Start The Refi Process On The First Mortgage, Would Citi Then Contact Me?

MNTwinsfan

LoanSafe Member
Feb 13, 2013
24
1
3
If we started the process of refinancing our first mortgage with B of A, would that prompt Citi to contact us and do you think they would then possibly negotiate a settlement on our second that was discharged in 2010 BK 7?
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,799
456
1,000
48
Southern California
www.loansafe.org
Citi Mortgage would not be notified until later on toward the end of the mortgage process for payoff information. I'm not sure if they will contact you once this happens, but you will have to deal with them in order to get the lien released.

Have you tried contacting them to settle?
 

MNTwinsfan

LoanSafe Member
Feb 13, 2013
24
1
3
I have been following the steps to settlement. At this point I don't know who actually has my second. So I am not sure who to contact.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,040
160
63
San Diego, California
www.loansreduced.com
Does your current lender doing the refinance know about this 2nd lien? Be careful, a lien affecting title may prevent your ability to refinance. If they currently hold 2nd position they will not subordinate if you're behind on the loan.

I would really make this clear to the loan officer you're working with...especially prior to paying any out of pocket expenses like an appraisal. Obtain full loan approval before doing any of that.

As far as answering your initial question, Moe was right on the money - they will not know until they receive a subordination request or payoff if obtaining a cash out refinance to pay them off.
 

MNTwinsfan

LoanSafe Member
Feb 13, 2013
24
1
3
Filed BK 7 in 2010, did not re-affirm either mortgage. Bank of America is the first position and have kept payments current to stay in house. CitiMortgage is in the second position and stopped payments back in 2012 (following the settlement steps). Haven't heard a word from Citimortgage in 6 years. Last time I checked with the county they told me there were two lien holders on the property. I checked with the county today and they tell me there is only Bank of America listed as a lien holder. Anyone know what happened to the second lien holder. Haven't received any kind of notice from Citi or anyone else stating that the second was forgiven, written off or that the lien was taken off.
 

MNTwinsfan

LoanSafe Member
Feb 13, 2013
24
1
3
Filed BK 7 in 2010, did not re-affirm either mortgage. Bank of America is the first position and have kept payments current to stay in house. CitiMortgage is in the second position and stopped payments back in 2012 (following the settlement steps). Haven't heard a word from Citimortgage in 6 years. Last time I checked with the county they told me there were two lien holders on the property. I checked with the county today and they tell me there is only Bank of America listed as a lien holder. Anyone know what happened to the second lien holder. Haven't received any kind of notice from Citi or anyone else stating that the second was forgiven, written off or that the lien was taken off.
Some more information. I did a credit report check in December of 2017 and neither mortgage is listed.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,040
160
63
San Diego, California
www.loansreduced.com
I just dealt with a client with a very similar situation and spoke to a Citi exec regarding this as a matter of fact. Here's the likely situation, the lien still exists on the property and is still being held by Citi. If you haven't received a 1099C (cancellation of debt) the mortgage could very likely be charged off but because it was included in BK we wouldn't know the status of it until having title do the research.

Bankruptcy will remove the item from your credit report entirely which means that you are no longer personally liable for the debt however the property is (including the 2nd lien).

What is your plan for right now or goals?
 

MNTwinsfan

LoanSafe Member
Feb 13, 2013
24
1
3
We were possibly looking at a refi to lower our rate if possible and also get the mortgage situation squared away. Would like to have one current mortgage and not have the two liens from the BK 7. We aren't sure if we will have to take out a mortgage to cover both liens or if the second lien has been canceled and need to refi for just the lien to B of A.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,040
160
63
San Diego, California
www.loansreduced.com
I can actually most likely help with that. There's a few borrowers here on LoanSafe I have been able to do a regular conventional refinance with a 2nd lien unpaid/charged off. In their case they were threatening foreclosure.

I'd love to chat more in detail, can you either give me a call or shoot me an e-mail when you get a chance? I would say the best thing to do in your situation is get an approval in underwriting prior to ordering an appraisal and paying any money out of pocket to ensure you're going to get the loan and also what you're looking for (terms...etc). E-mail: [email protected] or 619-379-8999
 

Jzone

LoanSafe Member
Jun 20, 2017
148
15
18
69
Filed BK 7 in 2010, did not re-affirm either mortgage. Bank of America is the first position and have kept payments current to stay in house. CitiMortgage is in the second position and stopped payments back in 2012 (following the settlement steps). Haven't heard a word from Citimortgage in 6 years. Last time I checked with the county they told me there were two lien holders on the property. I checked with the county today and they tell me there is only Bank of America listed as a lien holder. Anyone know what happened to the second lien holder. Haven't received any kind of notice from Citi or anyone else stating that the second was forgiven, written off or that the lien was taken off.
I was in similiar situation with Citi. Went through chapter 7 and did not reaffirm 1st or 2nd. Kept 1st current but stopped paying the second. Took less than a year to have Citi transfer the loan/lien to United Guaranty-a collection agency basically. If you havent heard from Citi in 6 years, I would think the loan/lien would of been sold/assigned to someone.

