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Mar 2010After bankruptcy what if I don’t pay my second mortgage?
Posted by Robert Weed / in Chapter 7 Bankruptcy / 627 comments
After chapter 7 bankruptcy, I often advise my clients, just don’t pay the second mortgage.
Now, if you don’t file bankruptcy and stop paying the second mortgage, two things would happen. They will call you day and night; and eventually they would sue you and garnish you. Bankruptcy keeps them from doing either of those.
Will they foreclose you? That’s the big question. The second mortgage can sell your house to a new homeowner only if they pay off the first mortgage. If the value of your house has dropped below what you owe on the first, that’s just a way for them to lose more money. They are not going to do that.
I often advise my clients, just don’t pay the second mortgage. This is a strategy that takes nerves of steel.
To put it another way, the second mortgage won’t kick you out of your house just to be mean. They will only do it to make money. If they can’t make money, they won’t do it.
So, what are they going to do? They will wait patiently for you to keep paying the first, and hope the value comes back up (and the balance on the first drops) that at some point you have equity that they can grab.
So, if you follow this just-don’t-pay-the-second strategy, you know you will never have any equity in your house. If you go to sell five years or twenty years down the road, the second will still be sitting there. (With five or twenty years of interest and late fees.)
So when does this just-don’t-pay make sense? Suppose you have five more years before your youngest is out of high school. Once that’s done, you might want to move to a smaller place anyway. Then you can stop paying the first mortgage too, and move out. The bankruptcy still protects you from both of the mortgages. (You’d have to keep paying the HOA until the first mortgage forecloses.)
Does this strategy hurt your credit? It does and it doesn’t. It doesn’t hurt your credit score, because that second mortgage will just show bankruptcy and can’t show any late payments after that. (For my clients, we check to be sure.) But it does hurt your being able to buy again.
For loans like car loans–or interest rates on your credit cards–your credit score pretty much controls, so you’ll be able to get a care loan at a good rate. Your score will be good, if you’ve built up new, good credit.
But to get a mortgage, a different rule applies. The March 2, 2010 manual released by Fannie Mae, (link here https://www.efanniemae.com/sf/guides/ssg/sgpdf.jsp) says what you have to do to get an insured mortgage. You have to be two years after the bankruptcy (with extenuating circumstances), but you have to be three years after a foreclosure. Even though there will not be a foreclosure on your credit report, there will be one on the land records, and a mortgage lender will check there, too.
So if you follow this just-don’t-pay-the-second strategy, you keep the house for three or five or seven years; then you have to plan to rent for three years or so. Then you’d be able to buy again.
If real estate goes up a lot over the next ten years, you’d be better financially to move out of the house right after the bankruptcy, rent for three years right away, and then buy again. (If real estate stays flat, then not being able to buy for ten years doesn’t lose you anything.)
But if you want to keep your children in the same school and the same house, just-don’t-pay-the-second is a good plan.
What if you want to keep this house long term? One way to do that would be with a second mortgage relief Chapter 13. See my website on that. http://virginiasecondmortgagerelief.com/
Or, you can not pay the second for a couple years, save some money, and then offer them a cash settlement. Say you owe $75,000 on the second mortgage, file chapter 7 bankruptcy, and pay them nothing for three years. If the value of your house is still less than you owe on the first, and you offer them $7000 to call it even, they might agree. If you move out, they get nothing.
That strategy takes nerves of steel. And it works best if you go for several years of not paying them–you want them to get used to getting nothing, so your offer of 10 cents on the dollar looks good. I’ve seen it work.
Here’s an example where Chase, after getting nothing for four years, offers to settle at $20,000 second mortgage for $2000. And here’s an example of HSBC offering to settle as $126,000 second mortgage for $12,600.
Here’s an offer to settle at $28,500 for $4250. My client filed bankruptcy in 2010–this offer came in 2014.
PS In January 2015, Bank of America forgives the whole amount.
Ahmad filed bankruptcy with me in 2011. He got the best possible deal–Bank of America offered to forgive the whole amount of his seocnd mortgage.
Don’t worry, Ahmad, this will nto hit your credit. and not have any tax consequences either. And I’ll straighten it out if it does.
This nerves of steel strategy does not always work; but it works a lot.
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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.
Robert Weed
Here’s a letter one of my clients sent to me. On my advice he had not paid his second mortgage for about six months, and they approached him with an offer to settle for 25%. This was even before the bankruptcy. https://robertweed.com/resources/PNC%20Letter.pdf
PS On this letter from PNC, offering to settle $71,000 for $17,000. My clients tried but couldn’t get $17,000 together. They didn’t do a counter-ffer, figuring it was pointless. PNC then shocked them, and me, by dropping another $12,000!
Paul
Great article! I live in colorado. discharged from ch 7 November 2009. Chase has the second and now sent it to collections. They were included in the ch 7 filing. They say they can garnish and collect. Is this right? My first is current with WF and reaffirmed. House is valued at $250. The first is $150k and the second is $100. THANKS!
Robert Weed
Based only on what you have told me, it looks like there might be three violations by the debt collectors.
1. Violation of the bankruptcy discharge. Trying to collect a discharged debt
2. Violation of the Federal Fair Debt Collection Practices Act–misrepresenting the legal status of the debt.
3. I’ve hard the Colorado has a state Fair Debt Collection Act–would be a violation of that, too.
Talk to your bankruptcy lawyer and see if he wants to go after them. Otherwise, you could go to the National Association of Consumer Advocates and look for someone who does Fair Debt Collection Practices work. http://www.naca.net/
jerry
Minnesota Second mortgage unrecorded discharged charged off chp 7 BK. Is bank able to record and foreclose now? or are they out of luck? Property value is same as 1st mrtg. Lender is citimortgage or citibank and loan is with their recovery dpt which doesn’t do settlements. I want to keep my home for at least 20 more years! Help!!
2nd out of luck
Robert Weed
Have you talked to your bankruptcy lawyer there in Minnesota? If they didn’t record the second mortgage prior to the bankruptcy, they can’t do it afterward.
Jack
I ‘m in California and discharged from CH7 one year ago without reaffirm any of my first, second and third (2nd and 3rd are HELOC). If I only pay my first mortgage will the 2nd and 3rd keep on adding up the late fee,interest,… to the principal ? My first loan is 440k and 2nd is 60k 3rd is 120k, The house is worth 500k at most. How much they can get normally if the first do the foreclose auction sell ?
Thanks !
Robert Weed
Yes, the 2nd and 3rd will keep adding up the late fees. But, as you suggest, at a foreclosure sale the first would get $440,000–if it even sells for that much–and the second and third get nothing. So you have bargaining power.
Since you’re in California and I’m in Virginia, my suggestion is not based on any knowledge of your local situation.
Rebecca
We filed & were granted CH. 7 discharge 6/2010. We did not reaffirm either the 1st or 2nd mortgage. We have been paying on both since, but cannot afford the 2nd mortgage anymore. Our house is worth approx 60-70K less than what we owe. Realistically, can the 2nd mortgage foreclose on the property and have negative results on us? Would it be to our benefit to stop paying and try to offer a settlement in the future?
Robert Weed
Realistically as long as the house is worth a lot less than you owe, they are not going to foreclose the second mortgage. So you can stop paying and then later offer them a settlement. As I say, though, this takes nerves of steel. How old are the children, how long do you expect to stay in the same area. All those are factors in deciding what’s best for you.
Robert Weed
Yes, I think you should stop paying the second and offer a settlement in the future. As I say on this blog, though, it takes nerves of steel.
Tony
I currently own a property in Florida. I owe 260k on the first and about 66k on the second. The property value at about 130k. I was unable to pay the second due to financial hardship. I stop paying both and was able to save some money while negotiating a modification with both first and second (Wells Fargo Bank). The first mortg. modified but the second refused to modify or settle. Instead, they garnished my check. I recently filed for ch7 and was advised by my attorney to stop paying and turning it over to the bank and/or let them forclose. His reason behing this advise it that bankruptcy will wipe out the second but so long as I stay in the property they will come after me after bankruptcy is over. Therefore, as of next month I will stop paying the first which had became hard for me to afford due to the second garnishing my pay. Is that a good idea?
Robert Weed
When you stop paying debts, you can expect to get garnished. That’s why you file the bankruptcy. Now that you have filed bankruptcy, the second has to stop garnishing you. When the bankruptcy stops them from garnishing you, most people can afford the first. Of course it may be smarter to give up the first, too. That depends on how good the modification is–and how much you like the house.
Alex
Chapter 7 Discharge 01/18/11
1 & 2 Mortgage not reaffirmed
1 & 2 Mortgage Current as 04/01/11
2nd Mortgage show as Included in BK ans is closed on Credit Report.
State: Florida, Miami-Dade County
Home Value: Low: 100.000 – High: 110.000
1 Mortgage balance: 138.000
2 Mortgage balance: 54.400 (Onewest Bank/Indymac Bank)
Will stop 2nd Mortgage payment to try Settlement 4 to 6 months for now, pennies by dollar. 2nd will Foreclosure or settle? Can a lawyer defend me if 2nd mortgage star a foreclosure Process and stop the process. I read that Onewest bank is very aggressive bank.
Thanks
Robert Weed
I can’t make any promises, but the 2nd will settle. I had a client just today ask my opinion on an offer form HSBC to settle a $108,000 second mortgage for $10,800. As soon as I can clean up their personal information, I’ll post it here. I don’t know anything about Florida foreclosure law, except that Virginia is one of the easiest places in america to foreclose people and Florida is a lot harder.
Alex
Check Reaffirm on Chapter 7 Petition on both Loans 1st and 2nd. Banks did not send any documents to sign, so I suppose the loans are not reaffirm. Am I correct? or not?
Why do you said with Nerves of Steel? Is hard to settle in my case?
Thanks
Robert Weed
Checking reaffirm is usually not a good idea, so I’m glad they didn’t send you anything to sign. Nerves of steel–some people can’t get used to the idea of not paying on a mortgage.
josie
hi, i have a 1st mortgage with wells fargo for $175000 and still owe 173,000. i also have a 2nd mortgage with american home services bank for $15000 and still owe them 14,500. can i put my 2nd mortgage into chapter 7 proceedings and not pay for my 2nd mortgage? i live in new york state. I am not sure if i should include my 2nd mortgage? thanks. josie
Robert Weed
You are required to list every one of your debts in the bankruptcy. The question is, what do you do afterwards. One important question is the value of your house. In some parts of New York state I know the value have collapsed and are never coming back. That makes it easier to decide to not pay the second.
But I sure don’t know the details of real estate in New York; that’s why a good local bankruptcy lawyer is so important.
Robert Weed
You have to “include” everybody in your bankruptcy–leaving them out is lying to the court. Your question is whether you should stop paying the second, since they can’t touch you after the bankruptcy. When I talk to my clients, I start with the idea that not paying is the best idea. But that depends on how long you plan to stay in the area, whether you think values are going up or down, how old the kids are. A whole lot of things.
Sherri
CH 7 BK discharged 7/2010
1st owe $455,500
2nd owe @198,000 (interest only)
Both loans not reaffirmed
Current home value approx. $679,00
We live in California
Tried twice for loan mods., banks won’t budge and just say to short sale or surrender.
Having a hard time making payments. Current on payments now but won’t be in next month or two. We would like to stay in the house for the kids. Could we stop paying on the 2nd without going into foreclosure? Would this be wise?
I also was thinking if we just let the home go into forclosure we could save up some money to get a little ahead. Right now we are paying $3700/mo. in mortgage payments. We then could have a little savings when we are booted out. But, if we could save $600 + on the second a month for now that could help.
What happens when there is a little equity in the home?
Robert Weed
I’m just not that familiar with real estate markets in California to have much of a guess. But if you can’t afford to pay the second, I’d experiment with not paying it. How many years do you have to go to get the kids out of high school?
If it’s just a couple, I’d see if you can make it not paying the second; if they are still in elementary school, may stop paying both, save money and then move.
Heather
We filed for chapter 7 last year. Discharged Dec 2010.We are current on our first mortgage with BOA balance 167,000. We have not been paying our 2nd since Oct 2010. 2nd is with HSBC balance 101,000. Our house value is about 200,000 maybe a little less. We received a letter from HSBC today saying “your account is now being serviced by our Virginia Beach Processing Center. Please be advised that payment in full is due upon receipt of this letter. Please call us to discuss your intentions regarding payment” It is our goal to settle for 10% paid as a lump sum. Do I go ahead and make that offer??? Do I contact them at all?? Are they going to foreclose since the value is more than the balance owed on the first mortgage??Advice please. This is the first time we have gotten anything from them since we stopped paying. I live in Georgia. Thanks
Robert Weed
I’d lean toward approaching them now with a settlement offer. But I don’t know much about real estate values or foreclosure procedures in Georgia. That’s why having a bankruptcy lawyer who knows your local situation is so important.
Robert Weed
Now is a good time to see if they are open to an offer. But if they don’t make you a good offer, then sit tight. (My guess is that the best offers come two years after the bankruptcy; but that’s only a guess.) HSBC (Hong Kong Shanghai Banking Corporation) came to America by taking over Household/Beneficial Finance. Household Finance started by making high interest loans to people with bad credit. They still have that finance company mentality. Because of that, I have sometimes seen them be more flexible than banks with better reputations. But not more honest; so you should not necessarily believe everything they tell you.
Lesslie Arevalo
My first loan was modified and the second loan went into collection. Had paid the 2nd in collection @$150/month for a year then they stopped deducting from my bank account as I signed for a direct deduction. I recieved no calls,no bills from the collection agency then the account appeared in my credit report as a bad debt charged off. I thought it was written off so never contacted the collection agency. My credit score had gotten better and is looking into the possibility of buying again as I moved to another city and the property is being rented for a year now. I checked on the status of the second loan with the collection agency and they said the account had been moved back to Chase/washington mutual which was my original lender for the second loan. Called chase and asked about it and they said I owe the whole amount and I need to pay the whole $84,000.00.They refused any type of modification I asked why I never received any bill or any calls from them and they said that I filed for cease and desist which I never did. Are they gonna come and garnish my salary? or put up a case against me? What are my options? Thanks.
Robert Weed
My just don’t pay the second mortgage is a good strategy–if you file a bankruptcy! If you just don’t pay and don’t file bankruptcy–well, most people end up where you are now. Bad credit, and no good way to get out of it. For most people, bankruptcy really works better than any other choice. Sorry.
Becca
We live in CA. 2008 we were in pre forclosure. We were told to stop paying our mortgage by OneWest because “that is the only way they will consider us for a loan mod” we sent docs to them 5-6 times, always were told “missing” items. Finally organized a protest in front of their corporate offices in Pasadena, CA. Got someone’s ear and they worked out a loan mod however it was only temporary. In 2010 we filed ch 7, did not include the home. Charged off 12/2010. We never reaffirmed our mortgage. In April of this year OneWest advises loan mod is over and payment is now tripled but said some of the payment would go to principle. Lied. All of our $5,000 a month is going to interest. Contacted them again about a loan mod again told “must be behind in paying mortgage”….our children are all in college. This is a big home, we really do not need it and paying $5,000 a month that is not going to pay off the loan, we don’t see the reason to stay. We are thinking of banking the monthly payment and seeing how long we can stay before getting kicked out. Question is: since we were in pre forclosure in 2008 can the bank just reactivate that or do they have to start all over. We are hoping they have to start all over because that would give us some time. Also, we owe more than we can sell the house for. We’ve consulted with real estate people, an attorney about doing a quiet title (questions about OneWest really owning the note), fact is we are just tired of fighting.
Robert Weed
I hope you did “include” the home when you filed bankruptcy–otherwise you lied to the bankruptcy court. What you mean, I hope, is you said you intended to keep paying on the home. You were smart then to NOT do a reaffirmation, so you can always change your mind, move out, and not owe them anything. I tell a lot of people once the kids are all in college they may not need the big home, and so being able to move out and not owe is a really important advantage.
As to how they have to start up again foreclosing you in California–I have no idea. Sorry, Virginia is all I know about.
Mary
Hey There, we are in North Carolina and filed for chapter 7 in 2009 and it was discharged in Nov. 2009. Our 1st and 2nd mortgage were not re-affirmed (but they did modify our first). We are current on our first and due to a huge reduction in income over the past few months we just recently became behind on our second (now about 3 months behind). The first loan is 324K and the second is for 95K the home is maybe worth around 375K. We would love to stay in the house and could afford it if we could somehow drop the second or settle it down the road. Would that work in NC since we are a deed of trust state? Can they force the foreclosure? If we don’t pay, will they just file a lien on the home so that we can’t sell down the road until the second is paid off or settled? Thanks so much for the help!
Robert Weed
They already have a lien on the house–that’s their 2nd mortgage–so already you can’t sell down the road. But the key thing to remember is you can move out and not owe them any money–that bankruptcy still protects you. My recommendation usually is to stop paying when the BK is filed, or before. Get them used to getting nothing and then offering a compromise. Your values suggest there is some value on the house that the second is attached to, so they may not be willing to come down much. (And there’s some small chance they might foreclose. I don’t know enough about NC law or NC property to have even a wild guess on that.) Now that you can’t pay anyway, you’ll just have to see what they do. When you get your income back up, I suggest you bank the payment instead of making it, so you have negotiating power if they want to talk.
Matt
I am filing chapter 7 my home is worth 470. I have a first with 496k that we would like to reaffirm and a second with 118k and a third with 140k that we wont reaffirm. We plan on staying in the house for 20-30 years. If the house appreciates over the next 15 years can they come after me now that there is value?
Robert Weed
If, if the values increase enough that it would be worth their while, then they will foreclose you out of second or even third mortgages. My guess is they will want to settle with you cheap after two or three years if you make them an offer, but that’s only a guess. That’s why I say not paying takes nerves of steel.
(You need to check my May 16 blog on mortgages–you don’t want to “reaffirm” the first. Pay it, but don’t reaffirm.)
Matt
Ok thanks – I forgot to tell you that our first was modified through Obama’s program – can they still foreclose because I have a 25 year modified loan program if the value increased
Thanks
Saverio Barbiere
Dear Mr Weed
I know you dont know CA law but wanted to hear your advice. I have a $855k first w bank that I was able to got modified last year. My home value is underwater about $100k and I have a $400K second with Credit Union that I havent paid on in 11 months and $30k total worth of CC and thats it. To make matters worse my company just filed BK and I am unemployed. I can rent out my home to cover the first till I find a new position. The second however has just now offerred to settle with me for .25 on the dollar /or $100K which I dont have and if I did w/o employment certainly not going to give to CU. I want to keep my home and hoping they will settle for .10 which I thru out there and the CU said they wouldnt except. Is BK chapter & my best route or should I rent out my home and live to fight another day on the second? They lose on a foreclousure.
Are you in a stronger position by filing BK first and then negotiate on the second?
Thanks
Sam
Robert Weed
Sam, I definitely think they will be more likely to come down further on settling the second mortgage when you hit them with a bankruptcy. In one of the early comments on this topic, I included a letter from PNC offering to settle $71,000 for $17,000. That was before bankruptcy. When my clients could not come up with the $17,000, they came down a lot more.
But, as you pointed out, I’m not familiar with real estate in California.
Missy
Chapter 7 filed/discharged in 2007. Did not reaffirm either first or 2nd mortgage, but both are current. Third child leaving for college this fall. Will now have only one child at home (an elementary student). Housing market here (Michigan) is awful….much like the rest of the economy here. Considering “walking away” from our home later in the year or next year. How will this affect our credit report. Since we didn’t reaffirm our mortgage(s) with BK, will a foreclosure show as an additional negative on our report, or would it still be considered part of the original BK?
We may consider stopping payments on both mortgages ($1700/mo), banking the savings and renting when we are forced out. Our other option would be to put our home on the market for sale, but with the local market flat, doubt that it would sell. Many homes in our subdivision have been on the market for over 2 years.
Our plan is to move south in 4-5 years, when kiddo number 3 done with college. Youngest will be in middle school. I’m completely comfortable with long-term rental in the meantime.
What do you think?
Robert Weed
Let’s start with the credit report. Your credit report should be showing “included in bankruptcy” now, while you are paying. And continue to show “included in bankruptcy” when you stop. No payment history–and no foreclosure–either way.
(They get that right after bankruptcy no better than eight or nine times out of ten, though, so you should get your credit reports from each of the big three now and check. Do disputes if you have to.)
If you are thinking of walking away in the next year or so, boy I’d start saving money now by not paying the second. Now I know nothing about how long it takes to foreclose in Michigan (longer than Virginia I’m sure), so I don’t know what to tell you about when to stop paying on the first and how long it would take to be forced out.
How are rents there? (Here, they are high.) Can you rent for less than the payment on the first? Or can you try to get a loan mod on the first? You might be able to stay in that house for less than rent would be, by not paying the second and getting a mod on the first.
On the other hand, are you hoping to buy when you “move south.” That would point you to renting in Michigan for a few years. Why? Under current regulations you can buy a house two years after the bankruptcy is over. You’re already there.
But it has to be three years after the house is out of your name.! And, since you are sill paying, the house is still in your name. And it will be for many months, maybe a year, after you stop paying. So if you want to buy again in four or five years, you’d want to plan to move out and rent pretty soon.
agutter17
I have filed chapter 7 and it has discharged. my first and 2nd mortgage is with Citimortgage. First is about 240,000 and second 56,000. my first foreclosed and paid 75,000 at the sheriff’s sale. If I can get the second lien off my title I have a credit union willing to lend me the 75,000. I am in Michigan and have 6 months right of redemtion. Any ideas on how to get them to remove the lien? I only have 4 months left and I know everything takes time.
Robert Weed
Wow That’s really specific to Michigan law. I have no idea.
torero
My chapter 7 BK was discharged on 2007, I did not reafirmed my 2nd mortgage and it’s not reporting to my credit report since 2007, it shows as paid off. They don’t send me any bills, however I’m still making interest payments until now. My first mortgage has a balance of 105,800, my second one 29,000. Both together add up to 134,900. The value of my home is about 135,000 right now. I paid 140,000 in 2006.
Both Loans are with suntrust.
My financial situation is actually worse than a year ago. Do you think they will foreclosure on me if I stop paying that second mortgage? I’m in NC.
Thanks in advance!
Robert Weed
I think they would let you go for quite some time without foreclosing if you pay the first but not the second. But if values continue to improve, then they would foreclose you. So based on what you are telling me, not paying the second would be a temporary plan but not a long term plan.
Susan
I am almost 2 years from my chapter 7 bankruptcy discharge. I did not reaffirm my 1st or 2nd mortgages and haven’t made payments on them in over 2 years. I want to try to get another mortgage on a different home when the 2 year period is here.The banks have not even begun to foreclose on my home yet.Is this going to affect whether or not I can get a loan after the 2 years discharge period?I have read where you have to wait 3 years after foreclosure. But that could be many years down the road since they haven’t even started the process and my 2 years post bankruptcy is almost here and my credit has been perfect ever since the discharge.
Robert Weed
I’ve read what you’ve read. That the house has to be out of your name for three years before you can get a new mortgage.
I’m told that one way around that is to have the old house (the one that’s not foreclosed) rented out. And I know one or two people who have talked their way out of the three requirement; I’m not sure how.
Lenders, and real estate agents, in your area would have an incentive to help you with a work-around, if there is one.
ann volpe
I have filed a chapter 7 bankruptucy in Ohio and have a 2nd mortage with beneficial for 15000.00 and the have been paying for 5 yrs and the balance has never gone done the interest rate is so high we ask for a modify and they wont give it to us our 1st mortage is current with a modify can the 2nd mortage foreclose on our home if we dont reaffirm with them and stop paying we have not paid them since we decided to file bankrupcy it has been 4 months our chapter 7 is almost done what should we do we want to keep our home
Robert Weed
Your bargaining power with Beneficial on the second mortgage depends on whether you are underwater on the first. Whats the house worth compared to how much you owe on the first? More? A little less? A lot less?
If the house is worth a lot less than you owe on the first, than you should think seriously about not paying the second.
Maggie
Our BK was discharged last fall. It was chapter 7. It was the result of having to close one of our businesses. We had guaranteed most of the debt, so had to file personal chapter 7. We have not reaffirmed either mortgage and are current on both.
1st – $112,000 – fixed 5.5%
2nd- $119,000 – interest only next 4 years
Home Value – $224,000
The second was used for the business as well, but we could not include it in the chapter 7. It doesn’t look like we will qualify for a chapter 13 in four years either. We are thinking of stopping the payments on the second (both are with Chase) and trying to offer them $10 – $12K after 6 to 8 months. We are concerned about our ability to afford the second in the future and we really need to start thinking of building retirement savings (we are in our 50’s). We are in Colorado.
