Success Stories in Settling 2nds

custombuilder

LoanSafe Member
Jul 25, 2013
47
6
8
Northern CA
Well - it would help if you are NOT paying both to show true hardship. I was in a good place in 2012, because back then I was self employed as a 1099 consultant. What I did is I told half my clients to stop paying me for 6 months - this shows I had limited cash flow income. Then I took big chunks of $ out of my bank accounts and put them elsewhere (ie under mattress or in SD box) to show that I had very little money to pay my living expenses, plus my home was barely worth $240k and completely underwater.

I first got my home in April 2006 via two subprime I/O loans (80/20) thru Citywide Mortgage and GMAC (HELOC). The loans were sold off a few times ending with ultimately Bank of America servicing the first note from Countrywide mortgage and SLS.net servicing the HELOC.

Original balances (interest only):
1st mortgage = $333,000 BoA
HELOC = $62,430 SLS.net

My tax assessment for 2012 for my home was $228k and given my loans added up to $395k, I was obviously upside down and unable to refi or get a better loan. My home, at best, would probably short-sell for $240k, but my main intent was to keep my home and get a loan mod with BoA and (hopefully) settle the SLS.net HELOC.

So in the beginning of 2012, I stopped paying both loans in February 2012. I claimed financial hardship with BoA and SLS.net. I applied for a loan mod with BoA and told SLS.net I was not interested in a loan mod of any sort (they will require you to download their forms)...I kept in touch with BoA for purposes of getting a loan mod. However, with SLS.net, I basically ignored all calls and letters and a loan mod offer from them. I missed a total of 11 payments this year for SLS.net.

I missed a total of 5 payments with BoA, and finally in September, BoA offered me a 3mo trial period to qualify for loan modification. I was required and was able to make the 3 payments for oct/nov/dec and just last week, I was given a new loan agreement for the $333k first loan = $98k principal forebearance for 24 years, and new loan made on the remainder starting at 2 percent APR; ; and increasing slightly on an annual basis. At end of 24 years, I will have one balloon payment of $222k which I will have to payoff or refi at that time. And on top of that, I got pay-for-performance principal reductions of $1000/year from BoA for the first 5 years after my mod! (like getting $5k tax free!)

After I got that, I finally called SLS.net (i know these discussion boards say not to call, but it worked for my case). My loan after 6months went to charge off, so my account was sent to their Recovery department. I explained my hardship situation and given that I live in a recourse state, I let SLS.net know that I was not intending to NOT pay them at all - I offered a cash settlement to close out the loan in 2012 and release the lien on my home. All I did was give a verbal offer and the phone rep placed me on hold (to speak to a manager). Within 2min, they counteroffered me $500 higher, and I was able to settle my SLS.net HELOC for $0.12/dollar!!! Not bad for just ONE phone call after over 10 months!!! I paid via check on the phone ($9.95 charge) and I was issued in 2013 a 1099-C for the unpaid amount. I did NOT OWE the income tax on this via the "The Mortgage Debt Relief Act of 2007" since the HELOC was originated solely to obtain the home initially. I had good timing as this relief act was going to be eventually extended up thru 2016 from what I read.

So in the end, I got to keep my home with one modified 1st loan NO more HELOC! The money I saved from not paying BoA for 5 months and SLS.net for 11 months was more than enough to cover my settlement check to SLS.net to eliminate my HELOC and now for the past year, my home has about 3% equity (and I rent it out for a net profit, while I now live in a new home over 2x the size of my previous home). Even after a loan mod, you are able to buy another home provided you show that you have had excellent mortgage payment history for 24 straight months after mod. Hope you all have just as good outcomes with your underwater loans! My guess is that I lucked out because SLS.net was the servicer for my loan, but Wells Fargo was the actual note holder. WF was one of the big 5 banks named on the $25B mortgage relief settlement - Probably why it was pretty easy to eliminate my HELOC... GOOD LUCK with your loan reductions!!!
BONY holds my note which was originated by Countrywide, sold to BOA, then I guess bundled and sold to BONY. Nothing much on here about BONY. I wish BOA still had both of my notes as I hear of settlements all the time with them.
 

