Refinance After Paid Charged-off Second

pelicanz

LoanSafe Member
Jul 17, 2012
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Hi - I'm having trouble refinancing my mortgage because of a charged-off second that has now been paid an the lien has been cancelled and released at the county about 3 months ago. The original charge off date was 2013, but we managed to pay it off in 2019. My home is worth $225k. I owe 99k on the first and have 50k in debt I'd like to pay off so refinance would be $150k plus closing costs. Our lowest score is 680 range (highest 720). Getting conflicting information from lenders. Tried to refinance last year but lender (Ditech) said because we were making payments on charged-off second that we didn't qualify (payments were less than the original mortgage agreed amount). So we paid off the loan and got it completely removed from our credit report and confirmed lien release. Now lender (Quicken) is saying we can't do FHA because it has to be paid off over 3 years ago. I sent them the letter with the charge-off date of 2013 so waiting now. How can a charged-off second mortgage with a lien release and clear title that isn't on my credit report be causing so many problems? Does the FHA keep records longer than the credit bureau? Thanks. Really would appreciate the help and get this mortgage refinanced.
 

Jzone

LoanSafe Member
Jun 20, 2017
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How can a charged-off second mortgage with a lien release and clear title that isn't on my credit report be causing so many problems? The simple answer is because its a charged off loan.

Need more info, but it sounds like you settled the charged off second with a debt collector for less than what was owed? And then they released the lien?

If thats the case, most lenders would still see you as a higher risk than simply your 680 credit score. Generally, charge off stay on your credit report for 7 years and bankruptcy for 10 years. And a charged off mortgage, is looked at a lot closer than a charged off credit card or not paying on a car loan.

If the charged off loan is off your credit report, how did Quicken know about it to deny you a loan?
 

pelicanz

LoanSafe Member
Jul 17, 2012
33
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Jzone - I paid off the balance in full with the original creditor with a 10% discount. Tried to settle for years but had too much equity. An old FHA case number that was "tied up" with another lender had to be released so they could refinance - that case had a comment that I was paying for less than the full balance at one time on another mortgage. You can only have one "open case" with FHA - and for some reason a lender I got a rate quote from last month month had opened a case. The current lender is stating that since there was activity after the charge-off it complicates the situation. Seems like I would have been better off not paying the second mortgage at all but that would have been risking forclosure - punished for trying to do the right thing. I'm wondering how I can get those comments on my FHA case history deleted in case I have to start over. Seems like the FHA keeps more information on you than the credit bureau.
 

OneHugeMess

LoanSafe Member
May 30, 2016
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I'll let you in on a secret. Quicken Loans loves to push borrowers into FHA loans, because they have slightly higher margins, and the qualification standards are far weaker than Conventional Fannie & Freddie. It's there "Go-To" and their Loan Officers basically do not steer far from it, ever.

Assuming two things. If your DTI is somewhat Normal and under 46%, and your mid-score FICO is actually 680, here is what I would do. Go online, and apply at LoanDepot & Guaranteed Rate. When they assign you a loan officer after filling out the application, tell them, you want a conventional fixed rate loan, not a FHA, and you do not care if the interest rate is slightly higher. If they ask why -- say "I do not want to pay PMI, or the funding fee" -- I want a conventional, fannie mae or freddie loan. Be stern. You do not need, or probably want a FHA loan.

So long as the lien is released, and there is nothing reporting on your credit report, the Fannie Mae Software (Desktop Underwriter) will never bring it up, and your loan should close -- assuming the DTI & FICO is good. Underwriting shouldn't ask a word, and truly, I do not even see this as dishonest, since you actually paid off the 2nd Mortgage.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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San Diego, California
www.loansreduced.com
Hi Pelicanz,
We have no problem refinancing borrowers that have charged off liens. As a matter of fact, I do it all the time even for homeowners where the liens still exist. I've refinanced and paid them off in full or even if the lien holder agrees to a lower amount. I have one borrower right now negotiating with the lien holder trying to get them down before we do a cash out refinance and pay them off.

Reason I'm saying the above is because if I'm able to refinance someone with an active charged off lien that hasn't been settled (of course charged off for 4+ years), I shouldn't have a problem refinancing your mortgage either.