Does this sound reasonable? Can Chase harrass us for payment? Would it help to have an attorney negotiate this for us?
Thanks for your help.
Robert Weed
Based on the real estate values you gave me, I don’t see that you have much bargaining power with the second. Because of the bankruptcy, they cannot harass you for payment.
But they can foreclose, and I think they would if you just don’t pay them anything at all. Maybe you can get them to reduce the interest a little; but I’d be surprised if they’d settle for much of a compromise when there’s so much equity beyond what you owe on the first.
liza
Hi, I leave in California and lost my house in November of 2010 to a foreclosure.for over a year I tried to file chapter 13 I owed 260K on the house with second mortgage being 53K and a few credit card debts but somehow my attorney fell short the first time. So I refiled with different attorney and this time I had a sell date and attorney filed the documents three days after the sale date. what can I do now, I moved out of the house 6 months ago and still have the credit card debts and the second loan that was an line of equity and I’m getting phone calls from creditors to settle with less than I owe to pay them. thanks
Robert Weed
You need to get a good bankruptcy attorney and hope you have not lost eligibility to file Chapter 7 to get rid of those debts and get yourself back on the road to good credit.
Look for someone who is a member of the National Association of Consumer Bankruptcy Attorneys.
Carrie
Hello:
I have a question. My husband and I filed chapter 7 bk which included both my first and second mortgage, and have been discharged since 9/2010. We are current on our first, and have been paying less than half of the payment on the 2nd. The first is with BOA, $93,000.00(which we applied for a modification and they denied) and the second is with GreenTree, $44,000.00. We live in MS. We inquired with the second on a modification since the first denied us, and they said we would have to pay them 900.00 before they would even consider allowing us to apply for a Modification. We can’t afford to do this. Home prices in my subdivision very. Houses are selling for 60k-105k. In our situation, what would be the best thing to do? Should we quit making the partial payments on the 2nd? They were sending us monthly statments, until this month. They quit sending them. Green Tree told my husband a few weeks ago when he spoke to them that they may send our account to collections or charge it off. What would happen to that mortgage if they did this? Since it was not re-affirmed in BK, would they send me a 1099 form for the charge off amount? We are not really sure what to do, and would like to stay in our home.
Robert Weed
Making a partial payment to the second mortgage is probably doesn’t do much for you. You are not getting any closer to getting equity in the property, but you enocurage them to think you’ll eventually pay.
We know for sure that they cannot (legally) 1099 you if they forgive or compromise the second mortgage, because the bankruptcy already wiped out the debt and there’s no tax on debts wiped out in bankruptcy.
What I HOPE–now that they say they are charging it off–is that they will sell the debt to a debt collector for maybe seven cents on the dollar. and you could save some money a settle up at maybe twelve cents on the dollar.
As I say, this takes nerves of steel. And there’s no guarantee it will work.
You say you want to keep this house. Keep it until your youngest (I’m just guessing you have one) is out of high school; keep it until you retire (how old are you?) Keep it until it’s paid for? All those thing affect how big of a risk you want to run; and how much money you would offer to settle up on the second.
cathy laud
i loved reading this ,,, u make so much sense….
i have property in florida, filed chapter 7 two years ago, and decided to check my credit to start over again…
on my equifax credit report it shows i have zero balance on second mortgage ….. and i have been paying them each and every month…
also on my first it shows zero balance and i have had a modification on this mortgage after i filed bankruptcy……
so if i stop paying on the second mortgage theres really nothing that can hurt my credit any further,,,, is that the same on the first mortgage????
i am planning on moving out of house within the next 12 months…. should i rent out????
Robert Weed
Not paying the second mortgage won’t hurt your credit at all. If you don’t pay the first mortgage, they will start to foreclose. Now it takes a long time to foreclose in Florida–I don’t know how long. But if you stop paying now, it might very well take them a year.
Carrie
Thank you for your response! We have 3 children, one that was jus born recently. We really like the house and would like to stay in it, but if we had to move then we would. I am wondering if I should make the partial payment at all anymore on the 2nd? They did not send me a statement this month, and the phone calls we were receiving from the 2nd mortgage holder have stopped for about 3 weeks. For a while we received two to three calls a day, and would tell them the same thing. We are sending them what we can. They did not want to work with us at all unless we paid them a larger amount, then they would consider sending us an application for a modification. I am just not sure what to do. If they send our 2nd mortgage to a debt collector, then does the collector own the deed of trust that is filed against my property and can still forclose, or is the mortgage then released and treated like a consumer credit debt? Should I have by BK attorney draft up a letter offering a settlement on the debt? Thanks again for your response!
Alex
Thanks for all your comments. I have a last one. When can i start to rebuild my credit, after discharge or after case closed. I have a discharge but my case still open. When can I apply for a secure credit card to rebuild credit? Thanks
vmarq
HELP, I understand all of the ideas behind not paying the 2nd, however in our situation it is not working here in Arkansas. Our 2nd has been stalking us since we filed ch7, immediately trying to lift stay, getting from the judge before our discharge an order ex parte granting relief from stay and abandonment of property. On three attempts to negotiate with them before, during, and after filing and discharge, we were ignored. 2 weeks after barely getting our discharge in our hand, they filed a lis pendans suit to foreclose. They will not talk to us or an attorney. This is weirdest part, our first mortg with another bank is $1,350,000, the 2nd’s is $650,000. The home value is less than the 1st. AND the 2nd bank is under ciease and decist by the FDIC! We want to keep our home, I designed it and it is very unique (perhaps the reason they are pursuing it), but who in their right mind would foreclose and have to satisfy the 1st mortgage for $1,350,000 when the value is below the first, there wouldn’t be anything left for the 2nd and there are attorneys fees, realtors commissions, advertising costs, taxes for as long as it takes to sell, etc.etc.??? What recourse do we have?
Robert Weed
This is what I mean when I say, this strategy takes “nerves of steel.” Maybe they are just bluffing.
On the other hand, if you can show the value is below what you owe on the first, most bankruptcy courts will allow you to come back with a Chapter 13 and knock that second mortgage off the house. You have to set up your Chapter 13 very carefully, because you are close the the eligibility debt limits. (You might have to use a Chapter 11.) With a million dollar house in Arkansas, it’s worth you lining up the best bankruptcy lawyer in town.
Amy
This is a great resource, thanks for having this site!
My husband was forced to file chapter 7 after our business closed in 2009. It was discharged 7/2009. We have a 1st mortgage and a 2nd with both of our names on them. The 1st is reporting to my credit and shows a late payment on 2/2011. We have never made a late payment on either. The 2nd is not reporting to either of our credit.
1st is with GMAC with a balance of $151k and had a modification to the rate after the discharge
2nd is with Greentree with a balance of $130k and a high interest rate
value of the home is about $220k
We can’t afford to make the payment on the second now due to a recent birth and new Childcare expenses. We had tried to get a modification from them 2 years ago, but they only reduced the interest to 1% for 18 months and then it went back to the full balance and rate.
What will happen when we stop paying? How long can we wait to settle.
What happens if we move out? Can I get a mortgage since only my husband filed BK?
What happens if we try to sell in 3 years and haven’t settled the 2nd?
Thanks!
Robert Weed
If both of you had filed bankruptcy, I think you’d be in a good position to play chicken with Greentree. They know if you move out and let the house go to foreclosure, the first would get paid and they’d get nothing. So you can think about not paying them for a year or so and then see if they will cut the balance in half. If they won’t, be prepared to move out. (Successful negotiators are people who can walk away form the table and not look back.)
The problem is that you stayed out of the bankruptcy. Greentree is not hitting your credit, but they could still sue you if you picked up and moved out. If you applied for a mortgage, on your loan application, you’d have to tell them you had a debt with Greentree that wasn’t hitting your credit report. At that point, probably you’d get turned down.
You’re locked into this house because you didn’t join in the bankruptcy. (You could try not paying for five or six months and see what Greentree does. They may not know that you were not in the bankruptcy. They’d have to be pretty dumb–and you’d have to be real lucky.)
Chris
I have filed bankruptcy a chapter 7 a week ago and was a month behind. I received a Motion for Relief from the Mortgage Company. I have caught up with my Mortgage payments but not all the late fees. Do I have to catch up with all the late fees now or can I still work out something with the Mortgage Company or will they just start forclosure on me for not paying the late fees that has acquired over the months.
Robert Weed
If you are in a bankruptcy right now, you should talk to your lawyer.
Steve Johnson
Great Site, I like your advice!
Here is my situation. I live in WA State, I was a real estate developer that lost it big time. Both the 1st and 2nd were with CW now BofA (BAC Servicing). I was severed NOD in late 08, Filed Chapter 7 discharged in 11/09. After the discharge I started working with them on a loan mod, every time they asked I would send them updated paperwork nothing would happen for 3 months then they would ask for updated paperwork again. So, recently they denied my loan mod and just now sent me a letter suggesting a short sale program or deed in lieu. My wife wants to stay, I don’t care, it would be nice not to have to move. I owe $417 on the first and $159 on the 2nd ($576). The house is sell able at $479-$520, if you add what I owe to what I would have to pay to cure both loans it would be approx. $90-$100, that means I’m in the hole between $150-$200K. I haven’t made a payment for 33 months if you can believe that! They have not filed on me yet, I’ve been watching very carefully. I also believe they would have to serve me with a new notice of default.
Well I’m now back on my feet financially, and I’m in a position to pay the back payments and fees on the 1st. (which I’m sure I can negotiate down) but it wouldn’t make sense for us to pay the 2nd. If I cure the 1st, I can just let the second set there on the title until I decide to sell maybe 2-3 years down the road? I’m sure the market won’t come back enough for there to be any equity. I just want to know if I can sell at any price above the first? And, I’m assuming they take what ever they can get on the 2nd, but do they have to release the lien from my title so I can sell? And, my credit has been slowly improving what effect does that have? I could also pay off the first, but I guess that wouldn’t make sense because I’m sure I would get a clear title? Anyway, any advice would be greatly appreciated.
Robert Weed
The second remains as a lien on the title to your house. And no, they do not have to “take whatever they can get” a few years down the road if you go to sell. They can block you–if they want to–unless you can pay them in full.
If you want some equity that you own, rather than wait for a sale, I think the time to negotiate with them is now. You say you are back on your feet financially, and that could mean a lot of things. But a bet the second would be glad to consider a cash offer of 10% of the balance.
Obviously you only want to settle with the second if you are sure then that the first is not going to foreclose you; so you need to negotiate with the first at the same time to get a catch up agreement.
As a fall back–and depending on exact appraised values–you could do a Chapter 13 to catch up the first mortgage and knock the second completely off. You’d need an appraisal below what you owe–counting everything you’re behind–on the first. I talk about this at http://virginiasecondmortgagerelief.com/. It looks like from what you say that you just MIGHT barely get an appraisal where you’d need it.
Of course just moving out is still an option.
Suze B
Thanks so much for your comments. Our bankruptcy was discharged in 2009. I quit paying our 2nd HELOC last April, 2010. I just contacted Wells about a month ago. Our HELOC was $200,000.00. I offered $15,000 to settle. We owe $350,00.00 on our first and our house is worth about $405,000.00 Wells has agreed to accept $20,000.00 as settlement for our HELOC. I am very happy with that settlement. I just wanted to make sure that can no way 1099 us for this debt since it was discharged already.
Robert Weed
Good negotiating; and thanks for telling us about it.
Right, they cannot 1099 you on the settlement because it was discharged in the bankruptcy already.
Melissa
Our situation is similar. Our ch. 7 bankruptcy discharged in december 05. We included the mortgage and did not reaffirm. In 2008 we had to get a 2nd mortgage (heloc) to pay some medical bills from our credit union. At the time we did not realize that the loan was structured so that it was front loaded with interest. Over the course of the last 3 years with this loan we have paid off less than $2000 (we owe $18000 now). Since our bankruptcy we’ve had 2 children and really want to move! We’ve had the house up on the market twice in the last 2 years and have not received one reasonable offer. At this point to sell it at what the comps are going for in our area we’d be having to bring close to $18,000 to the closing to break even…which we do NOT have. We’re so frustrated and feel like we are throwing money into a bottemless pit. We are worried though that foreclosing that second mortgage would kill our credit (which is pretty good at the moment) for years to ever get another mortgage. We are clueless how to get out of this.
Robert Weed
Your problem is that you have an after-bankruptcy second mortgage.
It sounds like your house is too small for the size family you have now. You’d be eligible to file a Chapter 13, which you could use to knock the second mortgage off the house; but that doesn’t make any sense if the house is too small.
You’ll be eligible for another Chapter 7 in December 201300that’s still pretty far off.
They are not going to foreclose that second mortgage if you don’t pay them; but they will sue you for it. Have you tried to get a loan mod form the first. If you can get that payment down, you can rock along for a while.
There’s no good solution to your problem that I see. Maybe a lawyer who knows the local situation better than I do would have some ideas.
dkr
hi good day my husband and I file chapter 7 our lawyer did not advise us properly we did not know we could file chapter 13 and wipe out the 2 loan its been 17 month since the case was discharge the first was modifie and the second that is with BOA they said it as a mortage insurance so BOA dont want to modifie want can we do thanks
Robert Weed
Without knowing a whole lot more detail, can’t give you any more advice than the general comments I have here.
Robert Weed
Don’t know enough about your situation to tell you. A good lawyer would spend an hour or so going over everything to get your best plan. But I can tell you that you would be eligible to come back with a Chapter 13 and remove the second mortgage–with most judges anyway, some might not like it. So if the value of the house is less than you owe on the first mortgage, you should get a good bankruptcy lawyer to look at whether filing a Chapter 13 to remove the second mortgage makes sense for you.
My post here, on just not paying and then trying to settle later, also is something you should think about.
Then there’s always just not paying the second. Depending on how good the loan mod is, how long it is before you think there will be equity, and how long you need that house. Things like your age and the age of the children come into play there.
avs
Hi there,
My parents just filed for Ch. 7 in April and the second mortgage has filed an Order to grant motion for relief from automatic stay and it looks like it was granted.
In their case, they owe on their first about $90,000 and their 2nd $100,000 and it their property value is about $196,000 so because their value is more than what is owed on the first, can the second mortgage still foreclose on the property? Can my parents try to negotiate with the second at all to see if they can still stay with the house? What can they do in their situation?
Robert Weed
You’ve looked at the math and you are afraid the second in this case will go ahead and foreclose. I’m afraid of that too.
Now the second would probably lose maybe $40,000 at a foreclosure sale, so your parents should have some bargain power. But I’d think the second would want something substantial as a payment; your parents should see what they can work out, or begin to look around for another place to live.
But don’t move out! Don’t know what state you are in–but it could take a year or more for the second to actually foreclose.
Katherine Groters
Thank you so much for your post. I’ve been trying to gather information online to determine what I should do with my 2nd and this information has been very helpful.
I am in CA and filed Chap 7 in 2010 (discharged Aug 30). I have been paying (min pymt amt) on the 1st and the 2nd (through Chase) on time since the discharge. If I can remember correctly when I filed chap 7 the mtk value was $40-50 below the bal of $180 (of the 1st). My 2nd was $70K. My second is a little different in that $60K of that was a 20 year fixed rate loan (Washing Mut at the time) at 7.25% interest. The remaining $10K was like a revolving line of credit (variable instr) so my monthly payments for the $70k is $575/mo.
My son is starting high school this Aug and I like the area and want to stay put so he can complete his high school years at this school. Then will probably look to rent elsewhere in the area. If I HAD to move into an apt right no I would – but my condo shares only 1 wall with neighbors (it’s a triplex), no one below or above me and has an enclosed garage. Renting in this area might be only $100 or $200 less depending.
I’ve experienced almost annual roof leaks from rains and the ceiling is noticably stained. The HOA is rediculously high (doubling in the 10 yrs I’ve been there) – so I don’t forsee holding on to this place long term. (I’m wondering anyway if I would run into issued with BofA if there ever came a point of trying to sell years later when I never reaffirmed the loan).
I’m wondering to myself why I should continue paying the 2nd at $575 a month and if it makes much more sense to just stop paying (and/or later maybe try and negotiate a settlement with them as mentioned in your post). If I stop paying will I be bombarded by credit collection calls then (nerves of steel?); will the 2nd try and foreclose?
Unfortunately my bk lawyer wasn’t very helpful with any questions I asked or attempts to understand how everything worked and effected me now and in the future.
Thank you for your response!
If I do end up negotiate a settlement (later)
Robert Weed
You’ve laid out the details of your situation very clearly, and based on what you say, I think you should stop paying the second.
No, they cannot bombard you with collection calls–that would violate the BK discharge. You need the nerves of steel if they start sending the notices they need to foreclose you. I don’t think they will follow through–it’s just a way for them to lose more money. But that’s where the nerves of steel come in.
Kate
Hello Robert, Thanks for your advice in 2011 as I have done exactly that, stopped paying on 2nd and continued on the 1st, never late pymts.
Flash forward to 2015 and the 1st mtg (which was bought by Nationstar) is currently at $152K. I received (many) settlement offer letters from Chase over the past few years, none of which I acted on or contacted Chase about. I was still intending to ‘walk away’ eventually. Son graduated this year and looking around at rent in the area (I like area a lot), and if I include the 1st mtg with HOA fees, I’m still paying $300-400 less a month than I would be paying in rent. I’m starting to think about the possibly of settling with Chase to release the lien and then try and refinance with Nationstar. The latest settlement offer from Chase is 3 options, one being a full payment (which I would prefer to do) at 15% of the bal (which is $67K); so for $10K they are stating in the ‘offer letter’ “Once your settlement pay off is complete, we’ll release any remaining lien(s) we may hold on the property.” I did contact them with questions and given a name of a negotiator however they were out of the office until nxt wk. If I were to do this I would want clearly outlined, detailed specifics from Chase that upon my pymt the lien would be removed (before I mail them anything). I’m wondering though, if I should continue to hold out to see if the offer amounts drops to 10% in the next year or counter offer at a lower %. They did say from start to finish once they received pymt, it could take 30-90 days to complete the process of lien removal with the county. If I were to do this, would this in any way negatively impact my credit?? Once lien is removed I would be looking into contacting Nationstar to see if I could qualify to refinance. The property values are going up (and insurance will prob start to increase in the near year or so…) – Researching comparable properties that have sold in my neighborhood this year, I’m looking at MV of $210-$220K.
I’m rethinking refinancing and keeping the condo because rent is so high and, I would be able to afford a $152K pymt (even including $333 for HOA) much easier than an apt rent of $1750+ I don’t know how long my son will living with but I could swing the payments on my own (and even pay more) so that I could even possibly pay the mtg off in 20 yrs or less. ….would be nice to have a place (albeit small) paid for when I’m at retirement age!)
Anyway – any suggestions would be appreciated. I don’t want to waste the time (and especially money) settling on the 2nd with Chase, to not be able to refinance so I’m trying to think of (and think through) everything. Any suggestions, ideas, insight would be greatly appreciated.
Best Regards,
Kate
Robert Weed
Kate:
I’m glad my blog has been a help to you–and you have clearly thought very carefully about what you are doing. Thanks for sharing your experiences.
You are way ahead of my in your knowledge of your local situation, so I really can’t add much. You seem to be on the right track. Whether to deal now or hold out for more, I really don’t know any more than you do.,
The one thing I can say is that settling with the second should have NO tax consequences and NO impact on your credit report. That’s because your personal responsibility for that debt was wiped out in the bankruptcy. So you are in a good position now to cut your best deal with Chase.
Kate
Thanks so much for your response and for confirming that there wouldn’t be any negative impact on my credit or taxes by settling with the 2nd.
And thank you for continuing to post and help those of us who find themselves in such situations and not sure where to turn. You have been more help to me (and others I’m sure) than you could ever image 🙂
Kate
Robert Weed
Kate:
Thanks for sharing your experience. And thanks for your kind words.
charles
Hi there
My parents are about to file for chapter 7 or 13, we live in illinois they owe $210,000 on the 1st and $130,000 on the second, the house is worth $130,000 my question is will they wipe out the 2nd morgage? and if we keep paying on the 1st can we keep the house?
Robert Weed
If you keep paying on the first, you can keep the house. A good bankruptcy lawyer might spend over an hour with you on whether chapter 7 or chapter 13 would be better. Some of that is the personality of your local bankruptcy court, but a lot of it is your complete financial picture, age, health life-goals, retirement plans, the works.
Thuy
Hi Robert,
Thank you for the informative blog regarding 2nd mortgages. We filed Chapter 7 and the case was discharged in July. We are 15 days behind on our 1st and 2nd mortgages. After reading this blog, we are considering paying our 1st mortgage and not the 2nd. We live in San Diego, CA. Our house is worth about $400,000. Our current balance is $246000 with Provident Funding (1st) and $183000 with the 2nd through Citibank. What is the likelihood of Cititbank foreclosing on our property since they are not completely underwater? We would really like to keep our house but we must get a much lower mortgage payment or we can’t afford it. If Citibank decides to foreclose, how long would we have before we have to be forced out? Any suggestions or advice is greatly appreciated. Thank you.
Robert Weed
You’ve laid out your situation clearly and I certainly think you are right that it’s more important to pay the first than the second. But real estate markets are local and foreclosure laws are set by the states. So I just don’t have any more to share on whether Citi is likely to work with you on the second, or foreclose, or just let you sit. It depends on local factors that I just don’t know anything about. Good luck.
John
Upside down in a house to the tune of about $70,000.
Single household income of $85,000
$80,000+ in credit card debt, about half of which is from spouse’s business over the prior 6 years
Too much income for a 7?
Where do we go from here?
Robert Weed
Are you in Virginia? For me to answer that question, you’d need to: download all my forms and fill them in; and go over everything with my paralegal. Then I would: have my paralegal type all your budget into our computer; meet personally with you for an hour or more to discuss your budget, the budget allowed you by law (which is based in part on your state and even your county), your goals, and what your choices would be under the law.
Then we almost always can agree on “where to go from here.”
Shannon
Quick question: My husband and I filed for Chapter 13 last year. We had a first and second mortgage that were only included to the amount that was past due. I have been paying these mortgages but am interesting in seeing if I can negotiate a settlement with the 2nd mortgage company (the amount owed is about $25,000). I know that I have read that you must stop paying in order to get them to talk about a settlement but if I miss a payment I receive a letter from my lawyer that the mortgage holder has reported this and I must pay it. Is this the case? What repercussions should I expect if I don’t pay the second in order to try and reach a settlement in the next 6-9 months?
Thank you so much for all your help! This site has been tremendously informative!
Robert Weed
Not a quick answer to your question. Sorry.
When you get into a Chapter 13, you have now promised the bankruptcy court–and been ordered by the bankruptcy judge–to make those payments. That causes a lot of problems including that when the Chapter 13 is completed, you still owe that second mortgage. It’s not just attached to your house, they can still come after you, too.
Now, in most courts anyway, if the value of the house has fallen below what you owe on the first mortgage, you can use Chapter 13 to knock the second mortgage off there. Here’s my page on that. http://virginiasecondmortgagerelief.com/. You didn’t do that. Maybe your judge doesn’t see it that way. Maybe it’s because the value of the house was too high. (Or, looking at it the other way, the amount you owe on the first is too low.)
If the value of the house is that high, then maybe the second mortgage won’t work with you. Maybe they’d foreclose, you.
When people come to see me behind on both mortgage and wanting to keep the house, I spend hours trying to see if something other than Chapter 13 will work. But sometimes Chapter 13 is the only thing that will work.
Jim
I live in fla I have a first morguage of 70,000 on my home and a second of 98,000 I have not payed the first in 7 months and the second in 10 the first and second were with boa they r threatening foreclosure on the first and have sold the second to real time solutions who is also threatening foreclosure. My question is I have the money to catch up my first morguage but I’m worried if I do that can the second still foreclose ? The market value if the house is around 60,000. I would like to stay in it a couple more years until my son is out of colleage. Any and all sugestioms r welcomed thanks great site
Robert Weed
BoA sold the second to Real Time Solutions because they knew they would lose more money if they foreclosed the second. Have you filed bankruptcy? If you haven’t, what Real Time will do is try to sue you for the money. That’s the problem.
You need to talk to a lawyer there in FL about filing bankruptcy so Real Time can’t come after you personally for the money. If it looks like that will work, then would be the time to catch up the first mortgage.
Nancy D-S
BK Chapter 7 Discharged 8/2010 Virginia
Mortgage w/HFC –included in Chapter 7
BoA Equity CreditLine –included in Chapter 7
Trying to do a DIL but HFC sez that BoA has a lien on the title. BoA sez yes they do and they won’t release it until someone pays them the $37,000 owed or the home is foreclosed. …but I can’t foreclose w/out a clear deed, right? WTHeck?