Foret

LoanSafe Member
Feb 2, 2016
20
6
3
43
DEMAND to have in writing that the account is "paid in full" or "settled in full" and it is clearly stated that lien will be released on your home. You will then get a 1099 for the unpaid balance. You will have to file this in your tax return for the year they issue it, so you have to push them to settle it in 2016 in order to get the relief for the discharge of indebtedness. You will file this 1099 with your tax return but you are not liable for the income tax from the amount forgiven. I know because 3-1/2 years ago I settled a $62,430 interest-only HELOC from SLS for $7,500 after less than a year of not paying them during my "hardship".
Thanks for the feedback triguy! I am fighting now to get the letter updated to clearly state the info I am asking for. However it's not working as they are adamantly sticking to their "this is a standard letter approved by attorneys" arguments...:-( :-( :-(
 

donnak0811

LoanSafe Member
Mar 11, 2011
61
1
8
Minnesota
Are you saying you had to pay $2000 in income tax for discharge of indebtedness, or your settlement payment to Suntrust was $2000? You should not have to pay income tax on any debt forgiven for real property (i.e. homes).
I did my taxes online on HRBlock website. When I put my info into the system, it came up that I owed $2228.00. I did not question the amount. How could I have gotten out of paying the tax? I did not want to second guess the IRS!
 

Preparingfordefault

LoanSafe Member
Apr 17, 2011
293
7
18
A bit off topic but this question is directed at those that have already successfully settled their 2nd's. The questions are in regard to credit reporting. I have read on these boards a few times that the 7 years late payments remain on credit reports is from 'first late payment only' but I am confused by how/if the entire late reporting falls off so I am thinking those that have settled would know:
Question 1: If for example the last payment made was in 2008, did the entire late reporting fall off you credit report by 2015 (meaning completely disappears for all month lates were reported) OR does the 7 years start again from the date you settled (most recent reporting), most recent late payment reported? etc. I hope that question makes sense.
Question 2: Did any of you track how your 'settled 'second affected your credit score when it was reported? Curious to know if it helped, hurt and if so how much.
 

Sugarpike

LoanSafe Member
Dec 14, 2010
14
0
1
Update post - So, we just got a "Notice of Default and Election to Sell Under Deed of Trust" on our second. To recap, we are current on our first, never late, in fact, and stopped paying on our second in September of 2013. We didn't hear anything from anybody until a couple of months ago when we got a letter, and then started getting phone calls, which I never responded to. My question now is, is it too late to call and try to negotiate? Or should I contact a lawyer at this point? We're in California, and my understanding from reading through these forums, is that the chances of a foreclosure happening on the second, when we are current on our first, and seriously underwater, is slim to none. Advice? @Evan Bedard??
 

bkakca

LoanSafe Member
Jul 5, 2013
189
20
18
Update post - So, we just got a "Notice of Default and Election to Sell Under Deed of Trust" on our second. To recap, we are current on our first, never late, in fact, and stopped paying on our second in September of 2013. We didn't hear anything from anybody until a couple of months ago when we got a letter, and then started getting phone calls, which I never responded to. My question now is, is it too late to call and try to negotiate? Or should I contact a lawyer at this point? We're in California, and my understanding from reading through these forums, is that the chances of a foreclosure happening on the second, when we are current on our first, and seriously underwater, is slim to none. Advice? @Evan Bedard??

Your numbers may matter.....are you still underwater on the first mortgage, alone, or....is your home value more than your first? Is your Heloc much larger than your first? Are your first and 2nd with the same lender?

Lawyers have been a waste of money for most folks here, but that is a personal preference. Could not find other foreclosures on 2nds on the forums, ours was the first I can see happening thus far.

Brief facts on our situation:

Not sure who you Lender is on either loan, both of ours were being serviced by BofA, the first is a Fannie Mae loan.
Same as you, we were always current on our first, stopped paying the Heloc in 2014. Still underwater on the 2nd by about $40K. Offered a settlement November 2015, with hardship letter. Heloc was 250K, first was about $160K, so Heloc much larger.

We had settled two Helocs with BofA in 2014 on rental homes, so were willing to try on our primary, and also willing to let it go otherwise.

They foreclosed on the Heloc lien at Trustee's Sale in April, and new owner did not know he'd gotten the house still subject to the first mortgage. He knows now.....He's put renters in the home.

We had found a nice house and bought just before the sale, had movers lined up and got out before any 5 day notice.

Cancelled the homeowner's insurance, got check back. Notified the HOA, got refund of advance paid dues.

Stopped paying on the first mtg. and BofA called a few times, told them we weren't paying as we don't own the house. They just transferred servicing to Seterus, who has not sent us anything on our new loan number and payment due for July 1st.

If they foreclose on the 1st mtg., (this would be another Tursteee's Sale from what I have read) the guy/investment firm that got the house at Trustee's Sale better bid on this lien too, or they're out the $143K they paid on the Heloc when they got the house.
 

Sugarpike

LoanSafe Member
Dec 14, 2010
14
0
1
Your numbers may matter.....are you still underwater on the first mortgage, alone, or....is your home value more than your first? Is your Heloc much larger than your first? Are your first and 2nd with the same lender?

