Strategy for Settling Your 2nd

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TomEason

LoanSafe Guide
Jun 18, 2009
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Do you negotiate 2nd's for a living, or do you have this knowledge through personal experience, or have friends/associates that have done it this way. Everything stated makes complete sense and the section pertaining to negotiation is dead on. Part of my job is negotiating very large $$$$$ Contracts.
trouble
LOL, no I don't negotiate 2nds for a living. Coming from a professional negotiator like yourself though, your approbation of the listed negotiation tips is meaningful. And, I do have negotiation experience in my own dealings, not only with my lenders, but in other real estate dealings.
 

TomEason

LoanSafe Guide
Jun 18, 2009
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SF Bay Area CA
Tom,

This is very well outlined. I settled my HELOC with WF for 20% over 6 months. They probably would have taken a little less in cash, but I needed to pay as I made the money. In general terms, I followed a similar path as you. First they overnighted me an offer of 60%, 50% at chargeoff and 30% following. I offered 10, 15, 18 and reached an agreement at 20%. In my State, this is subject to judgment so it was important to me to settle--as bankruptcy was not an option.

I will say that I did talk with them regularly. It did not hurt, but may or may not have helped. It certainly would have been easier to just avoid them and in the end, that is probably as good of advice as we could give.

I am often asked for private/personal advice on this subject. While I tend to give it, I always am sure to point out that I do not support strategic default for profit and assume the other party is under a hardship or please don't ask. I settled over $350k total as a result of a divorce and the economy.
dantheman
Thanks so much for sharing your personal experience in settling with WF (who, by the way, is not one of the most pliable lenders). Glad to know that speaking with them was not an apparent disadvantage. And, thanks for your kind remarks. To your point, I don't proclaim to always be right, by any means. After all each lender has it's own "personality" and internal SOPs. I'm glad you were able to get through your situation with an acceptable settlement.
 

dantheman

LoanSafe Member
Jul 5, 2010
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Just one more thing...

I will add that posts such as yours make this forum more valuable than others, by far. I am a member of a debt settlement board that is strong on the credit card settlement, and really helped me out with my credit cards and sba loan. However, they are full of spam and stupid (and I mean stupid) posts and questions.

Hope they don't start charging admission here lol...
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
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SF Bay Area CA
Hey tomeason; I made the mistake of sending in a hardship letter, bank statements and pay stubs to CLC shortly after I closed on a short sale, that was back on November 2nd, 2010. I was not reading this blog than. I have not heard from them since, not a peep. Is it too late to use your strategy if and when they get back to me. Moreover, do you have any idea what they might up to not hounding me. Back in Novemeber they seemed "hot to trot" I owe 43K and CLC was willing to settle for 13K and I offered 4K and they countered with 6K. This all during the one and only conversation that I had with them. I have not since received a letter, call or anything from them in 3 months. Another question, that charge off is setting there on my CR. Can they keep resubmitting it everytime they call or does it have to go to a collection agentcy for me to take another hit on my report.

thanks, any advise, input as to what my next move would be if CLC calls.
shobam
Let me take the easy part first. Reference your credit file. if CLC charges off the loan AND sells it, then the CLC credit entry should show a "0" balance, and the new debt owner would show the balance owing. However, if the loan is charged off, but not sold, then CLC can still show the balance owing, and the number of days late. A derog can stay on the credit file for as long as 7.5 years after the date of the last activity (meaning usually the last payment, or the debtor's admission of the debt - called "refreshing the debt").

As for your other question, let me clarify. Did you already sell the property short? Assuming the answer is yes, and you therefore no longer own the property, debt settlement is not only unimportant; it's most likely irrelevant. Why? Because CLC is now the proud owner of an unsecured debt. That debt is legally worthless, but may have some economic value if CLC decides to sue you. Before an unsecured creditor sues, it usually performs a pre-litigation analysis to determine if it's worth it. CLC may determine that you don't have assets to attach, and thus a judgment would be an "empty judgment," meaning there's nothing to collect against.
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
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SF Bay Area CA
Tomeason -Given I am one of the individuals who has been seeking your counsel as I'm in the middle of it, I thank you for giving a step by step process. I copied and pasted the info on a document for quick reference, I advise others to do the same. And because I'm in the hurry up and wait mode, I can refer back to what you wrote for assurance. I never intended not to pay my debt (the 2nd) even though I'm underwater but unemployment knocked at my door so now I pray and truly trust God for help and victory as I have the confidence in Him that truly all things work together for good for those who trust Him! Thanks tomeason and this forum for being a part of our solutions and help in time of need :)
lynnd
Thanks for your kind remark, and I'm glad you find value in this settlement guidance. Please don't feel alone - all of us on this forum are wishing we were in a better situation. I know you're taking solace through your connection with others here, and with your faith. Hang in there!
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Tomeason, I have read many of your post's offering advice on this issue. I am so glad the forum has someone of your stature to help push us along. I am in the process of beeing foreclosed upon by my loan servicer. I also have a second (construction loan) that I was not sure how to dispose of. Your advice gives me a realistic plan that I can follow and know what is supposed to happen at each step of the process. I can not thank you enough for your kindness and dedication to helping us understand the options we have.