Robert Weed
Right–the Chapter 7 discharges your personal liability on the BofA Equity Credit line, but it is still attached to your house. So you cannot sell it–or do a deed in lieu–unless BofA agrees.
On the other hand, why do you care about a deed in lieu? If you want to stay there for a while longer, try to work with HFC. If you can’t work with them, move out and let them foreclose.
Unless there’s something I don’t see, doing the work to line up a deed in lieu is just work down the drain. Get started on your new life.
Tim
Hi Mr. Weed.
This is a great website and I thank you for taking the time to respond to the emailers.
I have a situation in which I’d love some advice. My wife and I had a failed business and received a ch 7 discharge in Nov. 2008. We have a house valued at about $400k, 1st mortgage of 270k to Nationstar, 2nd at $100k to TD Bank and an SBA loan for the failed business at 250k. Obviously, in total, we’re upside down and I have no interest in trying to pay it all. Our strategy was to pay on the 1st and 2nd for a minimum of 2 years to get beyond that ‘2 year window before getting another mortgage’ and not get foreclosed on which we’ve done. Now, we want to move. I don’t think our 1st or 2nd is reporting our payments to the credit bureaus so, I want to stop paying on both and put our house on the market for approx. $385k and believe it would sell relatively quick (within 6 months). I would imagine, at some point, the foreclosure proceedings would start but, if we sell before the actual foreclosure, then it won’t be on our credit report which means we’d be able to get a mortgage for the next home. I’ve read, in Connecticut, it’s taking approximately 400 to 500 days to actually foreclose – not sure how accurate that is. Do you think it’s worth the risk of not paying and saving that money (about 2500 a month) for the next house?
Thanks for your response!
Robert Weed
I know less than you do about how long it takes to foreclose in Connecticut, but I agree it’s time to stop paying the first a second. Your credit report should show bankruptcy whether you pay or don’t pay. Cash is king in bad times; and not paying the mortgage can save a lot of cash.
You are trying to do a shortsale for the house at $385. It’s a shortsale because the SBA has to agree; the bankruptcy ended your personal liability on that loan, but it is still attached to the house. I don’t have any idea what they would want to approve the sale. I’d hope it wouldn’t be much, but don’t know.
I’m less hopeful that you seem to be that you can buy again soon. You need to get two years past the bankruptcy and you’ve done that. But I think you need to be three years past the foreclosure–and it’s still a year or more ahead. We’re not talking about a foreclosure showing on your credit report–the bankruptcy protects you from that. But a foreclosure in the land records. Two years after the bankruptcy–but three years after the foreclosure. That’s what I think the rule is.
Getting a shortsale–meaning the SBA loan agrees to let you sell the house–knocks a year off that three year rule. Two years after the bankruptcy; two years after a shortsale. That’s one reason to see if you can get that done.
Susan
Hi Mr. Weed,
I live in Baltimore MD and my chapter 7 bk was discharged in May 2009. Both of my mortgages were included in the bk and I have not reaffirmed them. I was able to get a modification on the 1st but not the second. Both are with BofA. I am also current on both, however I am about to take a big cut in pay in October which will make it impossible to make the 2nd mortgage payment. Here are the numbers:
1st Mortgage = 173k
2nd Mortgage = 48k
Current home value = 135k
If I have read your blog post correctly it would make sense to stop paying the 2nd. Here is the other part. I want to stay in my home……till they carry me out in a box. What do you suggest?
Robert Weed
Don’t know how old you are–how close you are to being carried out “in a box”–but you don’t have to worry about them foreclosing on the second mortgage until the house is worth a lot more than you owe on the first. I don’t know what real estate values will do over the next twenty years, but for sure that’s more than ten years away.
So just stop paying; save a little money, and in maybe three years if values are creeping up at all, maybe you offer them three or four thousand to release the second. As I say, that takes “nerves of steel.” But paying the second with your numbers is just throwing money away.
Tim
Not sure I completely understand. We’re not in foreclosure (yet) but have no interest of getting foreclosed on (I feel that’s a worse thing to have on your credit if we want to buy right away). I plan on selling prior to the actual foreclosure so I don’t “think” we’d have to wait the additional 2 or 3 years, right? If I stop paying now, I’m guessing that we would need to sell within a year or so before the actual foreclosure takes place.
Thanks again.
Robert Weed
The only thing I’m saying is you cannot sell without the approval of that SBA loan that’s attached to your house. You are talking about selling like it’s going to be easy. The big question is how much money will they want to release the SBA loan–because there’s no way it will sell for enough (based on what you told me) for the SBA loan to get paid in full.
So then it’s a short sale. A short sell has impact on your ability to buy again, although less than a foreclosure. That’s a little outside my area of knowledge, but I think either way you will have trouble getting approved to buy a new place right away.
Hopeless
Hi, my bankruptcy was discharged on April 22nd 2010, Chapter 7 in GA. I choose to keep my house its has 1st mortgage $206000 and 2nd $46000 and Home Equity Loan $3500. The house was appraised by the latest property taxes at 245000, if I’m very lucky maybe could sell it for $260000. (very good schools)
Should I stop to pay the second mortgage without to wonder I will be kicked out? I have 5 more years to pay left, I payed all the interests (8.25%) and the first mortgage has until 2015 only interest (7.24%) after variable we don’t know yet. I put a lots of money to improve the house I really would like to stay in but I’m struggling each month to pay $2600 mortgage. I asked four time the bank for loan modification they said no because I’m making my payment every month even if I’m not eating enough. I desperately would like to rebuild my credit, I filed because I closed down a business. Thank you very much for your advise.
Robert Weed
In bankruptcy, everything is upside down. Good is bad; and bad is good.
So it is bad that you have good schools–it means the bank thinks they can sell your house easily if they foreclose you. And it’s bad that you put lots of money to improve your house–that also means the bank thinks they can easily sell your house if they foreclose you.
What’s good is that you have a very bad interest rate. 7.24% is very bad. Banks now are making loans at less than 5%. So they could come down to say 5.24% and still be making money on you.
But they will not make as much money on you at 5.24 as they are at 7.24. So they are not going to come down as long as you stay current.
What should you do? I sure don’t know. I know only a little about you, and I know noting about where you are in Georgia. My experience is in the outer suburbs of Washington DC, with people whose house values have fallen a lot more than yours have.
But I do agree with the one thing they have told you. They will not give you a loan modification if you stay current. If you can’t afford that house payment and afford to eat enough, at some point you have to decide whether eating is more important.
When you do that, the bank has to decide if they would rather leave you enough money to eat, or take your house. I don’t know which one they will decide.
A.T.
1st with Chase $268,000 2 months late
2nd with Citi $24,000 haven’t paid in well over a year
House is valued at about $160,000
Chapter 7 (including second) went through 8 months ago in CA.
Of course Chase is already threatening foreclosure.
My first attempt to renegotiate my loan dragged on for 18 months being stalled by Chase, and they finally said they could do nothing for me because I was current on the mortgage. This was a major factor in my finally having to claim bankruptcy. But, I digress.
Now, I’m NOT current on my mortgage, and cannot afford the original terms, but I can’t renegotiate with Chase with Citi’s lein on the house. I’m thinking I’d likely be able to negotiate ten cents on the dollar on the second as the house is so far upside down (I was sooo jazzed to see that figure on your site, as it was what I thought was reasonable to offer all along!). But, is this just throwing good money after bad?
We want to stay in the house, and in fact are willing to pay 10-20% over market value in order to stay, but Chase has been so miserable to deal with, I truly think they’d rather lose an additional $30,000+ just to spite us, and we don’t want to pay a cent toward the second if we are going to have to move anyway.
What would you recommend we do? I could get a cosigner, and probably come up with some cash toward a renegotiation of terms, and pay 10% to wipe the second, but is it possible to do this all at once? Is it possible to renegotiate directly with Chase and have them pay off the second as part of the terms? I can drum up the nerves of steel, but I’m needing some direction.
How long is the MINIMUM it can take once officially served notice of foreclosure proceedings to when I’d be kicked out?
Thanks for all your help. Lots of good info on this site; actually made me feel a bit less horrible about my situation.
Robert Weed
Let me answer the easier question first. I have no idea how long it will take Chase to foreclose you in California. I’m in Virginia where the steps to foreclose people are maybe the easiest in the country. And all I can say here is that it’s often five months, sometimes longer, some times a lot longer. In California it may be longer than in Virginia. How much longer; I have no idea.
Your big statement is this. ” I can’t renegotiate with Chase with Citi’s lein on the house.” I know dozens of people who have negotiated on the first when there’s an unpaid second on the house. Even when both are with the same company; even when they aren’t. I think you just work directly with Chase. They don’t care about that second. Don’t think you should either.
The point of my blog is this. People who are way upside down on the first mortgage should concentrate on working out somehting wiht the first mortgage. The second is a problem for next year, or the year after that, or the year after that.
christy
Hi Robert,
Have been reading several answer and question posting on site but your reply is the best ever.Thanks for this site.
Now my scenario is this, I lived in Los Angeles CA.,was discharged in Chap7 this Aug 2011, I have a second home that is underwater with 2 mortgages under Chase bank, 1st mortgage modified my loan for 4.1%for 5yrs during the course of my BK 2nd loan is not instead they send me a letter to re affirm it which my lawyer adviced me not too, Now i am paying my 1st mortgage but not the second one. I was treatened before by the 2nd loan that it will survived the BK. I havent recieved any paper from the court that 2nd loan put lien on my property, but on my credit report before my BK it says remarks profit and loss write off. Also the property was place on auction on 2009 but stopped when my attorney filed a request for modification…Please adviced me
current value —–$400,000
1st loan—————$550,000
equity loan———–$122,000
Robert Weed
That’s what my blog here is about. They cannot bill you or call you and they only lose more money if they foreclose you. So they will do nothing. If you want to stay in this house for a long time, then my “nerves or steel” suggestion is this. Save a little money every month for a couple years. Then, after they have a lot of experience with getting nothing, call them up and offer say ten cents on the dollar. There is no guarantee that will work, but there’s a good chance it will.
Your lawyer for sure told you the right thing telling you not to reaffirm. That would have been really bad.
K
My bankruptcy discharged in 10/10. I am currently in a house with both a 1st and 2nd that were not affirmed. The home is worth about $440. My 1st mortgage is $336K , so not underwater…but when added to the 2nd $117K , it is. I am current on both loan, but after finding this site….I’m thinking of not paying the 2nd as values in my neighborhood aren’t increaseing. In this situation do you think that it would be worth it for the 2nd mortgager (Wells Fargo) to foreclose, since the underwater difference is not that much. Any information would be much appreicated. Thank you.
Robert Weed
Wow–your risk on the second foreclosing is whether there’s equity after the first. I’d be real nervous. I often advise my clients to stop paying the second mortgage when they are 75,000 under water on the first. You are in a much different situation.
If your youngest child is 16 and you plan to move to a smaller place when she’s out of high school–then maybe you stop paying the second now. Or if you are two years from retirement. But if the kids are 12 and 9, I’d be real nervous.
The thing you need did not tell me is how really attached to this house you are. How willing are you to take a chance? You would definitely be taking a chance.
K
Thank you so much for your response. This is great forum. I wish I had found it prior to the bk so that I’d have you for an attorney! To answer your questions, I’m not attached to the house. However, I do have a young (2) child and am a single parent, so I don’t think the addtional stress would get good for either of us. What perhaps is a better plan is to wait the two years till the stigma from the orginial f/c and b/k (on an investments property) are up and I can buy a house in a better schoool district. If at that time, or just before, the market doesn’t hold equity, walk away from this house just prior, or after closing on the new house…at that point , I think(?), there would be little or no reprecusions. Perhaps it makes sense not to walk away while the risk of anothr f/c is high and it’s cheaper to life in this house, paying the 1st and 2nd, than it would be to rent in a similar area . Your comments would be appreciated. Thank you very very much.
siteman
Bankruptcy keeps them from doing either of those. The second mortgage can sell your house at foreclosure only if they pay off the first mortgage. If the value of your house has dropped below what you owe on the first. They are not going to do that. The bankruptcy still protects you from both of the mortgages. Your comments would be appreciated. They are very organized and have a methodical approach to their business that has made it a lot easier for us to understand and provide the information they need in order to help us. I could not imagine a better Bankruptcy Attorney. At no point did we feel judged or criticized. The videos and information provided enabled me to come prepared for each meeting which made everything go smoothly. Everyone was professional and knowledgeable. The whole process was painless and efficient. I would recommend them to anyone in need of their services. I appreciated their humor and understanding of a difficult situation.This is a great post.
Steven Szurgot
My question is regarding my bankruptcy and retain and pay. Currently my home is up for. Sale and I have a short sale pending. I have recently relocated for several reasons and do not intend to go back into the home. If my short sale falls through is it true that I am not obligated to pay on home if I so desire and there will be no deficiency balance towards me. It seems to me thati am doing the bank a favor by short sale of the property at least they would reciprocating some money back. As of this month I stopped making payments on the property. Until now I was current thank you for your time.
Robert Weed
You skipped ahead of me. Have you already filed bankruptcy?
JR Reyes
My Chapter 7 was discharged in 5/10. Our 1st mortgage and HELOC was included in the BK. Both mortgages were not affirmed. We are trying to refinance. The title company is wanting us to reopen our bankruptcy case in order to file/record an avoidance of lien for the HELOC.
Robert Weed
JR As I explain in this article, you can’t avoid a second mortgage in a Chapter 7. There used to be a few Judges that said you could, but I don’t think there are any anymore.
Marianne
My husband and I are preparing to go thru a divorce. We filed for chapter 7 Bankruptcy back in 2007. We have 2 mortgages on the house and we reaffirmed the first mortgage, but not the second. We checked our credit report and the second mortgage is showing as discharged. We kept paying on it at the time because our house was worth more than we owed, but that is not the case anymore obviously. We owe $250,000 on the first and $28,000 on the second and the house is worth about $175,000 at the most. We are considering letting the first bank foreclose on the home, but if that happens, there will obviously be no money left to apply to the second mortgage. From what I understand, even tho the second was discharged, the lien still exists….so if we go thru a foreclosure and there is no money afterwords to apply to the second, can they come after us for anything or are we safe because of the discharge?
Robert Weed
The bankruptcy still protects you on the second mortgage–the lien gives them the right to get paid at the foreclosure if there’s anything left, but that’s all. I am really sick though at the thought you reaffirmed the first mortgage. It helped your credit score, a little, if the first has been reporting you as current, but now you will have a foreclosure and you’ve trashed your after bankruptcy credit. They might sue you for the difference, too, depending on what state you live in.
My clients sometimes want to reaffirm those mortgages and I say No, no, no no. The advantage of reaffirming a mortgage is not much; and the disadvantage can be so enormous.
Marianne
Honestly, we wouldn’t have done it had our attorney not told us that we had too. He made it sound like if we didn’t reaffirm the mortgage that we would have to surrender the house. Otherwise, we probably never would have signed. I am rather sick about it now myself. We live in Illinois and I know they could come after us for the deficiency….but I also know that sometimes you can negotiate with them not to pursue you for a deficiency after the foreclosure or a short sale. Do you have any advice on how to negotiate with the mortgage company not to pursue a deficiency judgment?
Rich B
I have a 1st and 2nd mortgage that has been discharged in a Chap 7 bankruptcy. I am currently paying the 1st mortgage and not paying on the 2nd due to no equity available in the home. The 1st mortgage is an adjustable rate, and even with rates going lower, they re-evaluate the payment structure each year. What would a 1st mortgage creditor do if you only made partial payments to them enough to cover the interest on the loan. Would they immediately go to foreclosure or would they give us a few years before foreclosing? What would you recommend if the payments increased to a level of not being able to pay the monthly payment?
Robert Weed
There’s no saying for sure. It depends on a lot of things–how much is the house worth compared to how much you owe. How long doe it take them to foreclose in your state; and how willing are you to walk away? (Negotiations are won by people who can leave the table.)
Have you applied for a loan mod; now might be the time to ask them to put you on a new 30 year fixed deal.
Sal Hernandez
I have a first and a Second Mortgage that has been discharged in chapter 7 bk. I am current on my first but I have fallen back on my second. My first loan is 264k and my second is 124k. The value of my home is about 315k. What options are available to my second mortgage lender?
Robert Weed
It looks like the second would get at least some money out if they forced a foreclosure. (How expensive and difficult for the second to do that depends on your state law, and I have no idea about anywhere other than Virginia.) So you can not be totally confident about just ignoring them. I’d get in touch and see if you can work something out.
Margarita
Even that I am not in your area, PLEASE help me! I applied for Bankruptcy-Chapter 7th (I have a meeting on Nov. 8th). I have 2 houses: In one I didn’t pay for almost 1 year and the 2nd.(I am paying on time and I want to keep it) What is going to happen if the lender of my first house sell the property for less than what I originally owe, there is a risk that the bank will attempt to collect the deficiency against to my other property?
Robert Weed
No, the lender on the house you are giving up cannot come after you for the deficiency. That’s why you filed bankruptcy. So they can’t.
Joe
I have a 1st and 2nd mortgage. We filed bankruptcy back 3 years ago and never reaffirmed the 2nd mortgage, only the first because we want to keep the house. I owe more on my 2 mortgages than the house is worth. I have been paying the 2nd mortgage even though it was discharged in the bankruptcy. I will not be able to pay the 2nd mortgage for about 2 months due to financial problems. If I start payig them again after the 2 months is there anything they can do? And is there a way to call them and offer a percentage of what I owe to get them to settle?
Robert Weed
I might have a little more advice is you gave me more exact figures. If the second would get most of what they want in a foreclosure sale, then I doubt they would drop down much at all. And if you’ve been paying for the last three years, that does not encourage them to negotiate either. They are more likely to come down if they think you don’t care and are prepared to walk away.
Terri
Last year we filed a Chapter 7. I have never been late on the first and have it currently modified by the making of home affordable program. I reaffirmed with my second and they told me they would work with me as soon as I modified with my first. I finally did and they said “oh sorry we actually cant” it got to be where we couldnt afford it anymore. I am in default now for about 5 months. I owe around $200k for my first and $45k for my second and my house is only worth now around $180K. I figured through reading that they would lose money if they tried to foreclose because their is nothing in it for them. I keep getting attorney letters saying they will take action if I dont pay. Do I keep ignoring them, hoping to settle? I dont want to lose my house!!! Am I in danger with what I am doing????
Robert Weed
Ouch. You really weakened your bargaining position when you reaffirmed your second mortgage. You really need to talk to a lawyer in your area and go over all your choices.
bob smith
We filed for bk chpt 7 in 2009 discharged in 2009 . We have a first and second mortgage. We can afford the first but not the second we have been paying on both for the last two years. We are current on the first but the second we were 6 months behind but they did not charge us off we started paying on it and they actually added three months to the back of the loan to make us only 3 months behind. the first mortgage is a balance of 207,000 and the second is 76,000 house value is approximately 188,000 foreclosures have sold for the same style house etc. for 190,000 should we continue to pay on the second or just say hey we can not afford it anymore and how long would it take before they would foreclose on us. How much equity would have to be in order for them to foreclose. we did not reaffirm our mortgages.
Robert Weed
I’d stop paying on the second for maybe three years. And then, if you want the house for the long haul, offer them maybe $7500 to call it square. That would be the wrong strategy is real estate values really shoot back up but I don’t see it. Of course I don’t know where you are, but I doubt they shoot up much anywhere. This does take nerves of steel though, and you need to be willing to move out if they force the issue, unlikely as that is.
Charles clemente
I had a 1st and 2cd mortgage I refinanced in 2012 to combine both but hsbc said they wrote off the 2cd mortgage and gave mea loan modifaction for the first mortgage years later green tree says I owe them for 2nd mortgage I made no payments in 7years charged no interest on loan what do I do now with forecheck on 2nd loan
Robert Weed
Charles:
You need to find where HSBC said they wrote off the second mortgage. Second, you need to talk to a real estate lawyer in your area, or a consumer lawyer or both. One places to look is here. https://www.consumeradvocates.org/find-an-attorney
Susan
I have a situationt hat is similar to many I read about on your blog but with a twist. Here it is. I have a first mortgage on my home for $170,000 (approx) and a second for $48,000 (approx). My home’s value has plummeted to $135,000. Obviously underwater. Both mortgages are with BofA. I stopped paying my 2nd in August and yesterday I received paperwork from BofA informing me of their intent to begin foreclosure. I am current on the first. I received a permanent modification on the first mortgage.
Here is the twist. I filed Chapter 7 bankruptcy two years ago and both mortgages were discharged in that filing. I want to keep the house but I cannot afford the $500 monthly payment on the 2nd. My salary has been frozen for two years while my health insurance and other expenses have increased. Additonally, I lost my room mate of 10 years who was paying enough rent to cover half of the mortgage.
I know it would be stupid for BofA to foreclose on the second since I am underwater on the first and they would be throwing good money after bad but so far they haven’t convinced me that they aren’t that stupid. I mean look how we got into this mess. My credit is not going to be affected by late payments or foreclosure since the debts were discharged so that is not an issue for me. I just want to keep my house and continue the first mortgage payments. What should I do now? I live in Baltimore, MD.
Susan
John
In my situation I have a 1st mortgage of $307K and a 2nd that is $77K. I have a family and live in great school district and want to stay in my house. I have not filed a bk yet trying to figure out if 7 or 13 will work better for me. I tried doing a mod on my 1st w/ a HAMP but learned the need for 2nd to subordinate which I didn’t want to do because my house is worth right around what the first is at maybe $5K more or $5K less. I haven’t paid on my 2nd for 3 years so they are use to getting nothing. I am working on a new internal mod with my 1st that doesn’t require subordination from my 2nd. I was paying on my 1st under the HAMP plan for 6 months until it expired as I learned about 2nd and haven’t paid on my first in the past 6 months. Do you think doing a chapter 7 then offering settlement on 2nd is the way to go or should I sweat out a 13 knowing that my first is just about at market value although could be a $5K more or less? My realtor said my home value comes in very close to my 1st. Very unsure what to do but need to act quick to get past this and move on with my life!
Robert Weed
It’s a tough call. You didn’t tell me how old the kids are, which has some impact on your decision. I’d like the chapter 7 better if the kids are maybe 16 and 12, than if they are 8 and 5. You read my comments on the Chapter 7 strategy up above. For my comments on Chapter 13, look at this. http://robertweed-bankruptcy-and-second-mortgages.info/. For sure I’d spring for an appraisal, as part of the decision making.
Debbie
My husband and I are torn on what to do with our second mortgage. We filed Ch.7 and it was discharged in June of 2010. We never reaffirmed our first or second mortgages. We have never missed any of those payments. Our home is appraising {county} for right at what we owe on the first. Can the second mortgage company foreclose on us if we stop paying them? And if so, how long would the process take? Homes in our area have been selling for 10,000 or more under the county appraisal. Any help with this would be greatly appreciated!
Robert Weed
I’ve given you my best shot in my blog. Like I say there, not paying takes nerves of steel. (I have seen exactly one attempt to foreclose form a no equity second mortgage–which we have been able to block. I don’t know what would happen in your state.)
Debbie
Just wanted to say thank you!
DONND
WE LOST HOME IN FORCLOSURE, HAD A 2ND AS WELL- WAS CALLED A 80/20, DID THE SECOND GO INTO FORECLOSURE AS WELL
Robert Weed
Did you file bankruptcy? I don’t understand where this question is coming from.
Tim
Hello Mr. Weed, I placed a post on another one of your blogs regarding settling my post bankruptcy 2nd mortgage. You responded by asking me to share my story. Neither my first or second mortgage was reaffirmed when I got my discharge in July 2009. Just kept paying so I wouldn’t have to uproot myself and move. Then after a loss of income I stopped paying the second lien, GMAC, and tried working with them but to no avail. After battling them with on and off again negotiations for 3 months, I didn’t hear from them for an additional 3 months, except their notices to foreclose. I didn’t make a payment the entire time. Six months have gone by and I let them test my nerves and today out of the blue, I got a FEDEX letter in my door. GMAC is offering to settle the 70K second mortgage balance for $6900. They say that “upon receipt of the funds, they will release the lien and cancel the agreement.” The house is worth about 152K with a first mortgage balance of 150K and the 2nd mortgage of 70K. I just wanted to ask, is there anything else I need to do? I wish to accept the offer and I am able to raise the funds from a little bit of savings, and the rest from family and friends. I would then only have to worry about the 1st mortgage with Bank of America but that is affordable. I just wanted to find out if GMAC would try to pull something shady, like going back on their word after getting the money. Otherwise, I wanted to thank you and let others know that your website is excellent regarding this type of situation and the strategy works, at least it did for me. I have been letting GMAC test my nerves of steel, as you say, and sweating it out over the past 7 months from not paying a second mortgage. I was worried about a foreclosure and one day after my birthday, I received this offer. Basically, it’s settling for 10 cents on the dollar. I live in Pennsylvania and would gladly encourage people from anywhere in this situation to read your site. Thank you.
