Second Mortgage Charged Off in 2012 - Lien Still Held by Credit Union

NewbieFed

LoanSafe Member
Jun 6, 2011
86
3
8
I owe $530K on the first mortgage on a house that is located in Maryland. The house is listed around $420 - $456K. I had a second for $60K with a credit union that I stopped paying on in 2012 and it was later charged off. I was finally able to obtain a modification in 2015 even though the second mortgage had been charged off. In 2018 I called the credit union trying to settle with them only for them to tell me to take a loan out or pay them $15,000. Of course I could not afford to do this and they refused my $5000 offer to settle.

Would anyone know why this credit union has chosen to retain the lien and not sell it to a debt collector? I'm sure I am better off by the credit union retaining the debt without being hounded by a debt collector. I have considered bankruptcy but I would rather not. I have about $100,000 in student loans and I am self-employed. My ex was removed with a QUIT CLAIM DEED and I am the only one on the deed. I would like to add my second wife to the deed but don't want to at this point due to there being a second lien on this home.

Does anyone know if the credit union can still sell my debt or is it too late for them to collect on it due to a statue of limitations (SOL) in Maryland? I've read that some that states don't have a SOL and I'm unsure if Maryland has one or not.

I would appreciate any input possible on my situation. I am trying my best to continue my mortgage payments but it is getting harder due to COVID-19. Thank you.
 

Jzone

LoanSafe Member
Jun 20, 2017
204
28
28
70
First thing to do is find out what Maryland SOL is. Im in one of those states, Michigan, which does not have a SOL on real property. Also go to your county register of deeds and see who the lien holder is. You may be able to look this up online also.

Since you havent filed bankruptcy, the loan and the lien are both valid. Charged off means nothing to you, only the bank for accounting purposes. They can sell or assign it or simply keep holding it. Lien holders, like your bank, know they will get paid eventually.
Till recently, with the coronavirus, most home prices were increasing, so no need to settle outstanding debt if the value of the home was going up.

Their offer to settle for $15,000 was actually pretty good. Thats 25% of the balance. Most debt collectors in the last year were not settling for less than 50%.

If you are current on your first, I would keep paying that, but since its the same bank that holds your second, I would contact them again for a settlement. Who knows, with the economy in a downturn, they may take anywhere from $5000-$15,000.

Filing bankruptcy probably isn't the best move for you. Student debt will not be discharged and you've already defaulted on your second mortgage. The best you could get out of bankruptcy would be release of the mortgage debt, but the lien would remain and they could still collect on the lien.

All of my experience is from filing Chapter 7. 1st and second mortgage discharged, but kept paying on the first to keep the house. That was 9 years ago. 2nd mortgage lien was assigned to a debt collector. I have no intention of selling or refinancing any time soon, so I just keep paying the first. If I sell or refinance, that second lien will have to be settled.

Debt collector can not collect on the debt since it was discharged in Chapter 7, but can foreclose on the property since they hold the lien. Very unlikely here in Michigan as the second lien holder also has to pay off the first mortgage to initiate foreclosure proceedings.
 

NewbieFed

LoanSafe Member
Jun 6, 2011
86
3
8
Jzone, thank you for your reply. I was wondering why the credit union was holding onto it and not selling it. As you can see my house is underwater by about $80-$100K or more so I am in good shape there. No one would try to foreclose in these circumstances on me if they were to be assigned the second lien. I'd really like to know though if MD has a SOL on real property. If they do I can't do anything about it, but if they don't, then what happens? The credit union does not own my first mortgage. I guess that is good. I will continue to pay my first as I am supposed to receive a "$5000" principal reduction at the 5 year mark which is in August 2020. Not a lot of reduction but better than anything. I will take your advice and look into the lien. If I could get the credit union to settle for $5000 I will take that offer! I don't want to see the property at this time and look forward to holding onto it as long as I can. When your 2nd mortgage was assigned/sold to a debt collector, have they come after you? Can they actually take you to court if you refuse to pay what they want? Can you tell me how much your second was? Just for my knowledge to understand what you're going through if my credit union does this to me. I guess if they try to sue you it's useless because they know they'd have to pay off your first mortgage. Is your house underwater too?
 

Jzone

LoanSafe Member
Jun 20, 2017
204
28
28
70
Jzone, thank you for your reply. I was wondering why the credit union was holding onto it and not selling it. As you can see my house is underwater by about $80-$100K or more so I am in good shape there. No one would try to foreclose in these circumstances on me if they were to be assigned the second lien. I'd really like to know though if MD has a SOL on real property. If they do I can't do anything about it, but if they don't, then what happens? The credit union does not own my first mortgage. I guess that is good. I will continue to pay my first as I am supposed to receive a "$5000" principal reduction at the 5 year mark which is in August 2020. Not a lot of reduction but better than anything. I will take your advice and look into the lien. If I could get the credit union to settle for $5000 I will take that offer! I don't want to see the property at this time and look forward to holding onto it as long as I can. When your 2nd mortgage was assigned/sold to a debt collector, have they come after you? Can they actually take you to court if you refuse to pay what they want? Can you tell me how much your second was? Just for my knowledge to understand what you're going through if my credit union does this to me. I guess if they try to sue you it's useless because they know they'd have to pay off your first mortgage. Is your house underwater too?
I get a letter once or twice a year from the 2nd lien holder. Original debt was around $50,000. They have sent settlement offers anywhere from $20,000 to $60,000 (supposedly adding fees and interest). I only communicate with written replies, never email or phone calls. That way every conversation is documented.

I always reply to their offers with my own counter offer of 10% and never hear back. They have not requested a payment or threatened to foreclose in close to 9 years now. Legally, they are not attempting to collect a debt, they are attempting to enforce a lien. My home has not been underwater for about 4 years now, but they have not increased any attempts to foreclose.