Please give me a call and we can go over a couple different options: 619-379-8999 or [email protected]
 

lizptrsn

LoanSafe Member
Oct 11, 2019
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1
I have a HSBC second mortgage havent paid since 2011 and have not received anything from them. I did file bankruptcy in 2010 but did not bankrupt the debit. My spouse also on the loan did not file bankruptcy in 2010 but did in 2014 but listed to reaffirm the debit but we could not get any response from HSBC. The loan has not been on our credit report for years. We would like to be able to refinace, can we do that? What happens with that? We would negotiate with HSBC from previous threads I'm not sure where people are with it. Have you refinanced anyone with a HSBC second? Please let me know.
 

Jzone

LoanSafe Member
Jun 20, 2017
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I have a HSBC second mortgage havent paid since 2011 and have not received anything from them. I did file bankruptcy in 2010 but did not bankrupt the debit. My spouse also on the loan did not file bankruptcy in 2010 but did in 2014 but listed to reaffirm the debit but we could not get any response from HSBC. The loan has not been on our credit report for years. We would like to be able to refinace, can we do that? What happens with that? We would negotiate with HSBC from previous threads I'm not sure where people are with it. Have you refinanced anyone with a HSBC second? Please let me know.
Why did you not include the second mortgage in bankruptcy? Even though that debt is not on your credit report, it is still owed to someone-probably been sold/assigned a few times by now. And more than likely there is still a lien on the property.

Go to your county clerks office and see who holds the lien. That is your starting point to see who you have to negoitate with to release the lien and refinance
 
L

Liz Peterson

Guest
I listed it as secured debit on my bankruptcy. I can look it up online took a minute to find by HSBC a successor trustee Clear Recon in April of 2018 then did a deed of reconveyance the same day. What does the deed of reconveyance mean?
 

OneHugeMess

LoanSafe Member
May 30, 2016
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Deed of reconveyance means the lien itself, has been released and marked as satisfied. Sounds like HSBC forgave the loan.
 

Jzone

LoanSafe Member
Jun 20, 2017
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I listed it as secured debit on my bankruptcy. I can look it up online took a minute to find by HSBC a successor trustee Clear Recon in April of 2018 then did a deed of reconveyance the same day. What does the deed of reconveyance mean?
That would be great news! However, check with your county register of deeds. If the lien has been released, it will be on file and you will want a copy of it.
 

andrealeepl

LoanSafe Member
Oct 22, 2019
4
2
3
I have a very similar situation to Liz Peterson - however we are already trying to refi , our title report shows our dormant second and I have been getting sporadic updates from the trustee/noteholder, they are forwarding the updates from Ocwen/PHH- one from today is below in italics;
We will need to clear chain of title prior to executing lien release, this loan is outsourced for chain of assignment as last holder in non-POA entity. Will keep you updated.
Is clearing chain of title something we can work on on our homeowner end? Outsourced? What could that mean??
 

Jzone

LoanSafe Member
Jun 20, 2017
166
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I have a very similar situation to Liz Peterson - however we are already trying to refi , our title report shows our dormant second and I have been getting sporadic updates from the trustee/noteholder, they are forwarding the updates from Ocwen/PHH- one from today is below in italics;
We will need to clear chain of title prior to executing lien release, this loan is outsourced for chain of assignment as last holder in non-POA entity. Will keep you updated.
Is clearing chain of title something we can work on on our homeowner end? Outsourced? What could that mean??
If the bank you are refinancing with cant tell you what this means, I would look for a different bank.

Liens dont go away easily, especially on a second mortgage that has been sold/assigned/transferred/etc.. Somebody wants to get paid first.
I am not sure, but it could be that there are some discrepancies in the sequence of transactions when the liens have been assigned and recorded at your county clerks office. Again, your bank refi contact person is who should be answering any questions you have.
If the chain of title cant be cleared, you probably would need to file a quiet title claim (not a quit claim), and have it settled in court. A quiet title claim takes about 6 months to complete. Anyone who "may" have a claim to your property must be notified and present their evidence in court as to why they "think" they have a claim in the first place.

If you can prove otherwise, the judge will "quiet" the title. In other words, to quiet the title means to quiet any claims against the property.
 
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Stephenhaven

LoanSafe Member
Feb 26, 2019
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Refinancing is basically the process of replacing an existing mortgage with a new loan. Refinancing your mortgage can be a good or bad idea, depending on your situation. Most lenders require a minimum credit score. Federal administration programs typically have lower minimums, although their lenders can insist on higher credit score requirements for some borrowers. You can also take advice from prestige or contact Prestige Capital Corporation.