Robert Weed
Tim, that’s great. You have the deal in writing, so I wouldn’t worry about them double-crossing you. You should make sure to keep the papers. You have a lot to smile about.
nette
my husband and I filed bankruptcy in 2009. We included the double wide that we are currently staying in, which was discharged in the bankruptcy. The lender calls and ask if we are going to keep the home, we always evade the question. My question to you is can we still give the home back due to it was discharged in the bankruptcy?
Robert Weed
Yes. You can move out and owe nothing to the lender. Are you in a mobile home park? The tricky thing you need to watch out for is the lot rent. You still owe the lot rent as long as the doublewide is in your name. So you don’t want to move out until the lender kicks you out–but you obviously need a place lined up.
Tim
Hi Mr. Weed, I wrote an earlier post about my second mortgage holder offering to settle the 70K balance for $6900. The 70K was discharged in 2009 under Chapter 7. I forgot to ask you about one other item. Is the difference of $63100 considered a forgiven debt that I have to declare on my taxes? I’m assuming that since the debt was discharged through bankruptcy, there wouldn’t be any tax liability. This would include any settlements made after the discharge, but not totally sure.
Bonz
I have a 1st and 2nd mortgage with Chase. The value of my house is currently around $200,000.00 underwater. I owe $49,000.00 on my 2nd mortgage. I filed for chap 7 in April 2011 and both mortgages have since been discharged. I stopped paying my 2nd mortgage on July but I am current on the 1st mortgage. I owe $907.00 in monthly payments for the 2nd mortgage, but I’m paying $1965.00/month on the 1st mortgage. I received a notice of intent to foreclose today. Since both mortgages are with Chase, can the bank foreclose based on the 2nd mortgage default?
Robert Weed
I’m guessing that they are bluffing–that they send you that notice of intent to foreclose because they want to panic you into starting to pay. I have only seen one actual attempt to foreclose from an underwater second mortgage here in Northern Virginia. I don’t know if they do it in California, but someone around there would know better than me. There’s no doubt that this takes nerves of steel.
Bonz
Sorry, forgot to tell you I live in California. Thanks!
Mona
My friend in california has decided to let her house go into foreclosure. She has already stopped paying her mortgage and HOA going on to 3 months now. She bought her house in early 2009 so it may be just slightly underwater. She has a minor son who lives with her 50% of the time. Other than that, she has no other dependents. She makes around $63,000.00/yr, if not more. Since she bought the house, she has received several salary increase and did not get any pay cut. She has no financial hardship, but decided to stop paying her mortgage because she sees other people doing the same. I am worried that because of her situation, her foreclosure may result in a bigger ramification compared to others. She may not qualify for chapter 7. I know that banks don’t regularly go through the whole court ordeal and resort to wage garnishment, but what are the chances that this can happen to her? Can banks take a closer look at her finances and find out that she can very well afford to pay her mortgage? What other repurcussions can there be? She says that she just plan to rent after the foreclosure. Thanks.
Robert Weed
I don’t want to comment on that. If she were my client in Virginia we’d get pages of information and spend about an hour figuring out what she should do. Guessing based on partial information just confuse the situation. She needs to talk to a lawyer in California.
Mary
Any advise here would be appreciated. I have a 2nd I have not paid for 3 months now, values listed below. Both loans discharged in Chapter 7 bankrupcy June 2010.
Property Value: 240,000 (Zillow)
1st Loan Balance:246,180.69
2nd Loan Balance: 57,000
Stopped paying 2nd after a requested modification, what they returned was terrible for us, and we would no longer be under the bankruptcy protection. I have written them a letter to contact us via mail for purpose of settlement only. My question is what should we do next? I would really like to settle this matter as it is causing me great stress, however, I have read on another site not to make the first move in terms of a settlement offer or I will end up paying much more. I am a bit worried about the value of the house rising and the 1st balance going down and the 2nd deciding to foreclose. I would really appreciate any input or advice on this matter, I am not sure where to go next. I don’t want to lose my house, but cannot make this payment on the second any longer.
Robert Weed
Just a couple comments. First, taking a mod does NOT mean you “would not longer be under bankruptcy protection.” You can sign the mod in blood–just joking–and still move out later and owe them nothing. The bankruptcy would still protect you. Second, I agree with what you read on the other site; you do not want to look too eager. Negotiations are won by the party who can leave the table and not look back. You need to act like you don’t care about staying in the house long term or not. You didn’t tell me how long ago you stopped paying–but I think you should not pay for about two years before you approach them for a mod or a settlement. Then, if they don’t give you something you like, don’t pay some more. I say in my blog this takes nerves of steel. You say it is causing you great stress. But you also say you cannot afford to pay. Then act like someone who cannot afford to pay. See if that helps.
Mary
Thanks so much for your quick response Mr. Weed. The reason I thought the mod, I guess this is what it is they offered us a balloon payment, all it really did was extend our terms, would make us lose our bankruptcy protection is because we would have to re-sign, wouldn’t this be the same as re-confirming? Really your post confirms what I have learned on this and other sites, but the re-assurance is nice. I have only stopped paying 3 months ago, so I guess I better get on my “nerves of steel” as you say. Like I said, my main concern is that we are underwater on our first, but not by much (see numbers above) and obviously the balance on the first will go down although I don’t really see property values going up I am certainly no expert in this area. I have also read on your site that you recommend this strategy when a first is 75,000 or more under, do you still stand by this or has the climate changed enough that I can also feel somewhat comfortable trying this strategy in my situation? I am in IL, I don’t know if this makes any difference. I really do appreciate the work you and others do to advice people in this situation.
Paul
Mr. Weed: Thank-you in advance for a reply. I currently own a rental property in Colorado. We were discharged from bakruptcy in February 2010. We reaffirmed the first and have ignored the second. Here are some numbers:
House value: $240,000
1st mortgage: $157,000 with WF
2nd mortgage: $100,000 with Chase
We are currently renting a home in Iowa. We have cashed in a retirement fund which will giveus approx $45k to use. We want to buy a home this coming spring in Iowa. When I stopped by WF to ask casually ask about getting a home loan in a few months, they said I would need to wait for two years after I settle the second with Chase. SO, here are my questions knowing I want to purchase a home this coming spring:
1) Should I try to settle with Chase since I have not spoken with them in two years?
2) Is WF comment about having to wait two years after settlement correct?
3) I would like to settle Chase for under $10k, keep house in colorado as an investment property, and use $30k for a down payment on a home in Iowa. Is this wishful thinking?
Thank-you sir!
Robert Weed
If the house is worth $240,000 and you only owe $157,000 on the first, I’d be surprised if the second agreed to come down nearly as much as you want. If they foreclosed you, they would get more than $10,000 out I think. And if values are going up, and you paying the first down, their situation keeps improving. Let me know if it works.
As to whether you have to wait two years after settling on the second, it sounds right to me, but I don’t know. I’m not a mortgage guy, although I try to keep my ears open. In general they want you to be two years after some kind of short sale or three years after a foreclosure before you can get approved again for a mortgage. I’d guess that settlement would be under the same rule as a shortsale, but I don’t know for sure. Shop another lender and see what they say.
I think you need to be three years past the bankruptcy, too. Cashing out the retirement before you explored all this with a couple mortgage lenders may not have been the best idea.
Do you have a tenant paying rent that it covering your first mortgage? Since you don’t live there any more, I wonder why you reaffirmed the first. Seems like two third of the people who comment on my blogs are reaffirming mortgages. I almost never think that’s a good idea, although it does help your credit score–as long as you are POSITIVE you can keep it current.
Paul
When we reaffirmed we got the loan down to 2% AND we had no intentions on moving. When cashing ou the retirement, I can recoup that now in 3 years. Plan was to use money to settle the second and pay off two car loans leaving only colorado home and student loans as debt. Then later started to think about trying to buy now instead of paying off cars. We are making $450 profit a month from Colorado rent. My wife thinks we should try to reaffirm chase at a lower amount ($50k) which would make us eligible to get a new home mortgage in the spring? Thoughts?
Robert Weed
Oh–getting down to 2% definitely made it make sense to reaffirm. You are a good negotiator. I think offering some kind of compromise on the second mortgage, rather than a ten cents on the dollar settlement, is more likely to succeed. Or, you can offer them a choice as a way to open negotiations. Every real estate market is different and I can barely keep up with what is happening here in Northern Virginia.
Andrea
OK, so we had to file Chapter 7 because this wretched job/housing market pushed us out of the dream home we built. We managed to get out but had to pay a lot to do so and we acquired a large debt to do this. So we quickly bought another (much smaller/older) home before we filed. Jobs are very steady again and the bankruptcy discharged in Sept 2009. We did not reaffirm the mortgage. The home is worth maybe $15,000 less then what we owe now because the market still kept dropping. But we have not put too much money in it, maybe $8000. Our plan was when we bought the home was to fix it up and stay here forever, but now that we see we are not helping our credit from this “pay and stay” arrangement, maybe it isn’t wise to sink a bunch of money into the home. We are happy here though so I just don’t know. The scenario I want advice on is this; we are going to be receiving a lump sum of around $40,000 in the next year and now that our family is THREE larger (we adopted) we need another bedroom. We could build on and really make this home exactly what we want to be happy here forever, or maybe we should just walk and put a huge down payment on another house that fits us better and hope we get a fairly decent payment since the BK had ruined our credit. Here is the real question, since this mortgage is not on our credit, showing discharged, do we even need to say anything about having a mortgage when we apply for another loan? Since this arrangement is almost as bad as just renting, cant we just report what we pay each month on housing and not mention a mortgage? What if we just rented this house out and bought another? From what I can tell is, the worst case scenario is we get renters who didn’t pay, so we couldn’t afford to pay on this mortgage and they foreclose, but perhaps the best case scenario might be that we continue to pay on this mortgage and in 25-30 years we own 2 houses. Is there something stopping us from doing this?
Robert Weed
You laid out a lot of detail–which shows how hard it is to give you complete advice. But here’s one thing you need to know. Even though there is no mortgage showing on your credit report, there is still a mortgage. The lender will pick it up in a computer search even if you “don’t mention it.” That would also be loan fraud, so you really don’t want to do that. You won’t get approved for a loan that way. However, if you rent it, I’m told be lenders (I’m a bankruptcy lawyer) that your probably can get approved for a mortgage. So I think you’ve analysed that part right. Do you want to move and buy (with a renter in the old place)? Or do you want an addition to your existing house? That’s your choice. (Depending on the age of those kids and how fast you need to do something, you should also see if you can refinance the existing house when you are three years after the BK. And get get a lower payment that way. Your credit may be good enough. Refinancing with a new lender would get you a loan that then would show on your credit. That would be a third alternative to look at.)
Andrea
Thank you so much. I appreciate it. So in order for me to just walk away, the house would actually have to foreclose before I try to get another loan then?
Stephanie
Hello, I feel as though I have received so much information from the scenarios of others, I’m hoping you can give me some clarity on mine as well. Basics:
Primary residence in Henderson, Nevada-original purchase 3/2006
1st-currently owe $362,279. recently modified under HAMP program
2nd-currently owe $72,000+
Property value currently around $180,000 AT BEST.
I stopped paying both the first & 2nd around Feb. 2008.
I filed Chapter 7 BK in October, 2008. Both my 1st and 2nd mortgages were included in the BK and not reaffirmed. My BK was discharged in January 2009, at which time I was advised that since my home had not been foreclosed on yet, I could attempt a loan modification (I had attempted this several times prior to the BK and been denied). I worked on this loan modification on my first mortgage (Aurora Loan Services) for over 2 1/2 years and was finally approved for the HAMP program to modify the loan in June, 2011. There is no reaffirmation of the debt in my HAMP paperwork. I’ve been making those new 1st mortgage payments with no problem, when my 2nd mortgage (BofA)reared its ugly head last month and requested that I sign a Dodd-Frank Cert. and send it to them. I was advised that I should do so by a local foreclosure attorney. BofA has since sent me a trial payment plan pkg. similar to my first, but it is not something I can afford in addition to my modified 1st mortgage payment. They are already making noises about starting the foreclosure process and I have just started receiving calls from a collection agency (which I thought was to stop with the BK) from a company collecting on behalf of JP Morgan Chase (I assume my mortgage servicer) and that they want to know my intent for this property as they will start foreclosure if I do not start paying. I contacted Aurora Loan Services and they have not been contacted by any entities to “negotiate a payoff” and if they did, they advised me they could not speak with anyone on my loan without my written permission. They also advised me that they do not negotiate with 2nds, they want to be paid in full. So…my long-winded summary of details brings me to the following questions: If I can’t afford to participate in the 2MP program and just ignore them and continue to pay on my 1st, what recourse does the 2nd mortgage holder have at this point, especially since the home is so far upside-down? and is it possible to stop the collection calls if I chose to ignore the 2MP?…can they sue, attempt to garnish wages, etc., since that 2nd mortgage was included in my Chapter 7 BK? After going through all of this for so much time before, during and after the BK, I definitely have nerves of steel, but I want to be armed with the facts as I move forward. My plan was to stay in this home for the 5 years of the modification, and see what my options are, if any, at that time. Worst case would be to walk away from the home when I’m in a better position to do so. I’m just barely getting back on my feet from the last few years of losing almost everything, so I don’t have the resources to move elsewhere anytime soon…especially not in Las Vegas, where the majority of the rental homes are a couple of payments away from foreclosure as it is and tenants are losing their deposits and being told they have 90 days to find another place to live over and over again. I just need to know what my best game plan is now…one crisis at a time!
Thank you,
Robert Weed
Thanks for all your detail. Sometimes when people sign the Dodd-Frank cert, they get the second forgiven, so you want to try that. Otherwise, just pay the first and ignore the second. The chances of them trying to foreclose you, especially in Las Vegas, are so small they are invisible. They cannot sue or garnish you–you are correct that the bankruptcy protects you form that. The bankruptcy also protect you from them badgering you. This is kind of a gray area–because they probably are legal to approach you with negotiation offers but they cannot request payment. It’s a hard line to draw; but at least once a month I sue them for crossing it. And I’ve had good luck on those with my judges here. If you say, I am not interested in your offers, stop calling. Keep good notes. And then see if your bankruptcy lawyer will sue them for violating the discharge. Since it’s a collection company, it’s also a violation of the Fair Debt Collection Practices Act.
Eric
HI, I have a Question about if after chapter 7 bk, In which the home loan was discharged. What if the current bank sells your loan, would it still be considered discharged, because there would be a new loan.
Robert Weed
If the bank sells it after the bankruptcy, it’s still discharged. They can’t get around the bankruptcy that way, or they’d all do it.
Morgan Douglas
Robert
My 1st and 2nd mortgage were discharged in my Chapter 7 BK in December 2009, along with 2 car loans, all of which I intended to continue to pay, and had hoped that by doing so would rebuild my credit. But, my attorney did not have me reaffirm these debts, so they all show as discharged and there seems to be nothing I can do. I believe the BK is removed as negative credit after 7 or 10 years (I forget). What happens to my 1st and 2nd mortgage at that time? Will they appear as outstanding balances, or still discharged? I would like to build my credit back up.
Robert Weed
MORGAN: They will never show as anything but bankruptcy in your credit report, until they fall off your credit altogether in seven years. (I agree with your lawyer that NOT reaffirming is nearly always the best course.)
Debbie Abel
Mr. Weed
Did a chapter 7 did not bankrupt on my home, dont know exactly how that works, but did not reaffirm either. underwater of course with my first paying on time it has been nearly 2 years ago. My second mortgage bank america just sold my 2nd to green tree about 4 months ago due date on 1st have until 16th which is always payed by then except this month, just sent it in today, because they said they would take action on the 1st if it was not payed. had to buy dryer it went out(used one at that). They call me at work every month to get the payment or to see when i will pay it, are they suppose to call me. and what i really would like to know do I have to pay the second , because we are struggling and trying to get a moditfication on first been denided getting ready to try again. We were forced into bankrupty because my husband became disabled. Please help with advise. Thanks
Robert Weed
DEBBIE: They Greentree should not be calling you. That’s a violation of the bankruptcy discharge order and, since they got the loan after your filed bankruptcy, its also a violation of the Fair Debt Collection Practices Act. you should find a lawyer who will sue them for those violation.
For sure, you should not pay GreenTree on the second mortgage before you have a loan mod on the first. Why? If you can’t get a loan mod, you can’t afford the house, so what’s the point in paying the second mortgage if you are going to end up moving anyway.
Once you get a loan mod, then should you pay the second? That’s a trickier questions. I’ve explained as best I can here that not paying for a couple years is the best course. And then, if you expect to stay for a whole lot longer, offer them a low ball cash settlement. But can I guarantee that will work? No. As long as real estate values keep falling, it should work for a lot of people in a lot of places. That’s the best I can do.
Michele
I went through a chap 7 bankruptcy 2 1/2 years ago. Im current on my first and second mortgages, and I m trying to refinance. Do the mortgage company’s report payment history during this time? Im not sure if I will be approved. However, If I stop paying on the 2nd, can they still charge intrest and penalties? If I stop paying on the 2nd, and put it towards the 1st, I can be done with the first in 8yrs, and then begin to repay the 2nd, and have it paid off in less than 2yrs. Does this make sense?
Robert Weed
MICHELLE: They don’t report it on your credit. Another lender might be able to get them to make a report on your payment history.
If you stop paying the second, YES they will add penalty and interest. So your suggestion of stopping the second, paying just on the first, and then coming back to the second. The second will be ENORMOUS when you get back to them.
teresa
We filed bankruptcy chapter 7 in 2008 and we had 2 morgages, i think that we reaffirmed on our 2 morgages but unable now to pay both morgages but will the 2nd make you have to pay them if the 1st one forcloses on the house or can they sue you to make you pay the 2nd one if it is forcloses on and we live in tennessee
Robert Weed
THERESA You really need to check back with your lawyer and see if you reaffirmed those mortgages, because this is EXACTLY why I tell people not to. If you reaffirmed they can, and the second almost certainly will, sue you and make you pay after the foreclosure. (The first usually doesn’t.) If you didn’t reaffirm, they can’t.
teresa
sorry had to add this that when we filed no one from the morgage companies was there when we filed bankrupcy so i don’t know if we really reaffirmed or not to keep the house but we living in it and has 2 morgages and we filed in 2008 and now we can’t make both payments and can the 2 morgage sue you if the 1st morgage forcloses on it if you move and just leave the home
Robert Weed
I hope you didn’t reaffirm. Have you been paying both mortgages? Can you afford the first if you stop paying the second. Don’t know about the value of your house or the amount of the mortgages, but the second will be very, very slow to foreclose if you keep paying the first. Usually like years and years.
Beverly Deese
I wanted to tell you that you are my hero for all the info that you have given to your readers on this website. Thanks so much! I filed for bankruptcy chapter 7 this year due to my retirement and I did not reaffirm my 1st or 2nd mortgages. My home is worth 62,000 at this time; maybe (the house next door has been up for sale at $62,000 and no buyers as of yet, its been 1 year). I owe 82,000 on the 1st – CHASE and 36,000 on the 2nd-BOA. My first payment is 673.00 and 2nd payment is 361.00. I am having a hard time paying my 2nd with my retirement income, (DOD employee – retired after 35 years) I also have just one adult child at home, 18 year old son. I was reading that Georgia ranked fourth nationally in foreclosure filing rates which doesnt surprise me at all. There is high unemployment here as well. I have been current paying my 1st mortgage but my 2nd I am one month behind. Do you think they will foreclose on my if I do not pay my second. Its been a struggle.
thanks in advance
Robert Weed
BEVERLY: No, I do not think they will try to foreclose on the 2nd. It gets them nothing. Also, if they did–I’ve seen this just one time–you could come back with a Chapter 13 bankruptcy and knock them completely off the house. See my webpage on that. http://robertweed-bankruptcy-and-second-mortgages.info/. But I don’t think there’s any chance they will try to foreclose the second mortgage where the first is way upside down like it is for you.
Beverly Deese
Thanks for the information, its greatly appreciated! One more question, how long after a chapter 7 can you file a Chapter 13? I have just completed my Chapter 7 bankruptcy with the courts as of November 2011. Just curious.
Pamela H
Hi I’m going to file for Chapter 7 this week, as I owned my own finance company that I closed during the credit crash. I’ve made very little money in the last few years. I have paid first or HOE for around 2 years. I also owe a year or so of HOA. I don’t want to reaffirm the mortgage. I would like to continue to live here until I am officially foreclosed on. Florida has an average of 1074 days or so to foreclose. I have conflicting info that this could speed up Chase(who now owns my first mortgage) to take the home. BoA had the home equity loan and recently it was sold to a secondary company. Will the same process for foreclosure apply to me as if I didn’t file Chapter 7.
Robert Weed
Yes, the foreclosure process is the same–EXCEPT that if they want to get started during the three and a half months your Chapter 7 is open, they also need permission from the bankruptcy court. Sometimes, they promptly get permission (called “relief from the automatic stay”) and then do nothing for months, or, occasionally, years. I can’t say why.
Kevin
Hi Robert, thanks for all the good info on your site. My wife and I filed for Chap 7 last week. The ideal situation for us it to settle the 2nd mortgage for a lot less than the $50K we owe on it and refi the 1st to a lower rate than the 6% we currently have. I started reading your postings because I wanted to know what would happen if I just didnt pay the 2nd mortgage. The first mortgage is probably $10-20K more than what the home is worth so with the 1st and 2nd together we are $60 – 70K under water. If we want to stay here long term should we just stop paying the 2nd and offer $.10 on the dollar in a few years with the threat of walking away from the house AND if we do choose to do that, should we wait until our Chap 7 is discharged as to not make waves with the courts? If the house doesn’t matter to us, would it make sense stop paying on the 2nd and pay just the first until we decide to walk away from both and forclose?
Robert Weed
Kevin: Thanks for your kind words.
Either way, I wouldn’t pay the second for a couple years. Before you negotiate with them, let them have a couple of years experience of getting nothing. And, of course, if you decide in a couple years the house doesn’t mean much to you, then you can stop paying the first, too, and see how long they take to foreclose you.
Debbie
Mr. Weed
I posted to you earlier last week about my bankrupty ch7 around to years ago, I’am local in your city.
My question is you either sendender or keep your home just do not reaffirm. Is there a difference in checking one or the other, and what would that be..we did not sendender nor reaffirm,does that still mean we did bankrupt on our home. I want to understand this. I stopped paying on my 1st mortgage 4 months before are bankrupty, had a court date to start process of action or forecloser something from WF which the bankrupty filing stopped that and my lawyer said if we were going to keep the house I had to pay it up before bankrupt date so I did that, so we would not lose our home according to him. Was this the correct thing to have done. As I mention to you on the other post I’am paying on time always, 1st oweing 346,000 with WF and 2nd 50,000 with GT. house is worth 246,000 . GT just took this over about 4 or 5 months ago from BA (dumb) and like I said they call me every month at work payment due on 1st I have until the 16th and I always pay before then,except Dec had dryer to go out so I bought a used one. They called and said they would start action if not payed by Dec. 31 so I payed it. My concern also is that the Guy that is on my deed of trust for the 2nd is the lawyer for my 1st mortgage. that is why Iam scare to stop paying on my second. With my husband’s disability it is getting hard to make the second and the upkeep on the home
Been denied Modification from WF getting ready to try again as are expenses have increased. This is my husbands home place we had it built on family land we do not want to give it up. and does a modification or the HARP program stop us from walking out and oweing nothing if we were to get either one of the programs. and as you said in my other post I should get a attornoy and sue GT for breaking the bankrupt laws. could that be you, or who could I see. You have handled a couple of family cases before, maybe I should have seen you.. just saying . Please help with more advice. Iam a gambler, but this is our dream home we have been here since 1997 first time we owned. we have been married since 73 unfortureate things happen to my husband that put us in this postion. Thank you much Debbie
Robert Weed
Debbie: Thanks for your follow up questions.
I do not think you should be paying Greentree. Take notes for a month on what they say to you; and then email me [email protected]. We’ll see if there’s something we should do about them.