Lawyers have been a waste of money for most folks here, but that is a personal preference. Could not find other foreclosures on 2nds on the forums, ours was the first I can see happening thus far.

Brief facts on our situation:

Not sure who you Lender is on either loan, both of ours were being serviced by BofA, the first is a Fannie Mae loan.
Same as you, we were always current on our first, stopped paying the Heloc in 2014. Still underwater on the 2nd by about $40K. Offered a settlement November 2015, with hardship letter. Heloc was 250K, first was about $160K, so Heloc much larger.

We had settled two Helocs with BofA in 2014 on rental homes, so were willing to try on our primary, and also willing to let it go otherwise.

They foreclosed on the Heloc lien at Trustee's Sale in April, and new owner did not know he'd gotten the house still subject to the first mortgage. He knows now.....He's put renters in the home.

We had found a nice house and bought just before the sale, had movers lined up and got out before any 5 day notice.

Cancelled the homeowner's insurance, got check back. Notified the HOA, got refund of advance paid dues.

Stopped paying on the first mtg. and BofA called a few times, told them we weren't paying as we don't own the house. They just transferred servicing to Seterus, who has not sent us anything on our new loan number and payment due for July 1st.

If they foreclose on the 1st mtg., (this would be another Tursteee's Sale from what I have read) the guy/investment firm that got the house at Trustee's Sale better bid on this lien too, or they're out the $143K they paid on the Heloc when they got the house.
Home value is right under $300,000; we owe $360,000 on the first and about $80,000 on second, so underwater completely. We don't have a home equity line of credit (heloc). The first and second are with different lenders, as the second has been sold at least three times since we bought the house, and the first has been sold at least twice. Our original lender went out of business.
 

bkakca

LoanSafe Member
Jul 5, 2013
189
20
18
Home value is right under $300,000; we owe $360,000 on the first and about $80,000 on second, so underwater completely. We don't have a home equity line of credit (heloc). The first and second are with different lenders, as the second has been sold at least three times since we bought the house, and the first has been sold at least twice. Our original lender went out of business.
That's a much better scenario than ours was.

Sounds like it may be just the first letter if it's the NOD, and many times these are sent out and a sale has not followed. Sometimes it's a scare tactic.

The strategy is to remain silent until they make an offer, but if you get a true Notice of Trustee's Sale, and you can see it's been recorded and they are truly going to proceed, and you want to keep the home, you may want to reach out to them.

Will let others jump in here.....but did your notice come via Certified Mail, and can you see anything recorded in public records in your county? Notice of Trustee's sales will be recorded. In AZ, have have up until the day of the sale to pay all fees and back payments and stop the sale.
 

Sugarpike

LoanSafe Member
Dec 14, 2010
14
0
1
That's a much better scenario than ours was.

Sounds like it may be just the first letter if it's the NOD, and many times these are sent out and a sale has not followed. Sometimes it's a scare tactic.

The strategy is to remain silent until they make an offer, but if you get a true Notice of Trustee's Sale, and you can see it's been recorded and they are truly going to proceed, and you want to keep the home, you may want to reach out to them.

Will let others jump in here.....but did your notice come via Certified Mail, and can you see anything recorded in public records in your county? Notice of Trustee's sales will be recorded. In AZ, have have up until the day of the sale to pay all fees and back payments and stop the sale.
It came regular mail and certified mail - several copies, in fact - and I can't see anything recorded unless I go down to the city offices, I believe.
 

bkakca

LoanSafe Member
Jul 5, 2013
189
20
18
It came regular mail and certified mail - several copies, in fact - and I can't see anything recorded unless I go down to the city offices, I believe.
Sugarpike, reading your previous posts, you say the 2nd was charged off? This is an accounting move and usually means they are not headed towards foreclosure, but may come after you for the debt. I wonder if it was sold to a Junk Debt Buyer and they are trying to intimidate you.....

Moe, Pennygram, Cat, WalkinBlues, can anyone jump in?
 

Sugarpike

LoanSafe Member
Dec 14, 2010
14
0
1
There is no sale date listed, but the paperwork indicates that a recording was requested and was recorded on 6/24/2016. I'm pretty sure this is a junk debt buyer, but our servicer indicated that this was the owner of the debt. And yes, when we last ran our credit a few months ago, there is an indication that the 2nd was charged off (and my credit rating is still quite high, fingers crossed that it stays that way).
 

