Over the past few years Americans consumers have been greatly affected by our current economic crisis and because of this foreclosure rates across America to skyrocket higher than they ever have before. Foreclosure is especially common with homeowners who have obtained a second mortgage (or HELOC) on their property. In the recent past many borrowers obtained this mortgage through a refinance because the market seemed great. No one knew what was to come in early 2007 when the value of homes began to drop dramatically throughout the states.

One of the largest mortgage servicers is the ever so popular Chase Bank, and they hold countless 1st and 2nd mortgages throughout our country. So because this major lender holds so many mortgages their foreclosure rate is extremely high, and it is very important to contact them right away if you are struggling your monthly payments. As everyone knows loan modifications are now the number one way for a homeowner to prevent foreclosure and remain in their home. But if you have a second mortgage that is killing your pockets each month a modification might not be enough, as it seems much easier to accomplish a modification on your first mortgage. There is not much a lender can do with seconds besides lower the interest rate, and because seconds are generally a small amount this might make very little difference in your payments.

Many people are not aware that Chase actually may allow a borrower to settle a second mortgage anywhere from five to fifty percent of the loans remaining balance.¬†However, recently mortgage servicers have been playing hard ball with homeowners who wish to settle their loans for pennies on the dollar. We have been noticing this trend in our forums as more members claim that they are experiencing many road blocks when attempting to settle their HELOC’s and second mortgages. Please keep in mind that there is absolutely nothing guaranteed when you are trying to negotiate a short pay off on any debt.

With that said, nothing ventured is nothing gained. So, you might as well take a chance at striking a deal on your underwater mortgage. For example, you may be able to settle your $70,000 mortgage for only about $7,000(or ten percent). Many lenders are now offering this type of assistance because the fact that homes values have dropped a significant amount, and in the event the home goes into foreclosure the second mortgage holder will get nothing from the proceeds.

In order to accomplish this you need to contact your lender and try to negotiate a fair settling price for the loan. It is wise to start out with a low offer at about five percent of the balance and slowly start to work your way up. Many settlements we have seen in the past ended up at about ten to twenty percent of the balance.

It is wise to first write up a settlement letter which will reflect much of what a hardship letter has to say when applying for a loan modification. In this letter you will want to explain in detail the circumstances that have caused this loan to become unaffordable. You will also need to state why you think this action will benefit both yourself and the lender and also how much you are willing to pay to settle the loan. Just type in “debt settlement letter” to your favorite search engine and you will find many sample letters for you to use for free.

Once you have completed the settlement you will be free and clear of your second mortgage and no longer have to worry about making that extra payment each month.

Moe Bedard
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.