My wife and I wish you the best.
smalltownblues
Thank you kindly for your confidence in my opinions. I wish you and your wife the very best. FYI, should your 1st lender foreclose, your 2nd will be wiped out and become a "sold-out junior." So, you may need never worry about settling with that lender. Though, if a recourse loan, they aren't legally barred from suing you, but it just doesn't seem to be happening anywhere. That could change in the future, and if you ever do get sued, it won't be too late to enter settlement discussions.
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
I will add that posts such as yours make this forum more valuable than others, by far. I am a member of a debt settlement board that is strong on the credit card settlement, and really helped me out with my credit cards and sba loan. However, they are full of spam and stupid (and I mean stupid) posts and questions.

Hope they don't start charging admission here lol...
Thanks for that observation, dantheman!
 

lostintheshuffle

LoanSafe Member
Feb 3, 2011
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Strategy for settling heloc querie

if the lender values the property for more than than the 1st and HELOC combined, is it still possible to negotiate a settlement on the HELOC due to significant change in financial situation; loss of business and most other assets?
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
if the lender values the property for more than than the 1st and HELOC combined, is it still possible to negotiate a settlement on the HELOC due to significant change in financial situation; loss of business and most other assets?
lostintheshuffle
Anything is possible. However, if the lender believe there's equity in the property, then a settlement seems less likely. However, if you disagree with the lender's value assessment (that it's too high), it might behoove you to convince the lender otherwise, with supporting documentation like a real estate broker's CMA, or an appraisal. The less equity, the more advantageous for your settlement probability. What you describe as a change in financial situation would be classified as a hardship. A hardship could prove advantageous, particularly if you can convince the lender you have few assets to drawn on now.
 

shobam

LoanSafe Member
Nov 25, 2010
373
1
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Massachusetts
shobam
As for your other question, let me clarify. Did you already sell the property short? Assuming the answer is yes, and you therefore no longer own the property, debt settlement is not only unimportant; it's most likely irrelevant. Why? Because CLC is now the proud owner of an unsecured debt. That debt is legally worthless, but may have some economic value if CLC decides to sue you. Before an unsecured creditor sues, it usually performs a pre-litigation analysis to determine if it's worth it. CLC may determine that you don't have assets to attach, and thus a judgment would be an "empty judgment," meaning there's nothing to collect against.

Yes; the house in question was sold in a Short Sale, it was my home for years than it became a second when I got married. We rented it, let people stay there in barter for work and what not, did that for 6 years. Was underwater to the toon of 80K when sold. CLC took 7.5K of 49K at closing then held me up for the rest (43K). Not heard from them in months. did sent in financails back in Nov 2010. Do i apply this strategy next time they call. do you think that my position is better/worse than someone with a second and still in the house or a hounse in process? any input would be welcome.

thanks

Did a "copy & Past of the guildline and i have it on the phone table at home in front of my chair!
 
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lindaneedsalifebutIamold

Guest
Tomeason,

As you might know, I recently rec'd a HAMP mod on my 1st. I am now trying to decide what to do with my 2nd.

House is in California
1st HAMP balance = 238,000
2nd HELOC = 140,000 (have been paying IO for 5 years)
House value from Zillow = 435,000 to $450,000, HOWEVER, there is a short sale in the area that will probably lower the value of my house about $40,000 - $50,000 since it is selling for about $75k lower than the last comp.

I was thinking that I would get the 2MP (eventually), but I'm wondering if it would make more sense to try and have the loan charged off and negotiate the 2nd. I'm thinking that it would probably take 5-6 mos before the 2mp happened and in the meantime, the value of my house is going down and reports are that 2011 will be the worst for foreclosures. I'm wondering if I could possibly negotiate better terms than the 2MP.

Any thoughts on this? I've decided that it can't really hurt me to stop making payments at least until the 2MP comes through. If the 2MP will mirror my HAMP as they say, it will kick it out to 37 years which is such a long time, would much rather try to negotiate it and pay a small percentage to get it off my back.

Any insight or thoughts you (or anyone from this forum) can give will be greatly appreciated!!
 