As to the first, yes you want a loan mod or HAMP or HARP. And if you do get one, you can still change your mind and move out later and not have to pay them any more. The bankruptcy still protects you.
al
Is their a law in place that states after so many years of not paying second after declaring bankrupcy (chapter 7) and continuing to stay current on first while home is still underwater on first that the second will just go away? Some lawyer states that will happen after 10 years of no payment? Is this true?
Robert Weed
Not as far as I know.
David
Mr. Weed,
It’s wonderful to know there are people like you that don’t mind helping other people. Your information for people in our situation is enlightening and helpful. I suspect most of your readers and clients, if not all, paid bills on time and intended to pay debts in its entirety until faced with circumstances that led to filing bankruptcy. Your information is helping those of us faced with tough circumstances that simply don’t know what to do to survive the financial challenges.
Although married, I filed bankruptcy in 2009 independent of my wife to minimize any negative impact on her credit. I filed Chapter 7 in Florida and was discharged of all debts except the 1st mortgage and auto loan that were re-affirmed (which I now know that I should not have done so based on previous comments posted). A 2nd Equity line of credit mortgage was not re-affirmed and was included in the discharge also. Both mortgages are in our joint names. We are current and able to pay the 1st mortgage but have been struggling to pay the 2nd mortgage. In fact, the entire payment made each month on the 2nd mortgage ($141,000) goes solely towards interest only – not the principal. It was established in 2006 as a variable home equity loan with Countrywide (now Bank of America) to become fixed after five years, which for some reason has not occurred yet. The balance of our 1st mortgage is around $157,000 and Zestimate estimates our home selling price at $190,000, which is a surprising increase than a few months ago when the price was estimated very close to amount owed. I would like to stop paying the 2nd mortgage as suggested in previous comments posted for a year or two. However, I’m concerned they, the 2nd mortgage lender, may foreclose if I stop trying to make payments since it appears to be some equity in the home now based on the estimated selling price over 1st mortgage balance. Are they likely to foreclose in this situation or can I not pay and buy some time? Do I have any opportunity of relief from the 2nd mortgage since discharge in chapter 7 bankruptcy?
Robert Weed
If you stop paying the second mortgage, they will sue and try to garnish your wife, since she stayed out of the Chapter 7. Like you, I’m nervous about the threat of foreclosure when the value goes above what you owe on the first. From what I read in the papers foreclosures are really backed up in Florida, but someone around there would know better than me. Once/if you decide you can’t keep paying both mortgage and the wife is ok to and ok with filing bankruptcy, then you need to take a fresh look at the whole family situation. Do you want to stay in the house long term? When do the kids, if there are any, get out of high school. If you file bankruptcy for the wife and just don’t pay either mortgage, how much cash could you save before you get booted out.
On the other hand, are values really coming back? Could you still get an appraisal now at $155,000–less than you owe on the first. But do you think in a couple years it will be at $200,000? Then you might want to do a Chapter 13 now; make a small payment to the court for three years (how small would the court approve where you are???) get the second totally off there and have equity.
You need to think about the family goals and then meet with a lawyer who will look at all the strategies.
Manuel
Question…
I live in California and filed bankruptcy 2 years ago. My home was not part of the bankruptcy. I’m current on my first and second mortgage; however, my first is an interest only and is approximately $50-70,000 upside down. My second is for an additional $100,000 at a 10 percent fixed. I’ve tried a loan mod on the 2nd twice and was denied. The bank stated that due to the bk I should have no problem paying the second and denied the loan mod. I’m struggling financially and was seeking advice on whether I should stop paying the second and what are the ramifications or should I walk away from both mortgages as both loans are bad and I feel as if I’m only renting this house. I think a 10 percent fixed on my second is ridiculous. Thank you in advance.
Robert Weed
In your situation, I almost always tell people don’t pay the second.
Once you stop paying the second, you are now “renting” (you hit that on the head with that word) just from the first. So, how does that compare with rents in your area? That tells you whether you should walk away from the first. Keep in mind that you are getting a tax deduction for mortgage interest–so you save a little money compared to paying the same rent to a landlord.
Dennis Rossignol
I filed chapter 7 my second was discharged. We did not reaffirm the 1st or the 2nd. Were able to remodify the 1st mortgage. The first is underwater about 50,0000 to 75,000. We are current on the first. We stopped paying on the second. Its been about 7 months now. We recently got a call from mitigation on the second asking if we were going to get payments caught up. We replied no. They asked if we were going to surrender the home.? We said no. Long story short they were fishing to try and get us to start making payments again. The Balance on the second is 130,000. We got a call about offering a settlement. The gentlemen first tried to scare us with foreclosure we told him the loan situation and that they would have to buy out or pay off the 1st to foreclose on us. He said that banks are now starting to work together helping each other out to foreclose. I said the 1st mortgage has a good performing loan and all payments are on time…that being the case why would they lose money with you by helping you foreclose on me. Once he realized that tactic would not work he asked if I would be interested in a settlement and that they were accepting settlements between 1,000 to 5,000 on average. I said I would be. He said in order to start the process I would need to send in the amount of my second mortgage and they would send the paperwork to start the process. I told him I would not send any money to start negotiations. He emailed me a packet that consisted of writing a hardship letter and wanted to know 2 years tax returns, pay stubs, profit and loss from my business. I asked why they needed all that info. He said it was a requirement by government Freddie Mac or someone. Basically all this info would show whether or not I could afford the second. Is this part of the process to settling the second mortgage. I would rather hire an attorney fill out one form stating that they agree to take XXX amount to close the loan. I would like to hear from you. What should I do and how does the process really work?
D.R.
Robert Weed
A couple things. First, was the call from the original second mortgage, or someone who took it cover after the BK was filed. If it was someone who took it over after the BK was filed, they are a debt collector and covered by the FDCPA. And you can sue them for making a false threat. (There is a lot of lying that’s going on over these second mortgages–the same kinds of stuff that triggered the mortgage boom and crash. I’m always looking for ways to slap them for lying, in order to do my part to hold it down.)
As to your bigger question. There is a Federal program that gives them a little money if they forgive the second. That maybe be why they want that stuff. (And of course you’d want that to get approved.) But basically, you are in a negotiation. You are not paying them; they have very limited rights. And you are negotiating. There aren’t any rules. If he’s implying they will settle $130,000 for $5000 or less, that would be a good deal. If later he comes back with something totally different, say No.
Rather than pay someone to help you (which just signals that you have money to spend), go to a book store and buy a book on negotiations. From your comments, you seem to handle the English language well. But its up to you.
mama
I filed chapter 13 a year ago in September. Since then I have decided to convert to a chapter 7. I have a 1st and a 2nd mortgage and am behind on both since I decided not to file on my house. What should I do now? I am almost 5 months behind on both? Please help me to know what to do?
Robert Weed
Wow. I’m sorry you are lost, but I don’t know what to say. That’s way too big of a question to answer in a blog. Don’t know why you were in Chapter 13 or why you converted. You need a good lawyer.
mama
I do have an attorney. I am trying to work it out with my mortgage company. They told me not to pay the 2nd mortgage and just pay the first. I want to set up payments out of my checking account but I can’t get no response from the mortgage company now. I have sent them 2 payments which would be August and September and told them I would pay 2 payments a month until I am caught up, but they have not returned my calls. Do you think they may be foreclosing on me? I have lived in my house for almost 16 years. It has not accumulated any equity in it. I owe 27,000 on my first and 20,000 on my second. What should I do?
David
I want to thank you as you are clearly giving folks confidence during a time when none of us feels very confident.
My question, I filed 7 back in Fall 08′ I did not reaffirm and have not paid my second since back then.
My problem starts with my first which from the day 1 I came out of 7 was immediately 3 months past due because I had stopped paying just prior to 7 per my lawyer (just in case they took it?). I have maintained it there and have actually brought it up to date 3-4 times over the past few years. My first is 220k my second was 80k my house is worth about 340-350k.
The issue is that my wife had huge medical bills in December 11′ plus the holiday for kids wiped me out big medical bills came after the presents were bought. I am now back at 3 months but, of course, this time instead of the usual threatening letter I got a foreclosure notice and since it’s backdated I have 2 weeks to resolve past due.
I have always wondered if they can even call me and send me invoices and send me certified letters for payment due to 7. They have refused many times to take the 3 past due months and post them to back of loan and I talk to same guy every time I call them pennymac is my company sold at 7 by citibank.
I can’t make the 6k in 2 weeks (4 months they want next months too). What direction would be my alternatives? I really need to buy myself 30-60 days as my funds will not be an issue at that point nor going forward. If you answer that my next would be how to get rid of the 2nd. you refer to a website above but it doesn’t seem to work re doing a 13 to followup 7 to rid the 2nd.
I do not currently have a lot of cash but that flow is about to ramp so I have limited time to restructure that 2nd. I guess I could settle too? What just call them and say this is so and so at. Wouldn’t that wave a red flag to research department to get me? Sadly my 2nd is a wells fargo
Robert Weed
Well, if you can’t get them to work with you, then you could come back with a Chapter 13. That would give you three years to get caught up on the first mortgage. You’d hit a problem, right away, however. In Chapter 13, you’d also have to start paying and catching up the second mortgage. If your cash flow ramps up enough, you could do that. If not quite enough, you could use the five or six months it probably takes you to get thrown out of Chapter 13 to catch up the first with your ramped up income.
Given that there’s enough equity to cover the second mortgage–something I rarely see where I am–you are going to have to deal with that second. At some point, the second will foreclose you.
So that raises a question: What is your long term goal? Is this house your Alamo? How long until your kids are out of high school. Would your wife’s bad health be affected by a move. On the other hand, do you think values are going up where you are faster than the second is getting further behind. In other words, do you think you can sell and get cash out in the foreseeable future.
And have you applied for a loan mod with the second?
There’s no obvious answer to what you should do. Short term if your income improves you should be ok with your first–and you can use a Chapter 13, even one that it not confirmed, to buy time to catch the first up. But at some point the second is going to make you move. Are you just waiting until that time comes; otherwise you’ll want to open discussions with them once your income improves enough that you have something to bargain with.
David
My income doesn’t ramp fast enough to meet the 2 weeks. By Summer it will and be able to put money away in good chunks. Kids just entered schools.
You say use a 13 what does that mean? Call them and say I am working on a 13 and not do it and then pay them the past monies in 60 days? I could do that if it will work. I don’t want to threaten such a place as my history tells them I am no good so far. Is there a 4 year window to do 13 after 7? I have a few months to go then…
My wifes health was a one timer issue we have full group policy under one of my companies but hers was teeth we don’t have teeth ins. so all cash.
I really don’t care about the house mentally but you start moving and renting there are costs to all those things and no tax benefit and I just feel I am not that far off on this thing. Maybe I am nuts? In my mind once I have money I assumed anything outstanding can be negotiated for less than I owe. I have spent the past couple years paying off people that helped me in my time of need.
Value of house will not increase that much if at all. But I am probably about even on loan v value in real terms using zillow. I assume there is a cost for any bank to do a buyout foreclosure would they do it to get a house that wouldn’t sell as a foreclosure they sell for much much less. Wouldn’t the gap have to meet a metric of some kind to make it logical. I have several foreclosures for sale on local streets and they have been that way for 2-3 years. If I am about even today I might add 10 by paying my 1st all this year.
Possible they, bank 1 and 2, are in working together and that I have met the point where they work together to get their combined money? That is in my head too.
I have never heard from Wells Fargo re my second since I filed. Do they have an educated threshold at which they normally accept a buyout? Like if I resolve my near-term and then with 15k in my pocket in June call Wells Fargo and say hey I want out of this I can offer you 10k with the plan to go to 15k based on an educated guess on what level they will definitely accept?
I am sorry to be long-winded. There is no-place to get specifics on anything your comments are the most straightforward I have ever seen and you should be commended for it because in my/all of our positions we get told so much non-truths it’s crazy.
sera smith
Hello Mr Weed , Thank you very much for your willingness to help, so I hope you can help on this. I filed a chapter 7 in 2009 and did not send reaffirmation on the second ones. However, as my lawyer then didn’t advise me well enough, so I started making 2nd mortgage after the so many calls and threatening that they would take my property. However, my spouse has been out of job and I am having difficulty paying 2nd mortgage. After reading some of the comments here, if I default on my 2nd mortgage, would it impact my credit score? I am assuming that it should be all under “chapter 7”. Also, my house is worth about 280,000 and I owe about 210K on the first one and 60K on 2nd one. Without 2nd mortgage, I have some equity that they can take for 2nd. I have been making 1st mortgage on time though and plan on continue to pay. If I default on my 2nd mortgage, given that I am making the 1st payment on-time, would the second lender still have right to take my property if they want given I have about 70K equity after the 1st one ? Or what kind of risk am I taking if I starting defaulting on 2nd mortgage? Your response on this will be very helpful!
Robert Weed
Your comment shows you’ve been following the discussion here closely. You are right that paying or not paying the second will have no impact on your credit score. The credit report just shows bankruptcy either way. You are also right to be concerned that if you don’t pay the second, they would have the right to foreclose you. Based on what you are saying, they might get a little money out of a second mortgage foreclosure, but I doubt they would get a lot. Some people who have commented on this blog have more equity for the second than you do, have not paid, and so far nothing has happened. So its hard to say how much the risk is.
I wonder who is the second and what kind of interest rate do they have? It looks like both you and the second would be better off if they would come down on the interest rate and payment and put you in a payment you can afford. Whether they would agree to that? Don’t know. That’s what I say about needing nerves of steel. When they panicked you into paying (the full?) payment, you weakened your bargaining position. But now you can tell them truthfully with the wife out of work they can agree to a lower payment or get nothing. See what happens.
sera smith
Thank you so much for your response to me (Sera Smith above). My second lender is Green Tree. Originally it was Irwin, but they sold it to Green Tree prior to my BK filing. My second mortgage is on 12% interest, very high, so I tried to refinance, but they wouldn’t work with me, but I have been up to date on the payment since the chapter 7 until now. Just can’t afford anymore. Forgot to mention this..back in 2009, besides the threatening, they called my neighbor to see if I still leave in the house and ask them to tell me that I need to call them back for important messages. Can they do that at all? I am not happy that my lawyer didn’t advise me on 2nd mortgage situation given I asked him about it. And I didn’t know that it is against the law to call me and threaten me to pay after the BK filing at all. I wish I had known that then.
Thanks again for your help!!
Robert Weed
In 2009 a more aggressive bankruptcy lawyer would have sued them for calling the neighbor. At least to make them cut out that stuff a little.
Bill
Mr. Weed, my wife and I completed a chapter 7 discharge in November 2010. This included our house which my wife purchased before we were married and thus, was the only one on the mortgage. We did not reaffirm the mortgage after bankruptcy. Our house is now worth much, much less than what we currently owe on it. If we decide to stop paying and let the bank foreclose on it, will I be able to get a mortgage in my name only after reaching the 2 year mark from bankruptcy discharge? We are worried that the foreclosure on my wife’s credit will affect my ability to get a new mortgage. BTW, we are in Illinois. Thanks!
Robert Weed
BILL: Ask a lender! I think you should only be covered by the waiting period after the bankruptcy. Since in your case there’s no foreclosure. But that may mean that they consider only your income to see if you qualify for the loan. Is your income–without your wife–enough? And have you been carefully rebuilding your credit.
You are doing what I’d tell my clients to do. But I don’t know if it will work.
Robert Hilliard
Hi Robert
I’m writing after reading your BLOG
We went bankrupt in 2009 and house was included in the chap.7 in Oregon and we did not reaffirm. We have a first and 2nd, and both were with Bank of America. The first is 160K and the 2nd is 49K but the house is worth 150K, and the homes here don’t sell. Then in February 7, 2011 the 2nd was transferred to greentree servicing? Every month they send me a statement saying this is not a bill and you are not obligated to pay but if you don’t!!!!
To make a long story short we decided that on January 1,2012 we stop paying on both mortgage and save up some money to be able to get into a Rental. But they called and pressured me into paying January’s payment. I was worried that by the way they were talking to me that they would start foreclosure proceeding, so I gave in partly because I do not want them to go ahead of my first. This was before I read your BLOG.
I wish I could do something GT? And how can bank of America transfer my 2nd to greentree two years after my bankruptcy.
Should I tell them that I will be recording their phone call and that I will not be paying them anymore. My wife and I wanted to stop paying the first and see how long they take to foreclose. Thanks Robert H
Robert Weed
Greentree probably violated both the bankruptcy discharge and also the Fair Debt Collection Practices Act. By contacting you directly; and making a threat (to foreclose) that they did not intend to carry out. I always sue on those for my clients. Don’t get much money–judges here are very conservative–but enough that its worth the trouble and keeps them within the law for the next twenty minutes or so. Maybe your bankruptcy lawyer would go after them–or knows someone around there who would.
Vicky
I have a question about my 2nd mortgage & it’s a little different than most of the others on here because we have not filed bankruptcy. I am in my last 9 months of a debt management plan that is getting rid of all my credit card debt. I’m been in this for four years. I do have a 1st & 2nd mortgage. My 1st was modified a year ago and my 2nd, which is through Green Tree, has had a lower interest rate for the past year but goes back up this month. I am trying to get an extension because I can not make that full payment. We have not had a raise in our income for 5 years (been with our employers for over 25 years) and our insurance premiums of course just almost doubled. My question is this. Green Tree is giving us a very hard time on the extension but also, if I only mail in half, they don’t accept it. I’m in a condo which is worth $75,000 (down from $105,000). I owe $75,000 on the first and $51,000 on the 2nd. We’ve been trying to do the responsible thing but feel like we are just throwing money down the drain. I did look in to Bankruptcy before the debt management plan but was told we only qualifed for the one where you have to pay everything pack anyway. I felt the debt mgt. plan would somewhat save my credit. Now I’m not so sure I can. I’ve thought about just finding a home to rent and walking away from the condo but still, just very unsure what is the right thing to do. Any advice??? Thanks. Love all of your information and the way you have helped others on here.
Robert Weed
I wish you had gotten a lawyer who would have worked harder at qualifying you for a Chapter 7 bankruptcy. Which is not to say that it is always possible–but you are an example of why I hate the alternative. (I do agree, however, that a debt management plan is better for your credit than a 100% Chapter 13. But a chapter 7 is you can pull it off is so much better. Unfair as that is.) If you walk away you can count on getting sued by the second mortgage. And if you could not get approved for a Chapter 7 bankruptcy while you were in the condo, for sure you can’t after its gone.
Your best choice–getting approved for a Chapter 7 bankruptcy is so much better than all your other choices, you really need to talk to a lawyer again and see if you can qualify. Otherwise you are going to be paying Greentree for a really long time. The fact that payment is increasing may help you get qualified.
Theresa
Hi,
Wow I am so very glad to have found your site. My husband and I live in Indiana and filed for a chapter 13 in Novemver (our attorney advised us to even though we really could not afford it). We have both a 1st and 2nd mortgage. The first mortgage has agreed to work with us and we just signed papers to do a trial mod yesterday. The 1st is with Midland Mortgage (MidFirst Bank) and is for 134000.00 the 2nd is a HELOC with Beneficial and is about 21000. A house like ours recently sold in our neighbor for 92000.00.
I told the attorney from the beginning that we wanted to do a chapter 7 and not reaffirm either and only pay the 1st for awhile. He stated we could not do that because the 2nd would sue us or foreclose (so at his urging we did a chapter 13). I then negotiated and arranged my own mortgage mod on the 1st. I also called the 1st a few days ago and asked them if we changed to a chapter 7 would it affect our mod. They said no it would remain the same. Yestereday we went to our attorneys office to sign the trial mod papers and also informed them we wanted to convert to a 7 and not reaffirm either loan.
The original attorney did not meet with us as scheduled and instead put us in with another attorney. He said are you sure this is what you want and we said yes. He then stated that after our bankruptcy is finalized the second mortgage (if we don’t pay it) can be sold to a debt collector who can then sue us and garnish our wages. I said I don’t believe that to be the case and this is what we want.
Was I correct?
Robert Weed
You are correct. I’d be interested if you would email me personally the name of your lawyer. Email me [email protected] I’m just curious.
This is Bob again. The lawyer she used in Indianapolis is NOT a member of NACBA–the National Association of Consumer Bankruptcy Attorneys. If you are looking for a personal bankruptcy lawyer, you should always check for NACBA membership. nacba.org.
Second, he has six google reviews and at least two of them look fake. Reviews have more weight with google if they are from people who review a lot. You can check on the person’s name and see. But if they are reviewing stuff all around the country, then they are probably fake.
Theresa
Also forgot to metion I do plan to wait several months and try to settle the 2nd if they don’t send an offer first. I have went as long as six months without paying them before and all they did was send a letter saying it looks like you are have a difficult time paying so we have reset your payment and added the past due to the end of your loan.
Robert Weed
I think you may want to wait longer than several months.
Tom
Hello Robert,
My wife and I have completed a chapter 7 discharge back in Oct 2011. This is after we converted over from a 13. I just found out that my 2nd Mortgage was charged off. We are still paying on our first after a Modification. We owe 25000 on the first or so more than what the house would sell for . Is this why they charged it off? I was told because it was a chapter 7 its normal procedure. Should we stop paying 2nd. We do not plan on leaving anytime soon…Thanks for the help Robert, Tom
Robert Weed
“Charge off” is an accounting term. It means the bank doesn’t expect your payment will get mailed in time for them to pay their electric bill with it. I try to explain that here. https://robertweed.com/blog/general-bankruptcy-law/bankruptcy-discharge-or-charge-off-whats-the-difference/.
My general recommendation is that you stop paying the second, which you’ve done. After a couple years of helping them get used to getting nothing, see if they will agree to a low ball settlement. Also, after a loan modification on your first, the Obama Administration provided some incentives (money) for the FHA Second Lien Program. http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/fha2lp.aspx. In other words, there’s some chance, if you don’t, the second will just forgive the loan. (They will ask you to sign a Dodd Frank certification that you haven’t defrauded the United States.)
there’s no guarantee that this will work. As I say in my blog, it takes nerves of steel.
Cindy
Robert,
Thank you so much for this blog! I am a CA homeowner with a GMAC 1st of $390k (payments current) and a BofA 2nd for 120K(no payments for 18 mos). The house is worth $245K – very under-water. Just met with a BK attorney who suggested a 13 to strip the second but I have decided to gamble & do a 7. My youngest son graduated last year and after 16 years in the house, I would be okay moving on if the second ever forecloses. I also think the ch7 will make my credit sittuation look cleaner to a potential landlord.
My questions is: If I am not legally liable for the first mortgage, after my Bk7, will I still get a 1098 for the mortgage interest? This is a huge issue for me because the only reason I stay, and not rent, is for the mortgage interest deduction.
Thanks
Robert Weed
CINDY: Yes. As long as you actually pay the interest, you get the deduction for it.
For many people it can be a tough choice between a Chapter 13 and stripping the second mortgage and going with chapter 7 and taking your chances. This is my blog on Chapter 7. I have a whole website on the Chapter 13 approach. http://robertweed-bankruptcy-and-second-mortgages.info/. When I get together with people I go over both. The age of the children has a lot to do with what’s best–but it’s really a personal choice. Glad my info helped you decide.
Paul Davidson
I agree with Robert. I read thru your article and it is really helpful. BTW, if anyone needs to fill out a form 1098, I found a blank form here http://goo.gl/Hd4NDR. This site PDFfiller also has some tutorials on how to fill it out and a few related tax forms that you might find useful.
Robert Weed
Thanks, Paul.
mouse
Dear Mr. Reed, I have a few questions to ask you. A year or ago i filed chapter 13. I was not putting my house or car in it. That would have been in February 2011. In August 2011 I decided to put my house in the bankruptcy. After looking for some place to live, I couldn’t find anything. I decided to keep my house and convert to a chapter 7. Now I am 5 months behind on my payments and I don’t know what to do. Can you give me some advice? I have a lawyer, but he doesn’t communicate with me very much. He just tells me when I need to send him money. The trustee already garnished my wages for 10 months. My creditors didn’t get paid a cent. That’s why I converted to a chapter 7. Too many months had gone by with no word from my lawyer. I have talked with the mortgage company about making payments to get caught up, but I am not having very much luck with talking to the mortgage manager. I really need help to know what to do. Please tell me what would be the best way for me to go.
Robert Weed
MOUSE: I don’t know what to say. You really need a lawyer who will give you good advice. Sorry you got into one who doesn’t. If I was your lawyer, we’d spend an hour or more trying to figure out what you should do next.
Theresa
Mr. Reed,
You responded to my question yesterday but, I have just one more due to some information I found out this afternoon. We are filling converting to a chapter 7.
We have already started a mod on our 1st mortgae but will not be reaffirming. We also have a 2nd (HELOC) but the house is underwater so we will not pay it and wait a year or so to negotiate.
