Wanting to sell, what about 2nd default mortgage...?

pamzam

LoanSafe Member
Mar 29, 2010
40
2
8
Hi Everyone,

Brief background history - we filed BK in 2009, I believe. We have a first mortgage of $125k and a (defaulted, charged off in 2018, after 7 years of non-payment) 2nd of $61,295. We're seriously thinking of selling our house, since the market is better, and I believe we could actually make a profit.

My question is this...will this 2nd mortgage hurt us, with a title search, for example? So, let's say, fingers crossed, we sell our house. We get to the closing table. The 1st is paid off AND the 2nd is paid off...?? If the buyers happen to run a title search first, will that screw us? (I'm not that savvy on the ways of closing fees and all that).

I've been reading lots of different things about this, and now I'm nervous about it. Also, I don't believe we reaffirmed our 1st mortgage and it's not showing up on our credit!!! Neither is the defaulted 2nd. I don't know if I want to contact whoever I need to contact, in fear of poking a bee's nest, but will this hurt us!?!

Even though the 2nd has been charged off, it's still a 'lien' correct, and one that needs to be paid. Will this come at closing, or is this something we'd have to pay off first??!?!

Where do I begin with this? We're looking forward to moving from our expensive area, to a much smaller and cheaper town, and I'm so nervous that something will fall thru.

Thanks so much...
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,004
155
63
San Diego, California
www.loansreduced.com
Hi there,
Did we by any chance speak about a possible refinance on this scenario? It sounds oddly familiar but I could be mistaken.

The charged off lien will need to be paid off upon selling the home. That means all the fees that they have attached to it as well. It's best to negotiate a settlement with them but I wouldn't let them know you are planning on selling the home.
 

OneHugeMess

LoanSafe Member
May 30, 2016
391
29
28
So here’s the deal.

First - No buyer is going to do a title search of their own on your house. A Realtor may, but it’s very unlikely. And if they do... all they’ll see is that you have two mortgages. No big deal, it’s very unlikely they will know your in default.

What you should do is request a pay off statement - from wherever is sending you bills or monthly statements. If they charged it off after six months of no payments - the delinquent interest and fees should be quite reasonable.

If they actually charged it off in 2018 — it’s likely you’ll owe almost double what you originally borrowed and you may have to do a short sale.

Do not tell the Mortgage Servicer that your selling, just ask for a pay off statement.

They will get paid off from the proceeds in escrow, they do not need to be paid off before the sale of the home.
 
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Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,004
155
63
San Diego, California
www.loansreduced.com
Looks like we had similar advice ;) Thanks bud, hope you're doing well this lovely Wednesday.
 
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OneHugeMess

LoanSafe Member
May 30, 2016
391
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28
It still is a lien — though, and will have to be paid off during a sale. It’s not going away.


My biggest worry is you may actually be underwater depending on how the investor treated your loan. So.... get that payoff statement and report back.
 
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pamzam

LoanSafe Member
Mar 29, 2010
40
2
8
Hi Erik,
Thanks for your response. How would I go about negotiating with them in this situation, and why not say I'd like to sell? Is it because they wouldn't want to work with us? I'm afraid to contact them, really, as it's been so long.

So how about a would I do this? Is my goal to get them to say "we will settle for $xyz amount?" And then when it comes to closing, instead of having to pay 61,295 maybe we'd only have to pay 40k (just an example)? We're in no situation to pay them $$, if they ask us to settle for something. Hence the reason why we want to move to a cheaper area!!

Thanks so much!!
Pam
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,004
155
63
San Diego, California
www.loansreduced.com
If you tell them that you are planning on selling it's like waking up a sleeping beast. They all of a sudden think they can get ALOT more than what they could get in a different circumstance. For example, I'm refinancing a borrower right now and pending a review from the lien holder to determine if they are willing to negotiate. I jumped on a three way call and handled most of it myself which is why this sounds so familiar.

I would mention that you just got your tax return back and want to settle the lien if possible. No need to give them any other information than that...then it also comes down to if you have the ability to pay them off. They may require to be paid off within a certain period of time. It can be done via a refinance as long as the loan was charged off for more than 4 years but you would want to keep that new loan for at least 6 months.
 

pamzam

LoanSafe Member
Mar 29, 2010
40
2
8
i just called to have the pay off amount sent to me. I was a bit mistaken. It's $61,925. He said that's the totally amount needed to release the second lien and when I asked if there were other fees associated with it, he told me it's a non-interest bearing account...

????
 

OneHugeMess

LoanSafe Member
May 30, 2016
391
29
28
Looks like we had similar advice ;) Thanks bud, hope you're doing well this lovely Wednesday.
Thanks. Battling a Cold but doing well otherwise. :)

i just called to have the pay off amount sent to me. I was a bit mistaken. It's $61,925. He said that's the totally amount needed to release the second lien and when I asked if there were other fees associated with it, he told me it's a non-interest bearing account...

????
Congratulations. You got extremely lucky. Most people still have interest accruing. What will happen is they will simply get their proceeds in the sale of the home, like a normal lender would. When your account charged off (well before 2018) they stopped the accrument.

I wouldn’t even try to negotiate. Just accept that gift of no interest and run with it. You’ll still get your equity.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,004
155
63
San Diego, California
www.loansreduced.com
That cold has been going around! I still feel like I have it a little bit over here and it was a month ago it attacked me. Feel better.
 

Jzone

LoanSafe Member
Jun 20, 2017
133
12
18
69
Hi Everyone,

Brief background history - we filed BK in 2009, I believe. We have a first mortgage of $125k and a (defaulted, charged off in 2018, after 7 years of non-payment) 2nd of $61,295. We're seriously thinking of selling our house, since the market is better, and I believe we could actually make a profit.

My question is this...will this 2nd mortgage hurt us, with a title search, for example? So, let's say, fingers crossed, we sell our house. We get to the closing table. The 1st is paid off AND the 2nd is paid off...?? If the buyers happen to run a title search first, will that screw us? (I'm not that savvy on the ways of closing fees and all that).

I've been reading lots of different things about this, and now I'm nervous about it. Also, I don't believe we reaffirmed our 1st mortgage and it's not showing up on our credit!!! Neither is the defaulted 2nd. I don't know if I want to contact whoever I need to contact, in fear of poking a bee's nest, but will this hurt us!?!

Even though the 2nd has been charged off, it's still a 'lien' correct, and one that needs to be paid. Will this come at closing, or is this something we'd have to pay off first??!?!

Where do I begin with this? We're looking forward to moving from our expensive area, to a much smaller and cheaper town, and I'm so nervous that something will fall thru.

Thanks so much...
Clear up some details and I can give you an answer based on my 2012 bankruptcy.

Sounds like you are current on your 1st mortgage?

Your 1st and 2nd were NOT included in bankruptcy? And you had a 2nd mortgage that was "charged off" in 2018. That's not the same as "discharged". What exactly was discharged in your 2009 bankruptcy?

Previous posters are correct. The liens will not go away. A quick way to find out who holds the lien is just go to your county register of deeds-most counties even have this online to look up. If your first was discharged in bankruptcy, they probably have a lien also.

This will all need to be sorted out when you try to sell. Any liens will come up in a title search and the new buyer will not be able to get a good title with unreleased liens.

Whoever holds the lien on the 2nd probably wont budge much if they know you want to sell. Give them as little info as possible as Erik said. And as onehugemess said, be glad you are not accruing any interest and fees.

Worse case scenerio is that you would need to pay off the $61000 debt to release the lien and complete a sale. Then how much equity would you have after paying off the balance of the 1st?
 
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