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lindaneedsalifebutIamold

Guest
Also, so far BofA, who has the HELOC, has not rec'd the info on HAMP from WF that has the 1st HAMP
 

spiker54

LoanSafe Member
Dec 10, 2009
112
1
16
I guess my concern would be....what if the lender decides to hold on to the loan until prices increase (because my note is in an investment pool), adding interest on top of the loan, and then forecloses down the road after all. My credit has been screwed up the whole time, which would affect my ability for decent insurance (CA is the only state that prevents this and I'm not in CA right now) and getting a job. There's no time limit, right? My 2nd is insured, so would the insurance co pay off the "pool" and then sell off to a collections agency?
 

facha

LoanSafe Member
Dec 1, 2010
411
2
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Florida
Also, so far BofA, who has the HELOC, has not rec'd the info on HAMP from WF that has the 1st HAMP
Linda1961, what you are trying to do might not work because of the value of your house, even if it drops by 40K - 50K. Here is the math, both loans are $378,000 current lower value minus $50,000 is still $7,000 in equity. Obviously it's your decision to make but I think it's very risky. With the 2MP your interest goes down to 1%, for now, I would suggest you make the payments until you get the 2MP. That will come automatically when your 1st goes on the list that the lenders match up. I think it's called LPS, not sure. Of course this is assuming that you want to keep your house.
 

stuckie

LoanSafe Member
Jan 12, 2011
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1
Thank you for posting this

TomEason,
Thank you for this valuable resource. I am trying to figure what to do in our situation.

We filed chapter 7 last summer and it has been discharged. First mtg WF is current, second with SLS (GMAC second mortgage) is 5 months behind. Neither was reaffirmed. It has been a struggle so we stopped paying the second mortgage. Our SLS loan has a balance of 90k and I would say property has residual value after payoff of the the first of between 20k and 50k. Not sure what to do. They sent us a breach letter last month and we have until next week to catch it up. I just worry that we might have enough equity that they wouldn't want to settle.
 
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lindaneedsalifebutIamold

Guest
Facha,

Yes, I do want to keep my house. I have decided not to make payments because they put me on a 3 month lowered payment schedule for the unemployed where I only pay $25/mo but the guy said it's just like the HAMP in that I would still be considered behind and when 2MP comes in, I would have to make trial payments anyways.

I've kind of heard on this forum that the 2nd never forecloses, so I thought maybe they would negotiate a settlement if I went behind. LPS has not notified them of my HAMP yet and I understand it could take several months. I guess I'm just getting greedy. Sure would love to get rid of my second all together.
 

facha

LoanSafe Member
Dec 1, 2010
411
2
0
Florida
Facha,

Yes, I do want to keep my house. I have decided not to make payments because they put me on a 3 month lowered payment schedule for the unemployed where I only pay $25/mo but the guy said it's just like the HAMP in that I would still be considered behind and when 2MP comes in, I would have to make trial payments anyways.

I've kind of heard on this forum that the 2nd never forecloses, so I thought maybe they would negotiate a settlement if I went behind. LPS has not notified them of my HAMP yet and I understand it could take several months. I guess I'm just getting greedy. Sure would love to get rid of my second all together.
I can understand that you are anxious to get this mess over with. Again, be careful about the 2nd, as you will read most of the 2nds that are in collections, charged-off, settlement negotiations are under water. Your lender has no reason to let you settle for a fraction of the value if you have the equity. It's a pain in the neck to constantly have to wait and wait and wait, which the banks couldn't care less about. It just wears us down, the 2MP should be done quicker than it is. Trial payment on the 2MP are only required if you are late otherwise it's permanently modified right away.

Please don't make a hasty decision before you have thought it through.
 

smalltownblues

LoanSafe Member
Jan 6, 2011
166
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Thank you kindly for your confidence in my opinions. I wish you and your wife the very best. FYI, should your 1st lender foreclose, your 2nd will be wiped out and become a "sold-out junior." So, you may need never worry about settling with that lender. Though, if a recourse loan, they aren't legally barred from suing you, but it just doesn't seem to be happening anywhere. That could change in the future, and if you ever do get sued, it won't be too late to enter settlement discussions.


Yes, the second is a recourse loan. The SOL for written contracts is 6 years in AZ. Although I have not decided what to do, 6 years seems like a long time to wait it out. In another thread I had asked about my situation, but can't seem to find it. Regardless I have another question that falls in line with the topic of this thread.

We recently purchased a second home and moved to another part of the state. We are renting the house in question but are not making enough to cover the full mortgage payment. We are in the early stages of requesting a loan modification. It's not likely to happen since the home no longer our primary residence but we feel that we have to at least try. So it's just a matter of time before the first forecloses.

The servicer for my second recently made a settlement offer. The home has not gone into foreclosure and we are only 90 days late. Is now too soon to start negotiations for settlement? Should we wait untill it is charged off...or wait for the foreclosure to happen...?

This is our situation as it stands today;
$230k owed (1st $200k non-recourse, 2nd $30k) home is in AZ
$70k value (recent sold comps) ...yeah the second is definitely dead in the water!
90 days late on both

Oh and BTW, my wife thought the settlement offer was quite fair untill I showed her your post. She said she felt a great sense of relief after reading your post and said that it was spot on.

Thanks in advance.
 
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