I found out today the 2nd never registered a lien on the property. Since they haven’t can they once the bankruptcy is finale?
Mary
Mr. Weed,
I would so appreciate your help with these questions, I have no one else to ask and don’t want to “shoot myself in the foot” I have filled you in with my situation before but here is a quick recap.
1st- 244,669, .81
2nd-approx 60,000 -stopped paying in Sept of 2011
Zillow value-233,00
Recently recieved a letter from the bank of 2nd offering to settle for $15,000-which they say needs to be received by 3/30. We don’t have the money for this and are wondering how to go about countering. I hear these loans are settling for 5-10%, but are worried they will walk away and we would really like to settle this matter. Should we wait a bit so as not to appear to anxious? We have only been communicating with them via US mail, but I am tempted to email our counter offer, although feel we may appear over anxious by doing so. Where would you start the negotiation amount? Also, I have heard that how they report this matter to credit agencies can also be included in the negotiations, do you know about this? I don’t know the verbage to use on this. I know this is a lot of questions and I really appreciate your time in answering. This blog is a great place to get information.
Cindy
Thanks for your response, and link. Thanks again for this blog.
S. K.
Hi- I just read your blog and everything makes perfect sense to me… my only question is what is your advice if you have both older children and younger children?
Robert Weed
SK: All I can do is lay out your legal choices–and some of the factors you should consider. You have to take your best shot at what you think is best for you and your family.
If you were one of my clients, we’d spend at least half an hour going over all the angles, and then I send people home to think about it. Sometimes we hash in out for a second time in person before there’s a final decision. But I can’t do that here in the internet. sorry.
Mary
I understand thanks for providing the information.
Clifford
We filed Chapter 7 last year. Our home with 1st, 2nd mortgage and a lien for new windows put us just about 135,000 underwater.
2nd, and 3rd lien equal about 50,000, up till I read this post we have been fighting and struggling through to make ends meet, with our home being so under water and the Chapter 7 discharge would the 2nd or 3rd even think of coming after us or foreclosing?
We need to find a means to survive and this is not working.
Let me know thanks
Robert Weed
CLIFFORD If you need a means to survive, then this is easy. Just don’t pay the second and third. At some point, some where down the road the second will foreclose you–but that could be ten or more years away. Will you need the house then, or will you be ready to move? If you really think you’ll still be there more then ten years from now, they maybe in 2015, approach them with a settlement.
As I say in the blog, this takes nerves of steel. But if you can’t afford to pay anyway, you might as well try this. It’s got to work better than what you are doing now.
Angela G.
I purchased my $99,000 home in 12/02, with 10% down, an 80% 1st mortgage (at 5.75%), and a 10% HELOC. In 2005, I refinanced the HELOC into a 2nd mortgage (at 9.375% with a 15 year balloon, in the amount of $27,000). My 1st mortage includes escrow for my taxes and the payment is $539. My $65/month homeowner’s insurance is not included in the escrow. My 2nd mortage is $226.
In November, 2008 I filed Chapter 7 bankruptcy, which was discharged in March, 2009. In all this time, I have never once made a late payment on my home.
In May, 2012, my income will be dropping by $1500 per month as I will no longer receive child support for my daughter. I can continue to pay the 1st mortgage, as it equals about 31% of my income once I add on my $65 per month homeowner’s insurance.
Unfortunately, Countrywide/Bank of America is my loan servicer on my 1st mortgage (which is actually owned by Fannie Mae), and BofA is my lender/servicer on my 2nd mortgage. My current balance on the 1st is $66,800 and my balance on the 2nd is $25,500. Other homes for sale on my street range anywhere from $55,000 to $77,000.
I have yet to find one success story on the web of a customer who was able to successfully get a HAMP or HARP through BofA. So, I am thinking of stopping paying my 2nd mortgage, and continuing to pay my 1st mortgage, in the hopes that BofA won’t foreclose on the 2nd.
I recently pulled a copy of my credit report from Equifax, and it shows my 2nd mortgage with BofA under “Closed Accounts” with a status of “Included in Bankruptcy”. Of course it also shows “Date Major Deliquency First Reported: 10/2009”, even though I have never made a late payment, and have continued to make times payments on both mortgages during and since the bankruptcy.
My questions are:
1) Did BofA actually close the 2nd mortgage account and I have been paying on it for nothing? Or was a that a mistake they made in reporting it to the credit bureau?
2) If I stop paying my 2nd mortgage, would I be able to remain in my home without them foreclosing/taking it from me?
Any help or insight you can provide would be greatly appreciated!
Robert Weed
Angela:
I know of hundreds of people who have gotten HAMP of HARP through BofA. Apply and keep applying, if you want to live there, even for just a few more years.
To answer your specific questions.
The credit reporting, “Included in bankruptcy” is right whether you pay or don’t pay. After bankruptcy you keep paying in order to keep them from foreclosing. Based on the values you gave me, I’m guessing they will not foreclose you, any time soon, if you don’t pay the second.
2. And if you had stopped paying three years ago, you could have had some money saved. MAYBE enough that you could have offered it to them as settlement for them to release the second mortgage. There are no guarantees, though, and as I say, this takes “nerves of steel.” Now that you can’t afford to pay the second, its easier to stop paying–you’ll just have to see what they do.
George Schug
I have a question, I filled bankruptcy 3 years ago, we kept paying on the house and things were going well, then everything went up, the bills sky rocketed, so we stopped paying on the house. Come to find out we had reaffirmed the second loan, so this is where we are, we are living in the house paying the second loan who has a lien on the house, they said if we move or stop paying them they will sue me. The first bank (Chase) keeps trying to get their money out of us, we keep telling them to foreclose but they don’t, so if I keep paying the second loan can we legally keep living here?
Robert Weed
GEORGE: “Come to find out” you reaffirmed the second mortgage! How in the world did you reaffirm the second? I don’t think people should reaffirm mortgages, ever. But even if you see it differently than me, I can sometimes (very, very rarely) see reasons to reaffirm a first mortgage. I can think of no reason EVER to reaffirm a second! How did you sign off on that? How did your lawyer sign off on that???
As long as Chase doesn’t foreclose, you can live there by paying the second and not Chase. Maybe that will go on until the second is paid off, although I doubt it. Maybe it will go on for five more years–until you have eight years after your first filed bankruptcy. I doubt that, too. Then you could file bankruptcy again to get rid of that second mortgage.
Most likely Chase will finally foreclose you, and you’ll be renting somewhere and still paying the REAFFIRMED second mortgage on the foreclosed house. What a mess!
This is a good example of why people need to BE CAREFUL before they run out and reaffirm debts. Or just don’t do it. (What did you tell your lawyer that got your lawyer to agree to this?!)
Terry
You have a very informative site; unfortunately, I didn’t run across it prior to filing. I feel stuck between a rock & a hard place right now. I want to sell my home, MO. Lender won’t move forward until my house has foreclosed. I have been current on my payments/never late didn’t intend on stopping payments. However, I requested he send the credit report that he ran, because something he said just didn’t add up (he said my primary home is shown as foreclosure). Once I received the report & continued to read your replies to the inquiries on BK, I saw something was not right. I filed because I was drowning in debt due to lack of cash flow from investment properties & expenses to cover those properties. I refinanced my home (66k, homes are selling for less in my neighborhood) also to help with those expenses (10 k interest only for 10 years). The lender & realtor are suggesting that I walk away from the home, wait for BOA to actually foreclose,then wait an additional 3 years to try & buy again. However, after reading through my report I saw that my second w/ Citi wasn’t listed as included w/ BK, and now I remember my attorney telling me that it couldn’t be included w/ the filing. He said I had to continue to pay that. Because I had no prior knowledge of BK7 filings/proceedings I would have never known that ALL debts at the time of filing should’ve been included. But I would have thought that my attorney would have been working for me in my best interest & would have ensured that everything was taking care of. I gave him copies of all statements of my creditors but he wouldn’t accept that one. What can I do at this point? If I walk away from the home am I still responsible to pay off that loan or can I do what you’ve told other to not pay? Please advise. Thanking you in advance.
Robert Weed
Terry: As long as your case was discharged as a “no asset” case, then the Citi second mortgage is discharged even if it was not properly listed in the bankruptcy–as long as YOU didn’t have fraudulent intent.
BUT, I cannot understand at this distance why your lawyer told you NOT to list the Citi second mortgage. You need to go back and ask him. You need to ask questions and make sure you have answers.
Terry
I’ve put in a call to his office, now awaiting a response. There wasn’t any fraudulent intent on my part, I wanted everything that could be included, to be included. I still have copies of my paperwork,is there a place that I should look for the “no asset” case that you spoke of. Also, I’ve been late by a couple of days on several of my payments to Citi, each time they have called looking for the payment or approximate date that I will pay. It’s not indicated on the report, but, the balance of the loan is listed as well as payment amounts. If I stop paying what should I tell them when they call, especially since Ch7 is not listed under their creditor info on the credit report. Thank you for responding.
Terry
Also, since it was not listed in my BK, how is this now going to affect my credit since they are reporting to the credit bureau.
Ann
We have just entered our third year of payment plan of 900$ monthly. This has been very difficult for us to pay but we have continued. Our home is with Chase (1st and 2nd) we didn’t reaffirm and it has been empty for two years. When will Chase forclose? Is there a reason or strategy on their part of why they haven’t? Our lawyer has reassured us numerous times as long as we complete the plan we are protected. My husband is convinced that Chase knows a way around it and will find a way to obligate us after our plan is completed. Also water bills and hoa dues keep piling up and we don’t even live there any longer.
Robert Weed
Ann:
I know of no solution to force the mortgage companies to foreclose. In many places they are not foreclosing because they have too many empty houses already; and they’d rather have the water bills and hoa pile up on you, not them. (There may be one I’ve never heard of in the state where you are; there isn’t one in Virginia, which is all I know about.)
That’s why I tell people, don’t move out.
Victoria
I filed chapter 7 bankruptcy on my first and second motgage. I became disabled and I am 13 months out of my discharge date. I have been paying faithfully to Bank of America through out the whole process and never been late but I am finding it really hard to pay my second mortgage. I am doing without a lot just to make the payments. Is there any help for me for that second mortgage? Do I have to pay it if it has been included in the bankruptcy? Please help me what can I do?
Robert Weed
Victoria: I’m sorry to hear how much your are struggling. To decide what to do about the second mortgage, you need to look at it from the viewpoint of the bank. Does it make any sense for the second mortgage to foreclose you. How much is the house worth? How much do you owe on the first? If there’s nothing for the second mortgage to get if the house is sold, then they are not going to sell it. The bankruptcy protects YOU from the second mortgage. They cannot come after you for a payment. But whether they go after the house depends on whether they would get anything.
You should also see about applying for a modification with them. I can’t hurt to ask.
Nana
after the storm (bought a house in 2005, readjustable rate after 3 years, could not pay for it, stopped payment, tried to sell etc…had 8 offers in a period of 2 years, I had 2 mortgages (1 big for 280k and 1 small for 30K), banks would not agree with eachother on the shortsale (who would get what)…this was when this whole thing had just started, nobody even knew yet about shortsales and about this whole nightmare of the banks and their scams…could not keep up …option after all the years and frustration was Bk 7 because second bank started garnishing me…(just a short story: i was married, husband had no credit, everything was in my name, i am not american so i trusted him to do al for me – apparently he knew “shit” (pardon my languague) and also he was imature and left me in this mess…so, now after the Bk7, do I still owe my Big mortgage? also, i receive letters every month from the so called Mortgage and they gave me 3 options: buy the house cash (for 240k), cash for keys (3k to leave the house), or shortsale and compensation of 10K to do the work for them…now, i put my house up for sale and have an offer…also, imagine – now the bank accepts 240k for the house that once (and in the monthly statements) shows that i owe 560k – is that ridiculous or what…but i believe they are one fo those- they lost my documents…because i have been there for 4 years without paying a dime, but also i have been trying to sell, even after the BK7…but in one court section that i was called in, the bank had no clue who i was etc…that’s how i figure they don’t know a thing about me…what should I do? sell the house and get out (since I am getting divorced anyway and no kids) or fight with the bank for it? Or negotiate with them? wanted the house for 200k…or give me 20k to shortsale…??
thank you!!
Robert Weed
Nana: It’s hard for me to guess. The $10,000 to help them with a shortsale is a nice offer; but continuing to live for free would be nice too. It’s impossible for me to guess at this distance not knowing your state law which you should do. A lawyer in your state might have a better idea of your negotiating leverage, but so many of these people who offer to fight foreclosures are just scams. You’ve laid out your choices really clearly, but at this distance your guess is better than mine.
Annissa
Hello, I have file both my 1st and 2nd mortgage under chapter 7. Have paid them both on time and never late before and after bankruptcy. We are looking to move and wanted to know if we were able to sell house even though written off in bankruptcy. Owe about 192,000 total both 1st and second and house can sell for approx 240,000. I would like to pay the bank back what they owed and keep the difference. This is reason kept up with payments. Is there anything I can do to sell or just walk away?
Robert Weed
Annissa: If you can sell, pay both mortgages and walk away with a profit–the money is yours. You can just list and sell like anybody else. Looks like you might get $20,000 or more after commissions. That’s great!
J
Hello, I filed chapter 7 10/08. Was misinformed and thought that I had to reaffirm to stay in my house so I reaffirmed my 1st and 2nd mortgage.(I know, I screwed up). Well, my 1st never agreed and it was discharged, my second was reaffirmed. So we stayed and paid on both. Now I need a bigger house as we have outgrown this one. Can I have the 1st go ahead and take the house and continue paying on the 2nd until paid off? Or is that unable to be done? I can afford to pay but need to move into something bigger and have felt that I am stuck here because of the 2nd mortgage that I am still responsible for. I live in IL. Thanks in advance for your help.
Robert Weed
J:
Yeah, if the second is little enough that you can afford it, you could buy a new house, let this one go, allow the not reaffirmed first to foreclose, and keep paying the second.
Getting a mortgage loan approval to do all that will be really tricky, so talk to a lender. I suspect getting approval will take some fancy footwork–and you may have to rent out the house you are in for a while.
Miriam
Mr. Reed,
We bought our home (Vegas) in 2005 for $450k. Put half down and tried to pay off mortgage in 25 instead of 30 years. All was going well until the collapse in our economy. Our 1st is now 200k and our heloc is 70k. The value of our home on zillow is 210k. We haven’t paid our 1st in 11 months and our heloc 2 months. We were finally approved for a HAMP modification and we will start our trial in April for 3 months. The mod will only save us about $250 a month. We also have about 45k in credit card debts. We will be filing BK soon and not reaffirm the house. My question is if we do a BK 7, will the heloc (BOA) try to foreclose since the missed payments on the first will add up to more than the value of the home. We have not received any NOD yet. At this point, if we can stay here another year before any auction sale…then any money saved will be worth the stress. Thank you for your time.
Robert Weed
Miriam:
The second is NOT going to foreclose you when they won’t get any money at the foreclosure sale. They will sit tight and hope that you pay down the first enough, and values recover eventually, and someday they will have equity to foreclose or force you to deal with them.
If you want to stay for the long term, I suggest you approach them after a couple year, with a low ball cash offer. Yes, there’s stress. This takes nerves of steel.
Yve
Hi Robert, your information is great and really helpful. My husband and I have recently filed a chapter 7 to settle all of our unsecured debt including our second mortgage (320.0) with sls. We haven’t paid on our first mortgage in 16 months, and have been close to a foreclosure sale date many times at this point. We tried to get a loan mod in 2011 on our first Chase (450.0), and was unsuccessful, so listed home for sale. Went thru red tape to get an offer approved but both mortgages could not agree on amount so had to cancel buyer. Chase wanted the home to go regular sale as the bpo came back @ 630.0, but of course got no offers when listed at higher amount. Because of the automatic stay of 45 days we have a couple of months in the home left, however after trying to rent it is next to impossible to get approved because of the bk and upcoming foreclosure. What are your thoughts on attempting to get an loan mod again with Chase? Or a repayment plan….or is that a reaffirmation? And if we are successful in obtaining a loan mod, can the second fall out of chapter 7 for any reason and come after us? Appreciate your help!
Robert Weed
Yve:
I tell people don’t move out of the house. Don’t move out and keep applying for the mod. Who knows, this time you might get approved. It may be that one reason you got turned down before was your debt to income ration was too bad. Now that you have gotten rid of the unsecured debt, that ration will look better and maybe that’s what you need to get approved.
There is nothing you can do once the case dis discharged that would enable the second to come after you. They are still attached to the house. So in that sense you are renting from the first. (You have the tax advantages of owning, but you’ll never have any equity with the second sitting there, getting further behind.) But, hey, rents are high right now–so keep trying to get a mod on the first–and have a cheap place to stay.
Bud
Mr. Weed,
I have a first and second (HELOC) with the same bank – the first is underwater by at least $50K. Is there any chance the 1st trust holder (mortgage division) would subordinate their trust and allow the 2nd trust holder (retail division of same bank) to foreclose? I am paying the first (never late), but not the second. It would make no sense to me but banks aren’t particularly logical or smart about such things.
Also, I have a second home which is not underwater but with very little equity (maybe $10-15K, with a 3% ARM (as of today) – a Fannie Mae loan – what is the probability they might agree to a loan mod after a bankruptcy discharge and fix the rate at today’s current rate, to keep the loan on the books? It is current and has never been late.
Robert Weed
Bud: The banks may not be logical but they are not that stupid. The will not give up a performing loan just so they can lose another $100,000.
As to your second home, I don’t know. But if you are current, it seems like your are eligible for HARP, President Obama’s latest offering for people who are current on their payments. http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx
Miriam
Thank you for your response Mr. Weed.
mary
Mr. Weed,
I live in Illinois I filed B/k about 3 years ago I did not reaffirm with my second mortgage or first. I am unable to pay my second but am up to date with my first (no delays). I have not paid my second for about 7 months. My home is upside down it is worth about $150k
I owe $145k on first and $110k on second. My first is with Chase my second is Morgan Stanley Can my second mortgage forclose on me even if I am paying my first? I am worried every day that I will get forclosure papers.
Thank You
Robert Weed
Mary:
Yes they can but no they won’t. At least not for a while. The seocnd is not going to foreclose you if they won’t get any money. (The bank is not about you–they are interested in getting money. They don’t CARE what happens to you, good or bad.)
They are waiting for values to improve enough that they would get something when they foreclose–maybe five years–maybe ten–maybe more.
So you are not going to be able to stay there forever, but you can stay for now.
This takes nerves of steel. But what’s your alternative. Well, you can move out now. What’s the worst that can happen–sooner or later you’ll have to move out. OK, so calm down.
If you had gone three years NOT paying the second, maybe you’d have some money saved and could offer them a cash settlement. Maybe you can not pay them for the next three years and then offer them a cash settlement.
Will they take it? I don’t know. Will your house be worth more or less? I don’t know that either. What’s the worst that can happen? You have to move out. What’s your choice? Move out now. That’s not any better, so stay calm and let it play out.
Yes, I know this takes nerves of steel.
lisa
dear mr weed, i filed bkp7 and didnt reafirm with my home but did with my home improvement loan they gave me papers said on them if i wanted to keep my home i had to reafirm with it the loan i owe 96388 on my home only worth 75000 and the home inprovmnt loan is 24000 which by the way is 15% intrst and my home is all intrst also i can affrd to pay my homem loan but have had the 2nd loan on argsmnets due to the pymnt is too high if i dont pay the 2nd loan will they try to foreclose on the home if so i dont know what to do tired of paying all intrst and nothing paying off been in my home since 2006.my home was included in the bkp so its discharged
Robert Weed
Lisa:
Who is the “they” that gave you the reaffirmation papers and why did your lawyer let you sign them? And why did the judge allow it? (And, as I ask everybody, are you positive you reaffirmed? Does the court record of your bankruptcy show that you reaffirmed?)
The problem is not that they will foreclose the reaffirmed home improvement loan–the problem is they will sue and garnish you. Was all this in 2006? After eight years, in 2014, you’ll be eligible to file Chapter 7 bankruptcy again.
Samantha C
Hello,
Great blog!! Quick question…Just went through a Ch7 BK (discharged 7/11). Both first ($425K) and 2nd ($110K) are with B ofA. Modified HAMP with BofA and are on new/lower payments/interest rate. Haven’t paid second in many, many months. Just noticed last week on my banker online (with B of A…lists all my acccounts checking, mortgages etc.) that my HELOC is at a zero balance. I called and was told that it was charged off due to the bankruptcy. I asked if they would close that account..she is working on getting that done. What does this mean? Is the debt gone forever? Do I still have that lien against my property after the first mortgage? FYI…my property is worth about $250K…way underwater but we love our house and want to keep it, retire here etc. I appreciate any info. Thanks!
Robert Weed
Samantha:
Sorry, “charge off” doesn’t mean what you want. “Charge off” is an accounting term meaning for tax purposes they have lost that money. And of course YOU don’t owe it, because of the BK. BUT it is still attached to your house. that’s why I suggest you wait another year, and then offer them maybe $10,000 on their $110,000 heloc and see if they will agree to release the lien.
(Maybe start by offering $5000 since they are $175,000 under water. Their chance of ever having equity to get a hold of is real close to zero.) Now that I think of it, you say you want to retire in that house but haven’t told me how old you are. If you are in your 30’s their lien has slightly more chance of being worth something some day than if you are 59. Your whole life plan impacts how much you would give them to release their lien–but except as a bargaining chip with you, it’s worthless. So there’s no reason to offer them much.
Samantha C.
Thanks so much for the info! We are in our early 40s with young children (4 and 1). One more question….will the charge off or 2nd accrue interest as it goes unpaid? I guess we will work out an offer for the lien in the next year or so. We would obviously have to have the cash to settle up front, correct?
Robert Weed
My best GUESS on a negotiating strategy is that you want them to have at least a couple years of getting nothing, before you offer a settlement. I don’t think you want to be too eager. But that’s only a guess. Also a couple years gives you time to get some cash together.
Fabio
Hi,
I would love to have the following questions answered:
1- After ch. 7, if I keep paying the first mortgage on my home for three years (even with the loan being included in BK), can I try to buy another house BEFORE the house I “kept” goes into the foreclosure process? I was told that keeping the “included in BK” mortgage payments up to date is a good move, since it gives me a history of payments that will be positively seen by a new lender. Does that make sense?
I had a BK 2 years ago, and my mortgage payments are current –but the house is underwater, was included in bk (not reaffirmed), and I want to start shopping around for a new home. Will I be successful?
2- What if I try to work with my current mortgage company to get a new loan on the house I live in? If I put some money down, would they forgive part of the balance and give me a “healthier” loan, so the house gets out of the underwater point and does not go into foreclosure? This would actually be the perfect scenario, since I really like the house I live in.
Please let me know.
Best regards,
Fabio
Robert Weed
Fabio:
1. That’s the big question. I’d love to have an answer, too. There are five or six people on various parts of my website–and three or four of my own clients–who have been told they could do that. But then the deals all fall apart for some small reason. So I don’t know if it’s possible. I do know it’s hard.
(Maybe, I’ve been told this, you can rent out the house you are living in; and get approved for a new house that way.)
2. Don’t know either. I can say that they should be willing to do that. Are they set up to do that? Don’t know. Don’t know who your mortgage company is–but even if I did, I wouldn’t know the answer to that question. I’d say there’s no reason why you shouldn’t try.
Anthoney
Mr. Weed,
I have a question regarding the just-don’t-pay-the-second strategy.
My first and second are held by the same lender (Chase).
Balances:
1st-$234,000..
2nd-$140,000…
Current appraisal of house $160,000
Does this make any difference as far as how they will react to not paying just the second seeing that the hold both liens.
My bankruptcy has been discharged (Both first and second are included). I have continued to pay both the first and second to date. I like the idea of not paying the second then offering them a settlement in a couple of years.
We intend to stay in this house for the foreseeable future.
Thank You for your time
Robert Weed
My advice is the same even if both loans are held by the same lender. (ACTUALLY, if they really are the same, the logic is even stronger. Why would they foreclose on the second mortgage if they are AT LEAST getting paid on the first.)
In your case, where there’s clearly no equity, don’t pay the second for a couple years. Then see if it make sesne to offer them as cash settlement. Who knows, in a couple years the foreseeable future may look shorter–you may decide to just never pay the second.
Anna
I am current on my first mortgage, but can’t pay the second (HELOC) now over 2 years. I read that if you don’t make payments in 7 years and your house first loan is still underwater – that loan considers forgiven?
Robert Weed
Anna:
I’ve never seen anything like that. It might be specific to whatever state you are in.
Dawn
This blog has been such a great resource but I need to clarify if I may.
