012, and second mortgage still has lein on property but I have not paid anything in almost 3 years. Never recieved any 1099, but my attorney advised me to file form 982 if I did.
 
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