A few things could of happened to that 2nd lien.
1. Citi still has it
2. They sold/transferred it to some other bank/collection agency.
3. Citi released the lien but never recorded the release with your county register of deeds. (unlikely, but has happened)

The discharged loan has no dollar value, but of course the lien remains and can be sold or transferred. In my case, United Guaranty has the lien and contacted me about 2 months after they got it. That was more than a year ago. I made an offer of 5% of the balance to settle and they said no.

Im in no hurry to sell or refinance. So Im just waiting it out. Bankruptcy wiped out the loan, so Im not worried about the debt. Of course I would like that 2nd lien released but will wait for them to contact me.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,040
160
63
San Diego, California
www.loansreduced.com
That's exactly the other option to pursue, leave it alone.

Jzone, this is something I don't personally know as I'm not a BK attorney/real estate attorney but would you happen to know if the 2nd can exercise their right to foreclose on a home where the lien was included in BK? Let's say even if they were to pay off the 1st lien?

I'm starting to receive a lot of calls regarding this with people getting threatened by 2nd lien holders, even some very interesting situations where the borrower is claiming identity theft and fraud (loan opened by loan officer without her knowledge supposedly). These lien holders are scaring the daylights out of some of our members by saying they will pay off the 1st lien and FC. Now I'm not sure if I've ran across a situation where it was included in BK yet but I'm sure I will at some point.

Thoughts?
 

Jzone

LoanSafe Member
Jun 20, 2017
148
15
18
69
That's exactly the other option to pursue, leave it alone.

Jzone, this is something I don't personally know as I'm not a BK attorney/real estate attorney but would you happen to know if the 2nd can exercise their right to foreclose on a home where the lien was included in BK? Let's say even if they were to pay off the 1st lien?

I'm starting to receive a lot of calls regarding this with people getting threatened by 2nd lien holders, even some very interesting situations where the borrower is claiming identity theft and fraud (loan opened by loan officer without her knowledge supposedly). These lien holders are scaring the daylights out of some of our members by saying they will pay off the 1st lien and FC. Now I'm not sure if I've ran across a situation where it was included in BK yet but I'm sure I will at some point.

Thoughts?
Probably just a scare tactic used by debt collectors. I can only tell you what foreclosure law is in Michigan. The 2nd lienholder has foreclosure rights, but is paid after the 1st gets paid, but also has to also pay off the 1st AND get the 1st to agree to a foreclosure in the first place!

For example, if I am current on my 1st and not paying the 2nd, the 2nd could foreclose. Very unlikely to get the 1st mortgage holder to agree to a foreclosure if you are current with them. Why would they take a chance on the foreclosure price being less than what is owed them?

The only way I could see this working is if the balance on the first is very very low. Say only $50,000 is owed on a $200,000 house, then it could probably happen.

Again, Im only speaking from experience in Michigan.

So far my bankruptcy attorney has been 100% right on everything. 1. Don't reaffirm, 2. don't pay the second, 3. keep current on the first if you want to stay in the house, 4. work on settling the second at your convienance.

You know as well as I do that not every story will end happily. I've read several posts on here where there was no settlement and the 1st or 2nd did foreclose. But again, the foreclosure process can take a year or more. Use that money to find a rental home.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,040
160
63
San Diego, California
www.loansreduced.com
Here's a combo question to that - This specific borrower reached out to their 1st lien holder and explained what was going on (they are current on the 1st) and the 1st asked for contact information to reach out to the 2nd lien holder to communicate with them. The borrower did not release any information of the party she has been engaged with. Is this something you would think you be beneficial, to have the 1st lien engage the 2nd or could that be a tactic where the 1st would want to get paid in full and actually work with the 2nd? I guess we won't really know what their intentions are but it was an interesting one that I ran across recently.
 

Jzone

LoanSafe Member
Jun 20, 2017
148
15
18
69
Here's a combo question to that - This specific borrower reached out to their 1st lien holder and explained what was going on (they are current on the 1st) and the 1st asked for contact information to reach out to the 2nd lien holder to communicate with them. The borrower did not release any information of the party she has been engaged with. Is this something you would think you be beneficial, to have the 1st lien engage the 2nd or could that be a tactic where the 1st would want to get paid in full and actually work with the 2nd? I guess we won't really know what their intentions are but it was an interesting one that I ran across recently.
I can see that happening in some cases but probably not working out in the homeowners favor. The 1st really has no incentive to foreclose, unless they simply want to cut the risk of the homeowner not paying them also. After all , the homeowner is not paying on the second, so maybe they wont pay the first either.

Most banks are happy if you keep paying them. They are not in the real estate/foreclosure business. They are in the home loan business and want your money spread out over 15-30 years with interest.

Unless the homeowner is on a really friendly first name basis with a trusty loan officer, I wouldnt try it. Perhaps, the first could negotiate a settlement with the second and then combine that with the 1st for a new loan?

But , like you said, perhaps the first just wants to know how much money the 2nd wants when all the money is divided up after foreclosure. If they come to an agreement, then that would probably accelerate the foreclosure process.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,040
160
63
San Diego, California
www.loansreduced.com
That was my thought also, it was one of those "What if" type situations. You have to wonder what is being said after the phone is hung up. If I hear more about it I'll keep you in the loop.