I have first at 250k and second 70k and third at 8k. I am way under water on first by 20k
Without going to bk or anything could I just stop payments on 2nd and 3rd, save up the money and hope they settle with me for 5 or 10 percent and then not have to pay taxes on that? I am so confused as to what to do!
Bk or short sale or just stop paying the second and third??
Thank you do much!
Robert Weed
Dawn:
If you stop paying the 2nd and 3rd and “without going BK or anything” the 2nd and 3rd will sue you and garnish you. They won’t settle up–at least I doubt it–they will sue. That’s why people file bankruptcy–so they can’t sue. (Also your credit report will be HORRIBLE because it will show that $78,000 in debts that you are NOT paying.)
If you do a shortsale–probably the same result. For a short time during the worst of the crisis, second mortgages would get a little from the shortsale and call it square. I almost never see that any more. They will get a little to allow the shortsale to go through, but they still keep the right to come after you for the rest. And they then do.
Bankruptcy is where that leaves you. I’m a bankruptcy lawyer, of course, so I believe in my product. Bankruptcy is the legal way to get out of debts you can’t afford to pay. Except in very unusual situations, nothing else works.
Ana
Mr. Weed,
I filed for ch7 several years ago & included my home;which has a first and a second mortgage attached to it.
My child is in the 6th grade and attends a jr high parochial school. However, the parochial high school that she will attend in 2 yrs has had alot of issues with drugs and receives negative reviews. It costs $8400 a year now to attend the high school so in 2 years,it’s sure to increase and I don’t want to pay for her to go there with all those issues. The public schools aren’t accredited; therefore, I’ve been considering moving to a different area and renting where there are AAA rated schools.
I want to follow your advise in your previous responses to others and just stop paying and save to move.
Is there a way to keep up with the foreclosure and sale process if I follow through with your advice? I’ve heard before that the banks can and have sold homes, then padlocked the homes with police or court orders preventing the owners from entering to retrieve belongings. I just want to know before I stop paying, because I don’t want everything I have to be taken away when I could’ve moved it out beforehand.
Robert Weed
Ana:
My advice is in two parts. First, stop paying. Second, don’t move out.
As long as you are in the house, you can keep track of the foreclosure process and move out when you have to. Moving sooner than you have to and leaving stuff there is the way to get into those problem you mention. I talk about this in my blog here. https://robertweed.com/blog/after-bankruptcy/file-bankruptcy-stop-paying-dont-leave-that-house/
TAMELA ADAMS
I filed bankruptcy approximately 8 yrs ago. I chose to keep my house which had a second mortgage. I ended up having to short sell the house. I still have a second mortgage for 22,700. The original amount was under 25,000. So, i have paid approximately 13,000 over the years since I filed bankruptcy and still owe them 22,700. Am I legally binded to continue to pay this loan? When I call they mention I am protected by my bankruptcy, but I didn’t file bankruptcy on the house or second loan. So, I have a second loan that I am paying on for life and have no house.
Robert Weed
Tamela:
Oh no, oh no. No you are not legally bound to pay that loan. There is certainly NO REASON to keep paying it after the shortsale. (Any, looking back, maybe there was never any reason to pay the second at all. But maybe there was since the value of the house has been up and down a lot over the last eight years.)
Tamela, you do not “file bankruptcy on” anything. You file bankruptcy, period. You still pay what you want to pay–the house or the car–and you still have to pay things like child support. But you don’t pick and chose what to file bankruptcy “on.”
Most people see it the way you do–that’s why it’s so important to have a lawyer that tries to get into your shoes and explain things from your point of view.
You tell me that when you call them, they are careful always to mention the bankruptcy. Are there bills really clear about that, too? How many months (or years) have you paid since the short sale.
You need to talk to a good bankruptcy lawyer in your area–and carefully look at the bills and the shortsale papers. MAYBE you can get back the money you paid voluntarily since the shortsale. It’s worth spending some time looking at that.
TAMELA ADAMS
Thank you for all your help. I appreciate it. They never mentioned the bankruptcy part until the last couple weeks. No one can find my account, but, they said they are going to find out who has it so I can continue making my payments or to pay it off. They lost my account two months ago. They gave the account to someone else and then that company said that Chase recalled it. That is when it got lost. So, they looked at the active and inactive bankruptcy departments and still couldn’t find it. Then I mentioned I didn’t file bankruptcy on that loan. That is when she mentioned that I am still protected under the bankruptcy law. Then I asked her if I legally still had to continue to pay this loan and she said she couldn’t answer that question. At least now I know where I stand. And, I asked again, and again she said, I can’t answer that question. Thank you again.
Kelley White
I have a question. We filed a chapter 7 and it was discharged 3/2011. Our house was included and we only had one mortgage . We did move out and the bank hasn’t foreclosed on it yet. My question is do we have to wait the 3-4 years after a foreclosure or do we only have to wait the 2 years after a bankruptcy to buy a new home?
Robert Weed
I THINK that both waiting periods apply to you. Both the after bankruptcy waiting period; and the after foreclosure waiting period. Since there hasn’t been a foreclosure yes, that waiting period hasn’t even started yet. But, I’m not a lender. I don’t know for sure. I don’t know if anyone does.
Both my own clients and other people on my blog seem to come close to getting approved after the bankruptcy, being told the foreclosure waiting period does NOT apply, and then something comes up and they lose the loan. That’s really all I know.
matji
My Chapter 7 bankruptcy was discharged on 11/11. I took a loan for $10,000 from Cash Call on feb,2012 for a family emergeny. I haven’t been able to pay back my monthly installments. Can they garnish my wage? Or take me to court or jail. I will be paying them back, but my current situation is not letting me pay back the installments. Any advise will help.
Robert Weed
Matji: I don’t know what state you are in or what the state laws are there. There’s some chance that the Cashcall loan is illegal in your state, and you don’t have to pay them anything. You need t track down a consumer lawyer in your state.
(Bankruptcy discharged Nov 2011; take a Cashcall $10,000 loan in February 2012. That wasn’t very smart. However I can tell you that they cannot take you to jail; and if they are threatening too, they may be violating the law in your state.)
Robert
Mr. Weed,
Our backruptcy was discharged 33 months ago. We stayed in our home keeping current on our 1st mortgage of $102,000 with GMAC and our 2nd mortgage of $24,000 with Bank of America. We want to move out and buy another home. The home is maybe worth $105,000. What happens if we stop paying the 2nd mortgage to save money.
Robert Weed
Robert:
The key thing I can tell you is I don’t know whether not paying the second will make it harder for you to get approved on a loan to buy another house. I don’t know. I am pretty sure that stopping paying on the first mortgage would block you form getting approved any time soon to buy again, but I just don’t know anything about what happens when you don’t pay the second.
What I can tell you: the bankruptcy law still protects you, so they can’t call, can’t bother you, can’t try to sue and garnish you. And of course you would save money. I answer all that in my blog post–so I don’t think that’s what you are asking. But does it hurt your chances of getting a new mortgage sometime soon? I just don’t know.
tikki
I have a questions regarding chapter 7. I am a small business owner and considering filing a chapter 7. I have a first and second on a home which is under valued a little. Im current on the first but behind in property taxes and the second. The second sued me and we eventually worked out a payment plan. If I file the chapter 7 can I put the second in that while keeping my home and still making payments on the first mortgage.
1st with ING -431.200 they mod the first for me and put me in a fixed loan
2nd with Citi- 107,800 they were suppose to mod but since I was self-emplyeed told me I didnt qualify. They finally sued me and that was goign on for 1 year. just two months ago I reached a decision with them to pay month $325 bucks until the loan is paid off
My property taxes from last year were sold and I havent been able to pay those back.
Zillow Estimate says: $377,000
A realtor pulled sales and saw $490,000 for previous listings and sales
I can afford the first and HOA fees but thats it. Once I file bk I will be able to pay the taxes as well.
I have about 150k in debt from starting this business and I want to do the chapter 7 to brief a little bit.
Robert Weed
Tikki:
If Zillow says the house is worth $377,000 and you owe $431,000 to ING for the first, then Citi can basically do nothing about the second, after you file bankruptcy. Can’t call, can’t garnish–and they don’t have a hold of anything they can foreclose. So if you keep paying the first, you would be able to keep the house for a long time.
How long is the long time? That’s the issue–certainly in 30 years the first would be paid for and the second would then foreclose you. Some time sooner than that as values eventually go up and the balance on the first comes down. When would that be; your guess is better than mine, because you know real estate values in your neighborhood better than I do.
Before you ride off into Chapter 7, you need to talk to your lawyer about your business. Can you file Chapter 7 and keep your business? Well, does it own anything that’s salable? Does it have value as a going concern? Is it anything without you? Would your competitors want to pay some money to shut it down? What are the exemption laws in your state? I don’t know the answer to any of those questions, but I can tell you that you’ll need to go over that carefully with your bankruptcy lawyer.
Mishka
Mr. Weed, My husband and I have stopeed paying our second 9 months ago. We are also not paying the first for approxiamtley 7 months. lots of issues with modifying that led up to our decision to “strategically” get out. The house is over $100k underwater. Fannie has been saying they want to work with us so I do everything I can, send paper after paper, months of nothing Meanwhile the 2nd is getting nasty. My marriage has fallen apart and we are ready to move on. We woudl like to file bk seperately, we have seperated but still live in same home, different rooms for financial reasons. Can we file bk seperate and each list the 2nd mortage, then not include the first mortgage then we can figure out the modification with them or eventually they will foreclose and we will not have to pay on the forgiven amount. Does that sound correct? Thanks
Robert Weed
Mishka:
Lots of questions. Husband and wife can always file separately if you want to. And if you are having issues, each having your own bankruptcy lawyer is certainly safer for the lawyers and maybe for you, too.
A different question maybe you were asking. Do you count as separated, as each a family of one for eligibility purposes, if you are still living in the same house. My personal answer to that is yes, but I can image judges going either way–no idea what your judge thinks about it or if it’s come up wherever you are. A good one to ask your lawyer.
A big mistake people make when they talk about bankruptcy is to say the word “include.” When you file bankruptcy EVERYTHING IS INCLUDED. Leaving things off the forms is LYING TO THE JUDGE.
But you can keep paying something and have to keep paying others. So you can file bankruptcy and still pay the first mortgage. You can pay anybody you want to pay–and if you can’t agree on the mortgage mod, than you not pay. Yep, you can pay or not pay–they can foreclose or not foreclose. You get to do what you want; the bank get’s to do what they want–EXCEPT the bank can go after the house if you don’t pay, but they can’t go after you.
David
Mr. Weed, our ch. 7 was discharged in June 2009. We kept the payments on the first and second current until March 2012, when we stopped paying on the second. We have received numerous calls at work & home requesting past due payments. We’ve advised them that they are violating bankruptcy laws,but they’ve said that it was discharged in 2009. We have no idea what that means. The credit report that I ran does not show bankruptcy for the second but the first does. It shows that all payments had been received up and until we stopped paying where the first does not show payments made and reflects the bankruptcy.
1st question: Are they suppose to be calling us?
2nd question: Shouldn’t our credit report show no payments for the second just as the first does?
3rd question: What can we do?
Robert Weed
David:
1. No, they should NOT be calling you.
2. Right
3. Talk to your bankruptcy lawyer about suing them for a discharge violation. If it’s a debt collector, rather than the original creditor, it would also be a violation of the Fair Debt Collection Act. In some states, not Virginia, it would also be a state law violation. I ALWAYS sue when a creditor tells my client that the bankruptcy somehow does not protect them.
On the credit reports, your rights usually start when you do a dispute. So you need to get credit reports from each of the three credit bureaus. I have their 800 numbers here. https://robertweed.com/blog/after-bankruptcy/after-bankruptcy-getting-back-to-good-credit/. the right dispute letters to each credit bureau asking them to fix it. If that doesn’t work you’ll want to find a Fair Credit Reporting Lawyer in your state. Your bankruptcy lawyer might know one, or be one. Or you can look here. http://naca.net/find-attorney
Jen
Hello,
We currently have 2 mortgages with Bank of America. 1st for $145,000 2nd for $45,000.
We filed for chapter 7 bankrupcy and our home was not included. It was discharged in Dec 2010. Ive continued to pay the 2nd on time every month but have fallen behind several times with the 1st. As of January 2012 we were approved for a home modification on the 1st.
We have been making payments on the 1st and the 2nd now since January and realize we just cant do it anymore. We are considering staying current with the 1st and stop paying the 2nd. Can Bank of America still forclose on our house? We were also considering a short sale. Any input would be greatly appreciated.
Thank You !
Robert Weed
Jen:
I always have to start by telling people the mortgage was “included.” Everything is “included” when you file bankruptcy. Some things you still have to pay–child support. Some you still want to pay–your house. But you file bankruptcy “on” everything.
(Now I hope you are not saying you “reaffirmed” the mortgages–that’s a terrible idea that some people do. If you reaffirmed then they will sue you and garnish you on that second mortgage. I don’t let my clients do that, but some people do. CHECK with your lawyer.)
Can they still foreclose on the second? Yes. WILL THEY is the question. Not if they won’t get any money. You’ve posted your question here, where I have my best explanation of that. Don’t know the details of your situation, so I really can’t add anything.
(Maybe I can add one thing. I’m seeing more and more that they forgive the second mortgage, after a mod on the first, because they government will give them some small incentive to do that. But I can’t speak to the details of what they might do in your situation.)
SHORTSALE? That’s a question for you–a life question. Do you WANT to keep this house? Then you want to see if they will forgive the second or cut you a deal. What are your chances? Sorry, don’t know. That’s the nerves of steel strategy I talk about in my blog.
Are you sick of this house? Then yes, put it up for a shortsale and plan to buy again in a few years.
The answer to the shortsale question starts with what you want.
Mel
We had a chapter 7 discharge 9 months ago. We are very underwater for our first and second mortgage. We are ready to move on but would like to be able to buy another place in a few years and not wait for 3 years after BOA gets around to foreclosing.
My question is, if (or rather when) the house is foreclosed on will it impact my ability to buy a new home. Both my husband and I filed chapter 7, but only his name was on the mortgage. I am on the other paperwork, but not the mortgage. I know that we have to wait 2 years because of the bankruptcy, but I’d hate to then wait an additional 3 years after BOA gets to a foreclosure.
My second questions is, what are our options for the second mortgage given the rare chance that BOA does a principal reduction and we decide to stay. A lawyer said that they might do that but we are not sure about how this would impact the second mortgages. We have not paid either mortgages in well over a year at the advice of a lawyer. We’ve been trapped in an undecided MHA program for 3+ years.
Thank you!
Robert Weed
Mel:
My GUESS is that YOU would be able to buy after two years–but that would depend on you qualifying without needing a co-signer (your husband’s income). I don’t know that, though.
I rarely see principal reductions, but the political situation continues to build up some pressure on that. Sometimes the second mortgage will get forgiven. There’s a government program that gives them a little money to forgive worthless second mortgages.
Diane
We filed a chapter 13 in 2007 and then converted to a chapter 7 in 2009. Our 1st mortgage payments have been current. We thought the 2nd mortgage was discharged in the chapter 13 bankruptcy because the bank told us the account was closed and so we didn’t make any payments on the 2nd mortgage. When we filed with BOA to refinance under the making homes afforable program we found out that the 2nd mortgage has a lien on the title. I contacted our attorney who has now moved out of state and he informed me that the 2nd mortgage was not discharged in the bankruptcy. The 1st mortage is now “underwater” and the 2nd mortgage has been sold to a debt collector with a balance due of 17,000. There isn’t any equity in the home. We would like to stay in the home and continue to pay the first mortage with the refi at a lower rate but the 2nd mortage refuses to give a release of lien. They said that they are not require to because the loan was not paid in full. I contacted the debt collector “Recovery Group” and they offered a payment plan for the 1st year and then review or we could pay 12,000 to settle which we don’t have, this is why we are refinancing to lower our payments on the 1st mortgage. The letter clearly states that this is an attempt to collect a debt and when the total of 17,000 or settlement has been received then they will release the lien. If I agree to pay the monthly payments will this lock me into a new loan? If I don’t pay can they sue me? We live in MI. Should we agree to pay this amount or offer a settlement of maybe .10 on the dollar? We will not be able to do the refinance on the 1st mortage until they release the lien which sounds like they are not going to do. The 2nd mortgage is with Flagstar. Thanks for any advice you can give me.
Robert Weed
Diane:
Thanks for your comments. Your second mortgage, now with Recovery Group, can’t come after you personally, but is still attached to the house. It is “discharged” but it is not “released.” They have no leverage on you if you just stop paying on the first and move out when the first finally gets around to foreclosing. But they now know you want to stay.
That puts you into a negotiation, and it requires “nerves of steel.” I’d suggest you respond to their twelve thousand settlement offer by counter offering twelve hundred! Then get some books on negotiation to study.
One other thing–and I’m not sure about this, from what you have told me. I agree that you cannot “refinance” the first as long as that second is still there. But you might be able to “modify.” Maybe if you apply for a modification rather than a refinance, you might get a different answer. Maybe you got told no on both, but maybe you can try again by standing in a different line.
Good luck.
Shelly
Hello Mr. Weed,
My husband and I filed Chapter 7 back in February 2010 and it was discharge in June 2010. We did not reaffirm our 1st or 2nd mortgage but we have continued to pay both and are current to this day. Our intentions were to stay in the house and eventually maybe qualify for a modification program to lower our interest rate. I have been trying for 2 years to get our lenders to “work with us” and just lower our interest rate to make our monthly payment less of a monster. Neither one of them will help us and we don’t qualify for any special modification program because we are current with payments or make too much money. We thought we were stuck in this house with these crazy high payments until I started doing research on ‘walking away from the house after a Chapter 7.’ We have already taken a hit on our credit score and it has already recovered which is a good thing. However we want to know if we should stop paying on our second only or our first as well to save money. Our house is worth about $200,000, our first has a balance of $159,000, our second has a balance of $88,000 for a total of $247,000. We are underwater in our home but not underwater in our first. If we stop paying the second, will they foreclose on us to get their little bit of money (maybe $40,000) or do you think they would wait to get more? I know they can do either (if they buy the first) so what would out best move? Stop on one or both mortgages, walk away and rent until we can buy again. Or since we have good credit and no forclosure on our credit, could we qualify for a loan now and then walk away? It’s so very confusing.
Thank you,
Shelly
Robert Weed
Shelly:
There’s nothing that I know for sure.
I THINK that you cannot qualify for a mortgage until three years after you no longer own the house that you filed bankruptcy on. UNLESS your income is strong enough that you can afford both mortgages. (And then after you moved you could rent out the old house or just stop paying.) You have to still be current to do that and most people report the deal falls apart but there are a couple people in my blog who say they have done it.
There’s no reason to NOT try.
As to whether the second would foreclose for the little equity they might get if you stop paying them–I just don’t know. It depends on a lot of things I don’t know. The policy of the lender, foreclosure procedures in your state, how many properties are sitting empty, dumb luck. I just don’t know.
towanda jones
My name is Towanda and i have a first mortgage and second i filed bankruptcy on both. If my first is paid off can my second come after my home? I have been paying my second should i stop paying it?
Robert Weed
Towanda:
Yes, if the first is paid off, and you don’t pay the second then they can come after your home. So that answers your second question. Whether you want to stop paying the second depends on how long you want to keep your home.
What I have on my blog, and other people’s questions, lays out the choices you have. But your best choice depends on the details of your situation. You know those details and you need to talk it over with someone who knows your situation and knows you.
Donovan Jarrett
hello Robert Weed i have A question i am underwater i have one house hold income and i have first mortgage and a second mortgage and a lot of credit card a car payment and new furnace just put in and i do not now where to turn for help can i file a bankruptcy for second mortgage and the credit cards and so furnace is about four month old
Robert Weed
Donovan:
From what you tell me, it sounds like you should file bankruptcy and that would improve your situation a lot. But a good lawyer would need tons of details on your situation to let you know for sure what to do. A good place to look for a bankruptcy lawyers where you are is http://www.nacba.org/.
Anthoney
Mr. Weed,
I have been employing the just-don’t-pay-the second strategy for 3 months now.
I’m starting to receive a couple of calls a week and just received a certified letter stating “Acceleration Warning” (Notice of Intent to Foreclose)
You have said many times that this strategy takes “Nerves of Steel”
Is the process of applying “Nerves of Steel” to receiving these threatening calls and certified letters the term of which you speak? Lol
My first and second are held by the same lender (Chase).
Balances:
1st-$234,000..
2nd-$140,000…
Current appraisal of house $160,000
I’m current on my first and willing to hold firm against “NOT” paying the second if it is just part of the process.
Thank you for your time,
Anthoney
Karen
Filed chapter 7 5 years ago…Was in divorce papers that I sell my home if I cant get the home equity loan out of my ex husbands name…The house is in my name only but the home equity who is under beneficial is with both of us…When I pulled up credit report i noticed this was discharged with the bankruptcy and has a zero balance and not showing that I have been making payment for the last 5 years can my ex husband still make me sell my home since the bankruptcy was discharged and from what I see not hurting his credit any…
Robert Weed
Karen:
I think you want to ask your divorce lawyer, not me. BUT, I’m not sure that YOUR credit report tells you anything. Do you know what’s on your ex-husband’s credit report? Your bankruptcy did not get him off the home equity loan. (Or was he in the bankruptcy, too–you didn’t tell me.) So his credit report should show current–assuming, as you say, that you are paying and have kept it current. If you stopped paying, it would still show bankruptcy on you, but it would show late on him!
Mary Weiser
Hello Robert,
I read with interest your blog/reply dated 3/25 with regard to 2nd mortgages and charge off. Most of it was very clear but I’m trying to make sure I understand your information.
I filed bankruptcy and loans for 1st mortgage, 2nd mortgage, credit cards were filed in Aug. 2011. Now I have been trying to work with my first mortg. (Citibank) and 2nd mort (charter one) with loan modifications and HAMP loans to try to keep my home as I don’t want to foreclose. They turned me down for HAMP loan and other various remodifications. Now recently I was notified that my current loan with Citi (1st loan) will go down to 3.25% this month based on my original loan agreement…it is a 5/1 ARM interest only! So with that in mine my new loan rate will also now include PRincipal as well . If I would have been notified earlier that my loan rate would be reduced (it was previously 5.625) I would have tried to stay current knowing that my loan would now help pay off the principal. Anyway, meanwhile after months of trying to work with both banks….The first mortgage went recently to an attorne yto begin foreclosure proceedings. I have 90 days to pay back what I owe in back payments in order to stop the foreclosure…which I’m trying to do now with Citi. However they are including their attorney fees in the amounts and I’m trying to get this waived.
I also called Charter One (2nd mort) because this went to “charge-off” to a Debit collector with RBS Citizens bank….they cannot legally ask me for money since it’s under the bankruptcy. However I noted in your blog that you mention not paying the 2nd loan but continue to pay the first. IF I can get the backpay to Citi and get back on a regular monthly paying basis with them…..can the 2nd mortgage (RBS Citizens) put a lien on the first mortgage company? I owe 226,500 with 1st mortage and 50,000 with 2nd mortgage. The recovery dept on the 2nd loan told me today that if I can pay them 200 a month it would go strictly to the principal (even though interest still accrues at 7.14%) but that eventually the interest per month would lower based on decreasing principal. He said they wouldn’t put a lien on 1st mort company because I am paying them something. However, if I choose NOT to pay the 2nd and both loans were filed off on Bankruptcy then would I still keep my home if I continue to pay on the first loan??? Right now I’m only looking to try and keep this home for a couple more years till my son is on his own. I’d appreciate any advice or clarifications you can give.
My house is worth now approximately 239,000 according to sales on the same type of townhome in my subdivision. I owe 226,500 on first and 50,000 on second.
Thanks much
Mary W
Robert Weed
Mary:
On Citi, the first mortgage. I’d be surprised if they agree to waive the attorneys fees. They charge those because you were behind and they probably have actually paid them out. And I doubt you can get through to anyone who has authority to waive them. Can’t hurt to ask, but don’t count on it.
On Charter One/RBS–the second mortgage. My whole blog here is about the risks and advantages of just not paying the second mortgage. If you don’t pay them, they can’t call or garnish you, but they already do have a lien on your property. Based on what you told me about the value, I’d be very surprised if they would try to foreclose you in the “couple years” until your son is on his own.
The first would foreclose you if you don’t pay them, so you can pay the first and not pay the second and keep the house for probably several years. Paying the second may be just money down the drain. At some point the value would be back up enough, and the first paid down enough, that the second would foreclose. We’re hoping that’s after your son is “on his own” so you won’t need the place by then. This does take nerves of steel, because there are no guarantees.