Sugarpike

LoanSafe Member
Dec 14, 2010
14
0
1
There is no sale date listed, but the paperwork indicates that a recording was requested and was recorded on 6/24/2016. I'm pretty sure this is a junk debt buyer, but our servicer indicated that this was the owner of the debt. And yes, when we last ran our credit a few months ago, there is an indication that the 2nd was charged off (and my credit rating is still quite high, fingers crossed that it stays that way).
So, how would I know if this is Junk Debt buyer? I'm guessing it probably is, since this is the 3rd time this loan has sold - or maybe 4th - since we bought the house in 2005. Again, we're current on the 1st, so what does this company have to gain from foreclosing on an underwater 2nd mortgage? @Moe15 ? @Evan Bedard ? Anyone?? Oh, and found the sale date listed on some letter someone who wants to "help' sent me - Oct. 22.
 

Lancer

LoanSafe Member
Nov 20, 2013
24
1
3
I'm starting this thread at the suggestion of cahomeowner, who thought it might be helpful to those members who don't have the time to read through pages and pages of comments in search of a success story.

If you're curious which strategies have worked, and what the circumstances were for those individuals, you will likely gain value from this thread.

I've read on these boards settlement success at prices ranging from as low as 2 percent of the balance (unusually low) to about 40 percent of the balance (very high). Typical settlement prices seem to be running in the range of 5-10 percent of the loan's balance.

The challenge is those posts are spread out among many different forums and threads.

Hopefully this thread will help consolidate those stories, and will thereby facilitate a member's personal choice of his/her own negotiation path.
This thread is very old I know, but I have been following the strategy for 4+ years and finally succeeded in getting a favorable settlement on my HELOC.

My only question/concern is the my credit going forward. With this problem HELOC gone, I would like to try and refinance my 1st and 2nd. At the moment (pre-settlement), and despite the fact that I haven't paid on my HELOC for over 4 years, my credit is good enough to qualify for a loan. Problem has been the HELOC which is now going away. However, they will report "settled for less than full amount" which ironically will put me into a category where there is no way I can qualify.

Does anyone know if creditors are required to report "settled for less than full amount", or can they simply say nothing. If so, I will try to get this provision included in my settlment agreement.

thanks
 

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
They are not required by law to report anything, but they work hat and hand with the credit reporting agencies so they most likely will.

Good luck and please let us know how everything works out for you.
 

Lancer

LoanSafe Member
Nov 20, 2013
24
1
3
They are not required by law to report anything, but they work hat and hand with the credit reporting agencies so they most likely will.

Good luck and please let us know how everything works out for you.
Thank you for your reply. I also spoke to an attorney yesterday who confirmed basically the same thing.

This Forum has been very helpful over the years. Thanks for the service you provide.
 

LovingOcwen

LoanSafe Member
Nov 16, 2013
283
6
18
St. Albans New York
Thank you for your reply. I also spoke to an attorney yesterday who confirmed basically the same thing.

This Forum has been very helpful over the years. Thanks for the service you provide.
Lancer-I totally agree! Makes you feel like you are not the only one going through mortgage problems. Thanks again Loansafe!
 

PatZZ

LoanSafe Member
Jan 30, 2011
2,026
157
63
Nearby
This thread is very old I know, but I have been following the strategy for 4+ years and finally succeeded in getting a favorable settlement on my HELOC.

My only question/concern is the my credit going forward. With this problem HELOC gone, I would like to try and refinance my 1st and 2nd. At the moment (pre-settlement), and despite the fact that I haven't paid on my HELOC for over 4 years, my credit is good enough to qualify for a loan. Problem has been the HELOC which is now going away. However, they will report "settled for less than full amount" which ironically will put me into a category where there is no way I can qualify.

Does anyone know if creditors are required to report "settled for less than full amount", or can they simply say nothing. If so, I will try to get this provision included in my settlment agreement.

thanks
Well, earlier this week, I read a Press Release where the CFPB went after quite a few lenders for their failure to properly report mortgage histories to the credit bureaus as required. The CFPB claimed lenders are required to properly report because that info is used to collect Federal data. I didn't read it with that much interest because it doesn't affect me - at least not now. Go to the CFPB site to search for more info. Might be helpful.
.
 

NewbieFed

LoanSafe Member
Jun 6, 2011
67
0
6
Owe $630K on first and house worth $480K. Have a second for $60K that I stopped paying on in 2012. The first was originally $480K but I had to stop paying in 2010 due to a job loss. I wondered if I had enough leverage to settle on the second now that the home is still underwater and has had arrears tacked onto the first mortgage? I checked my credit report and it says the second was a "charged-off". I was leaning to contacting them, but do not know the legality of how much time they have to pursue me. I reside in Marylandistan. I also have over $22000 in unsecured debt and over $100K in student loans. I would like to offer a settlement if they would close it out, show it as paid in full and not pursue the difference. I am self-employed and my salary ebbs and flows with more ebbing than flow...Any ideas out there? I would certainly appreciate it. I'm willing to take out a small amount from my retirement fund but need to know what other's think. Take care.

NEWBIE