With the coronavirus pandemic happening, I think most debt collectors are in a sit and wait period. In my case, since they hold the lien, they know I cant sell or refinance without the lien being released. So they have the ability to wait it out, and I have the ability to just keep paying my 1st and not worrying about foreclosure.
 

NewbieFed

LoanSafe Member
Jun 6, 2011
86
3
8
Sounds good then. Especially if you don't intend to sell the house as I don't intend to sell. Heck, I'd probably have to do a short-sale or some other crazy move if I were to do that. I don't believe my credit union has been adding any interest or fees to the second lien as I have never seen the balance change. I guess we'll both wait to settle. I'm thinking as you are, this might be the best time to try and settle due to the pandemic. On a seance note, do you think you'll be able to take advantage of the proposed "H.R.6515 - Rent and Mortgage Cancellation Act of 2020?" (https://www.congress.gov/bill/116th-congress/house-bill/6515/text?q={"search":["Rent+and+Mortgage+Cancellation+Act"]}&r=1&s=1) I'm not sure if it will be passed, but if it does pass it might be good to jump on it. The one question I have is the wording and definition of "Covered Residential Mortgage Loan under SEC. 7. DEFINITIONS. : "(2) COVERED RESIDENTIAL MORTGAGE LOAN.—The term “covered residential mortgage loan” means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on residence consisting of a single dwelling unit that is occupied by the mortgagor as a primary residence". You know how we non-Fannie Mae or Freddie Mac mortgages have been screwed over because we were not able to easily get any HAMP, HEMP or whatever relief most people were eligible for? Well, does this sentence mean ALL residential mortgages according to the definition? I surely hope so and I hope they could not and would not penalize us with reverting back to the old terms of the mortgage.
 

NewbieFed

LoanSafe Member
Jun 6, 2011
86
3
8
I get a letter once or twice a year from the 2nd lien holder. Original debt was around $50,000. They have sent settlement offers anywhere from $20,000 to $60,000 (supposedly adding fees and interest). I only communicate with written replies, never email or phone calls. That way every conversation is documented.

I always reply to their offers with my own counter offer of 10% and never hear back. They have not requested a payment or threatened to foreclose in close to 9 years now. Legally, they are not attempting to collect a debt, they are attempting to enforce a lien. My home has not been underwater for about 4 years now, but they have not increased any attempts to foreclose.

With the coronavirus pandemic happening, I think most debt collectors are in a sit and wait period. In my case, since they hold the lien, they know I cant sell or refinance without the lien being released. So they have the ability to wait it out, and I have the ability to just keep paying my 1st and not worrying about foreclosure.
JZONE, I was able to settle this debt for $7999. Finally the lien will be removed from my home. I thank everyone on this site for helping me strategize this move. I do believe because of the Pandemic that it helped me resolve this issue. Others out there in my situation should consider doing the same. Good luck to everyone.
 

Jzone

LoanSafe Member
Jun 20, 2017
204
28
28
70
JZONE, I was able to settle this debt for $7999. Finally the lien will be removed from my home. I thank everyone on this site for helping me strategize this move. I do believe because of the Pandemic that it helped me resolve this issue. Others out there in my situation should consider doing the same. Good luck to everyone.
Thats good news! I have been tempted to contact my lien holder during this pandemic also. I've never done that before, always waited for their usual letter in the mail and then replied.
Was there any negotiation on your settlement or did they simply offer to settle for $7999 and you said yes?
 

NewbieFed

LoanSafe Member
Jun 6, 2011
86
3
8
I would check my property’s worth and determine if the property is underwater. I’m sure you already know by now. They’ll want to know why now at this time you want to settle. They want to know so they can exploit that for their good and to squeeze more out of you. So, if you just want to get rid of the lien to make yourself feel better they won’t have much to pressure you with. But, if you’re wanting to sell then they’ll push for more. They’ll want to know if you’ve listed your property. If you have you might have a harder time settling for a lower number. For me my property is underwater, I’m not selling and they know I could sit on this lien forever. I firmly believe this and the Pandemic helped. Just call their loss mitigation section and make them an offer. They’ll want to know what you can pay and when you can pay it. They’ll also want to know where you’ll get the money from. I wish you the best of luck.
 

faroff

LoanSafe Member
Jul 16, 2012
56
1
8
Hi- If you don't mind me piggy backing off this post. My situation is 10 years ago I filed for BK. Unfortunately
I did not have it discharged. Fortunately the BK and the debts have fallen off my credit report. However I had
a loan with the SBA and they did come after me. I didn't have many at the time and paid what little I could on a
payment plan to them, but after just a few months I stopped. To this day I have not heard a word from them. So
my question is I don't know if they put a lien on my house or not. Is there a way to find out for sure r do I need a full
Title Search from an attorney?
 

NewbieFed

LoanSafe Member
Jun 6, 2011
86
3
8
faroff, you should go to your State or County online system showing deeds and liens. There you can see if there are any liens on your home. If not, physically go to the court house and ask if there are any liens on your property. No need to pay hundreds of dollars to an attorney, unless you find a lien and want to negotiate it. An Enrolled Agent at a CPA firm can also negotiate with the ITS on your behalf. Good luck and let us know what you find out.
 
  • Like
Reactions: faroff

faroff

LoanSafe Member
Jul 16, 2012
56
1
8
faroff, you should go to your State or County online system showing deeds and liens. There you can see if there are any liens on your home. If not, physically go to the court house and ask if there are any liens on your property. No need to pay hundreds of dollars to an attorney, unless you find a lien and want to negotiate it. An Enrolled Agent at a CPA firm can also negotiate with the ITS on your behalf. Good luck and let us know what you find out.

Thanks so much. Do you know where I could start the search online for State or County system? What would I google to find it?