Thomas
Hello,
I was reading one of your responses and you said that you rarely reaffirm the first and never reaffirm the second. Could you tell me why? It sounds great, but my concern is the bank would come and take the house. Is this one of the nerves of steel moments?
Robert Weed
Thomas:
As long as you pay, they cannot foreclose you. Congress changed the law so a car finance company can repo your car even if you are current, if you do not reaffirm. But they cannot foreclose your house as long as you pay. The only advantage to reaffirming a mortgage is that it should then show current on your credit report. (And your mortgage services will be more polite to you.) The disadvantage is you just signed a NEW LOAN for $200,000 or whatever. That’s an enormous new commitment, for a tiny advantage.
Anthoney
Mr. Weed,
Do I correctly understand you that If I stay current on my first and do not pay my second after a discharged bankruptcy that by law they can not foreclose on me.
As I stated on June 6th, I’m starting to receive calls and certified mail threatening foreclosure from Chase if I do not pay my second.
I’m just trying to figure out if I should engage them or just ignore their threats.
Kind Regards,
Anthoney
mae miller
My house was listed and I have a buyer who wants to buy my house. I found out that Bank one has a lien on it for a open line of credit. I file bankrutcy 10 years ago and I thought this debt was included, I never heard from bankone until now, I cant close on this property and the Buyer has invested a lot already to buy the house. Help! I heard that because the lien should have been on the bankrutcy initially that i can have the bankruptcy re-open and have the lien be put on their and show on the bankruptcy schedule. and then I can close.
Robert Weed
Mae:
Bad news for you. You are required to list the second lien on your bankruptcy schedule and I assume you probably did. Because if you hadn’t, they would have been calling you day and night, and they would have tried to sue you and garnish you. Chapter 7 bankruptcy prevents all that.
But Chapter 7 does NOT get the second mortgage off your house. It stays parked there waiting for the day like today when you want to sell the house and now you have to deal with them. (I sometimes recommend to people that after three or four years you offer them a small cash settlement, with the threat to move out if they don’t take it. But that takes “nerves of steel.”)
Anyway, you have lived in the house for ten years without paying that second mortgage and you saved a lot of money because of that. But now you have to deal with them. They’ve got the equity in your house.
You didn’t give us any dollar amounts–what’s the selling price, what do you owe on the first, how much is Bank One claiming. You need a real estate agent with good experience in short sales to help you through all that.
And if you can’t get permission from Bank One to sell the house, maybe you stay.
(I’m assuming you did a chapter 7, not a chapter 13 back ten years ago. Chapter 13 would be more complicated.)
Lynne
Husband laid off May 2009…stopped paying mortgage (advice of WFHM rep) to enter into and expedite a loan modification process….while “waiting patiently” for WFHM to approve mod we claimed Bk~ch.7. Discharged in October 2009. Husband back at work right after Bk.was discharged. WFHM agreed to tack all back payments (including late payments) onto principal balance AND extend mortgage to 40 years. (What a joke, huh?) We agreed to these terms ONLY because we knew we would one day walk away or wait until home was not under water and sell to try to make a profit. It has been nearly 3 years. We continue paying 1st, not the 2nd. We are ready to leave and move to a nicer area.
Questions: 1) How long, on average, does it take a lender to foreclose? 2)Will the foreclosure process be expedited because of the BK and loan mod? 3) How long, on average, can we purchase another home? 4) Once the bank forecloses will we be able to get approved to rent a home?
1st Mortgage $327k, 2nd Mortgage $130K. (Neither Reaffirmed)
Value~$245K
We are both in our mid 40’s.
Thank you for answering all of our questions.
Robert Weed
Lynne:
Good questions–the exact questions you should ask. Sounds like you have been thinking carefully through this whole process. sorry that my answers won’t be as clear as your questions.
1. Don’t know how long it will take them to foreclose. Here in Virginia it’s at least three months, usually five or six, but it sometimes stretches out for a couple years. Most other states its longer. That’s all I can tell you.
2. No, the foreclosure process probably will NOT be expedited because of the bankruptcy. At least around here, it’s not.
3. You can buy a new house two years after the bankruptcy–BUT it has to be three years after the foreclosure. So if you let it go, three years after they finally get around to foreclosing you.
Now RIGHT NOW you are still current on the first and there’s been no foreclosure. There are I think two people on my blog who have posted that they have been able to get approved for a mortgage in that situation and then move to the new house straight from the old one. Government POLICY is to lock you out for three years after you have given up the house–but MAYBE you can slide around that if you haven’t given it up yet. Most people–and this is from what others have written here and what my clients in Virginia have told me–stop paying where they are when they get approved on the new loan and then the loan approval falls apart and they are stuck. The government does not WANT you to be able to buy a house from where you are now–still sitting current on the house in the bankruptcy–but it seems like some people have managed to do it. You should give it a shot. And you need to stay current on the first where you are.
4. With a 2009 bankruptcy, renting should not be a problem. My experience is that renting can be tough for the first year. I’m assuming you have carefully rebuilt your credit, since you seem like you have been careful about everything.
Ragu
Mr. Weed, Thank you for a great online reference!! OK, textbook case here:
In California, filed Ch.13 made payments for 2-1/2 yrs, converted to a Ch.7 and got just discharged in June of 2012. Just was approved for modification on 1st mortgage from $270k to $162k, done. 2nd mortgage was discharged in BK, but they still have lien. They sent standard letter requesting $29k or they would accelerate foreclosure. House is worth $140k.
Called 2nd mortgage, they stated loan has been “charged off” and that they would no longer pursue collecting the loan OR foreclosure. They stated after a “charge off” they will not file foreclosure even in 10 or 20 years….
Does this make any sense? Will they wait until I pay down the first to kick me out? They don’t want to sell me the lien, I asked. They only say I can pay balance or leave house….but they won’t foreclose and can’t ask for money. I don’t trust them….THANK YOU!!
Robert Weed
Ragu:
I think you have approached the second too soon. Let them sit for a couple years and then I think they will settle with you. If you were only discharged THIS MONTH it hasn’t moved to whatever department figures out what they can get for these things. Also there are some federal programs that will throw a little money at the second after there’s been a mod on the first. Wait for that to have a chance to work through their systems.
Them telling you that they would “never” foreclose is clearly not right. But I don’t think you are in any rush. At some point that account will land on the desk of someone who is in charge of squeezing a little money out of charged off accounts–and that’s the guy you want to deal with.
All this is my GUESS, of course. That’s why I say this takes nerves of steel.
Ragu
You ROCK!! Thanks for answering so fast! Guess we are staying put and living here for a while….without worrying about a FORECLOSURE sign on my front yard! Thanks again.
Jenny
Hi, So a few questions. My husband and i filed for bankruptcy in 2010.We have 2 mortgages first is 156,000 and 2nd is home equity loan 80,000 both with bank of america. We had our first modified after the bankruptcy and have stayed in the home, but we do not pay the 2nd cause we can not afford it and it just got charged off/ closed i what they say . What can they do? Zillow says are home is worth 128,000 so do you think they will eventually foreclose us? I have never been late on the first, but i dont know if we should walk away can we do that even if we signed modification papers after the bankruptcy? Can they send the 2nd to a creditior if it was in the bankruptcy? Or will they just forgive the 2nd!! I am so upset i dont know what to think or do?
Robert Weed
Jenny:
I can understand you are upset. Just not paying the second takes “nerves of steel” and that’s not easy.
PROBABLY, some time in the next thirty years the second will foreclose on you. Because EVENTUALLY the first will be paid for and the second will be all that’s left. (Now maybe they will have lost track completely by then, but you can’t count on that.)
You CAN walk away even from a modification signed after the bankruptcy–the bankruptcy still protects you. (Assuming you did not reaffirm during the bankruptcy–a terrible idea that a few people on my blog say they did.) But SHOULD you? How soon do you become an empty-nester? How close are you to retiring? Do you really care about a problem that’s fifteen or twenty or twenty five years down the road.
Right now rents are high most places and loan mod payments are low. So you need to ask yourself if renting something is better for you than staying where you are. Don’t ask me–ask yourself what’s right for you.
Emma
Needed some confirmation that we are doing the right thing. We filed for chapter 7 in 2006 and reaffirmed our 1st mortgage. 1st mortgage is 180K. 2nd mortgage was not reaffirmed. We have been paying both since the bankruptcy. I called my attorney to confirm recently that we did indeed affirm our 1st mortgage and she told me that she is telling her clients not to pay the 2nd. Should we stop paying? It would help up financially. Our home is worth $170K today if we are lucky. We would like to sell in two years and am not sure what will happen then… Would we need to enter a short sale agreement with both lenders? Bankruptcy really did offer us the second chance we needed and don’t want to mess up things now.
Robert Weed
Emma:
Yes, if you want to shortsale, after bankruptcy, you need approval from both lenders. If you had NOT reaffirmed the first mortgage, you could just walk away and not pay anyone. But, if the first goes to foreclosure, since you DID reaffirm, they could come after you for the balance. (That’s in most states–some states the first mortgage can’t and I don’t know where you are.) Usually they don’t, but that’s usually. (Your lawyer where you are would have more info on that than I do.)
Should you stop paying the second? There’s nothing they can do if you don’t pay them–except they could hold up the shortsale! BUT, my best GUESS is that having some cash to offer them a one time payment to let the shortsale go through is your best plan. Paying them every month is LESS likely, in my best guess, than having a lump sum, to motivate them when the time comes.
Good luck. I’m sure glad you didn’t reaffirm the second, but reaffirming the first did put you into something of a tight spot.
Robert Weed
Take a look at this. https://robertweed.com/resources/Bank%20of%20American%20Letter%20REDACTED.pdf.
This is from one of my 2008 bankruptcy clients. These folks filed Chapter 7 in 2008, paid the first, just didn’t pay the second mortgage. (That’s my nerves of steel strategy.) It paid off big last week when Bank of America sent a letter saying they are forgiving the entire loan.
(If you read the small print, the letter tells them they might be taxed on the debt forgiveness. Since this debt was “forgiven” in the 2008 bankruptcy, there’s no debt forgiveness tax. If the Bank send the IRS the form that says there is, we’ll fix that next year.)
Jen
Mr Weed…..I cannot thank you enough for your blog. I received a letter yesterday from Bank of America saying they forgave my second mortgage for $44000. Here is my situation…. I had a 1st and 2nd with BOA. I was approved for a home mod on the 1st in Jan 2012. During the home mod process they tell you to not make payments. When I was approved and I had to pay both payments ontime I found it very hard to pay the 1st and the 2nd. After taking your advice and reading several comments made by others I stopped paying on my 2nd mortgage. Its been 4 months and I was waiting to hear from them. When the letter came from Fed Ex I assumed it would be forclosure papers. But it was a Forgiveness Letter. WOW !!
For those of you that may read this post…….
I know everyones situation is different so please do not take advice from me.
Thank You !!
Robert Weed
Jen:
Thanks for sharing. Bank of America apparently agreed to forgive some way under waters 2nd mortgages as part of their big settlement with the state attorneys general.
Beverly Deese
Hi, I love your website and you are more informative than the bankruptcy lawyer that I hired for my chapter 11 in georgia. Thank you for all you do sir. Just to let you know, I quit paying my second because the 1st mortgage was underwater. Bank of America agreed to forgive my under water 2nd mortgage as part of their big settlement with the state attorneys general. I hadnt paid for 1 year and I also did not affirm the mortgage. I read articles on this website and I am so grateful for all the important information that my own attorney did not tell me. You are a wonderful person and thanks so much Mr. Weed!
Dawn
Mr. Weed,
We filed Ch 7 in May 2012 and expect our discharge papers any day now. We have a 1st and 2nd like many other people. Our 2nd is being very aggressive and not very cooperative. They want us to fill out forms to see if we qualify to make a settlement offer. We have not yet heard from our 1st. We assume they will contact us to our intent once the discharge is final. Is it unusual for a 2nd to be so aggressive when there is no equity in a property? During our Ch 7, they filed for a Relief of Stay and were granted that. What do they hope to accomplish? The 2nd is with GreenTree which is owned by BOA. We want to stay in the house for our boys for at least 5 more years. Should we continue to ignore them and only seek to work with the first? We are not sure what is to be accomplished with the 2nd if we haven’t even started talking with our 1st mortgage yet. Thanks for the great blog.
Robert Weed
Dawn:
It is unusual for the second to be so aggressive, but Greentree is unusual. No reason, though, to not put in their application–maybe they will offer you a settlement that you would want to take. (Remembering that the bankruptcy still protects you if you back out later.) You are not interested in a big reduction in the interest rate–but you ARE interested in a big reduction in the loan principal.
Bank of America is settling some second mortgages for ZERO dollars. Haven’t heard of Greentree doing that–but you can ask.
Margie
So glad I found your blog! I filed Chapter 7 in 2010 which included my first and equity loans, both with Wells Fargo. The first is affordable but the Equity is draining me dry. I’ve been able to keep up with the payments until last month when I paid all but $50 and immediately received a threatening letter from them. This month I cannot afford a payment at all. Since the same bank owns both loans, does the ‘don’t pay my second mortgage’ still work the way you describe, or can the bank foreclose on me if I’m still paying the first? I’ve tried working with the equity department, both prior to bankruptcy and after, but they won’t budge at all. I filed my bankruptcy on my own, so I don’t have an attorney to turn to with questions. Any help is appreciated.
I did not reafirm with either loan, and I live in CA. Thanks again.
Robert Weed
Margie:
The fact that both loans are serviced by the same bank doesn’t matter at all–they are in a different department–and likely held by different investors. What matters is whether the second mortgage would get paid enough if there’s a foreclosure that it’s worth them foreclosing.
What’s the value of the house–what do you owe on the first–and how much on the second. Those are the important facts.
Good luck.
Margie
Thank you for your help. Per the County Assessor’s Office, my condo is assessed at – Land $67,049.00 Improvements $100,577 Total $167,626 minus a $7,000 homeowners extension, so my tax bill is $160,626. I’m trying to contact a realtor to see what my same unit is selling for however I can tell you that there are currently a high number of foreclosures in our building. My first is $122,918.00 and my equity loan is $125,087.00. Would you believe that about 5 years ago we had an offer of $371,000 on our place but we weren’t read to sell at that time. Who woulda thunk?
Also, would you clarify for me, can the second foreclose if the first does not agree or how does that work?
Appreciate your feedback and thank you:^)
Margie
Margie
Hi Robert, Just talked to a realtor today who told me my condo unit is selling for around $165,000 if that helps at all.
kimberly
Hi Robert,
Filed chapter 7 discharged in 5/2011. Reaffirmed 1st (HSBC) didn’t reaffirm 2nd (BoA). House current market value $190-200k (zillow & current comp). Owe HSBC 268K (1st) & 40K on 2nd (BoA). Both mortgages are paid and current. How can we legally get out of the second mortgage or settle with them (BoA) to have the lien stripped/removed? Do we stop paying them and take our chances they will offer to settle? We do not want to do a “Chapter (20)”. We are not worried about foreclosure because of the value of the 1st(HSBC). The 2nd mortgage is listed as a conventional 15 year/balloon does this make a difference?
We live in Florida. We have asked our BK lawyer for “help” he told us to write a letter to BoA and offer them 5% of the loan value. Any insight would be greatly appreciated.
Robert Weed
Kimberly:
I agree with offering them 5%–BUT, they are not likely to say yes since you’ve been PAYING them. So I’d not pay for at least two years before I tried to work something out.
Also, as part of the mortgage settlement with the states, BofA agreed to forgives a lot of billions in mortgages, as apology for the various low-down things Countrywide did. they are forgiving a lot of second mortgages–ones that they KNOW they will never collect. By PAYING you make it a lot less likely you will get one of those offers.
PS Why on earth did you reaffirm the first???? Especially with HSBC. Did they give you an interest rate cut?
kimberly
Thank you for the quick response!
When we filed for the chapter 7, our lawyer stated that we needed the monthly payment for the “7” to work, so we reaffirmed the 1st(HSBC).
Yes, we got a interest reduction but the payment stayed the same. The mortgage will be paid off faster.
We will not be paying (BofA) as of October, in hopes of a settlement down the road..
Thank you for the advice, information, and this blog.
I know I am not alone.
Mimi
Hi Robert…
I have a question, we filed bk in 2008 and didnt reaffirm our 1st or 2nd mortgages. We are currently working on a remod with Wells Fargo for our 1st mortgage, but have not paid or heard from our 2nd mortgage in 5 yrs. The 2nd mortgage company went out of business a few years ago. How do I find out who holds my second lien, I’ve tried to search online but am havinh little success.
Also, our 1st mortgage is 283k and 2nd 88k the value of house range is $160k. My 1st mortgage wants us to get a subodination letter from 2nd mort company so that we can remod..Is that correct?
Robert Weed
Mimi:
Wow, that’s a problem.
I’d think SOMEBODY at Wells Fargo would know how to find an out-of-business mortgage company. I don’t have any idea.
I’d also think that Wells would want to work with you to keep paying rather than have you take advantage of the bankruptcy and just stop paying them and move out when they kick you out. But they may not see it that way.
Obviously you will NEVER have any equity in this house. And looking back (which is always easier), if you had stopped paying Wells in 2008, you could have bought a new home last year for $160K and be building equity today. Now maybe you really love the house you have or you are waiting to the kids are all out of school.
But Wells needs to offer you a good deal to keep you in a house worth $160K that you owe $370K on.
Margie
After your response to me on Sept 17, I noted some additional info on the 18th and 24th and was hoping to get a bit more advice from you. What do you think the chances of the second foreclosing based on the amounts I listed? Anything? Thanks:^)
Miyoshi
Hello Mr. Weed,
My first mortgage is with Wells Fargo $194k (stopped payment May 2011) and my heloc is with BoA $61k (stopped payment Jan 2012). Comps around my area for my home is $225k (purchased in July 2005 for $445k with half down). We received a BK 7 discharge in July 2012. We did not reaffirm the loans on the home. Today we received from FedEx a letter stating that our heloc was forgiven. I think the reason we got picked is because we had the heloc discharged in our BK. The only correspondence that we ever received from BoA was our monthly statements. No calls, no letters, nothing. We were all set to walk away from our home but now I am a bit confused on what our next move should be.
If I no longer have a 2nd, I’m technically not underwater with my house anymore (if you don’t include my missed payments). Does this mean I can sell my house on what I owe on my loan before I stopped paying? If that’s the case, it wouldn’t be a short sale and I could sell my house to anybody I wanted to. Right?
Also, since it was discharged in our BK, do I have to worry about any tax liabilities?
I don’t want to do a loan mod because Wells Fargo will tack on the missed payments to the end of the loan, whereas if I sold it to someone who was not at arm’s length, maybe, just maybe I can have it sold on what I currently owe minus missed payments.
I’m sorry if this is confusing but any help will be greatly appreciated. Thank you.
Robert Weed
Miyoshi:
You are right about BofA and their second mortgage and heloc forgiveness. To settle up for the bad things Countrywide did, they promised to forgive a lot of loans–and to save money they are forgiving ones where they are pretty sure they are not going to get paid anyway. So your was in that category since you had a bankruptcy and then had the good sense to STOP paying.
(You are also right that you have no tax consequences for the heloc being forgiven because it was already wiped out in the bankruptcy.)
That brings you to your first. What you owe isn’t what you owed when you stopped paying. All those late payments are in there. So you may be around break even.
You say you don’t want a loan mod because Wells will tack the late payment on to then end. You are right about that–but I’m not sure that’s the right question. Do you still like the house? Do you have somewhere else you’d rather live? Those are the important questions.
Keep in mind the bankruptcy still protects you with Wells, even if you get a loan mod. If they give you one of those mods where they step up in three or four years, you can stay there when the payment is low, and then move out when it adjust up.
Unless you are sick of the house, I don’t see any reason not to try for a loan mod and see what they give you.
Pat
Discharged from Chapter 7 April 2011. 1st 69,900 and 2nd $76,000 both with Chase. Zillow appraised home at $114,000 – BPO was done by broker appraising home for $91,000. Did not reaffirm mortgages. Stop paying 2nd January 2012. Would the 2nd settle for 5-10% two or three years up the road or more likely to foreclosure? I live in Georgia.
Robert Weed
Pat:
I don’t know. What I say on my blog is it takes nerves of steel.
Miyoshi
Mr. Weed,
Thank you for your quick response. We were ready to walk away from this house when the time came for us to. Wells Fargo has not filed a NOD yet and we were going to ride this out until the very end. I will contact Wells Fargo for a mod and hopefully they will help. I just hope that since there is no longer a 2nd lien on this house, Wells don’t decide to expedite the foreclosure process. Thank you again sir.
Pat
Thanks Mr. Weed – I have and will continue using those nerves : )
John
Mr. Weed,
Thanks for all the support and clarity you provide!
I just found your blog tonight, and already I feel much better and more informed. I do have a couple outstanding questions, which may be in the blog, but I couldn’t find specifically. Hoping you can help me understand my options.
I have a discharged NJ Chapter 7 BK from 2010. Just tonight, before I found the blog, I pulled my credit from annualcreditreport.com and found a couple issues that I filed online disputes for. The first was a CC included in the BK, which the lender is showing included but also as a “chargeoff” with the “CO” code. The second is my credit union, who is still reporting on a car loan that we did not reaffirm, but we kept the car and have been paying on. We’ve had some late payments on the car loan, and this has hurt my score, although it shoudn’t have been reported. It actually cost me a recent CC denial (which alerted me to the issue). We have gotten 3 or 4 new CC since the BK and they are all perfect history, almost 2 years now.
I also see that my mortgage lender ING has done several “hard inquiries” over the last 2 years since the BK, do they have a right to continue to access my credit report? And why they aren’t doing “soft inquiries” I don’t know, but that’s also hurting my score.
As to the mortgage company, I have a first and 2nd with ING, and a third with Citi. I am 30 days behind on the first, a year behind on the 2nd, and 18 months or more behind on the third. We are well underwater, I would say having a bit more equity in the home than the balance on the first, but still less than the 2nd. And the 3rd, forget about it, that’s another $120k underwater. We also fell behind on our property taxes, since ING does not escrow for them. We are behind about $20,000 and just last month our city put a tax lien on the property and sold the taxes in a tax sale. That gives us 2 years to redeem those taxes, as well as get current on the upcoming taxes as well. We feel we won’t be able to ever recover from the equity shortfall and now the taxes. I have fantastic rates on all 3 loans, like under 4% on all, which prompted us to try to keep the house. But it seems we’ll never catch up, and financially, the smart decision is to walk away (when forced to).
Wondering if we stop paying altogether now, if we are still fully protected by the BK. ie just wait til they foreclose and evict us, and move out then. Would we have any liability for the property taxes? Will any of this hit our credit report (and not be able to be removed via a dispute process)? (All 3 mortgages already show discharged in BK7 on the credit report, and no activity since, at least they did that right!)
I understand what you said in the blog about the 3 year rule. I guess I’m asking if that’s the only consequence if we decide to stop paying our mortgage and city taxes. Lastly, the first mortgage holder still calls us and sends emails routinely, as soon as we are 15 days late or more. They call from the BK team, so they know the loan is discharged in a BK. Can I just tell them to stop contacting us?
Thanks so much for your insights!
Robert Weed
John:
Good letter and good questions. Better than I know the answer to.
Everywhere that I know about, when there’s a foreclosure sale, the buyer has to pay the taxes and that gets you off the hook. But I don’t know how that works in whatever state you are in.
You are correct that there is no liability if you stop paying the three mortgages–but the taxes, from after the bankruptcy, I just don’t know what the counties do in your state.
And yes you can tell the first mortgage to stop calling…it’s borderline, but they may be violating the bankruptcy law now. They certainly would be if they keep calling after you tell them not to.
If you want to, you could do Fair Credit Reporting disputes against the credit union, because they have continued to report your payments, current and late. I’m not in position to judge whether on balance the reporting is hurting you more than helping. You might hack them off and have them repo the car–unless you’ve decided to give up the car, I’d leave that alone. (Also I’m guessing your bankruptcy lawyer is not much interested in after bankruptcy service to their clients or you wouldn’t be asking me.)
You are in a gray area on ING putting hard inquiries on your credit. They are allowed to do that if you have an account with them. Do you? Well sorta…you’ve stayed in the house and you are still paying. I think if you told them you are not paying any more, and don’t pull your credit, and then they do–that would be a much stronger case.
Illegal pulls is one of the few areas of the Fair Credit Reporting Act where you do NOT have to do a dispute before you sue..you can just sue them. You can look here http://naca.net/ for a lawyer in your state who does Fair Credit Reporting law. You might find one who thinks that the pulls are already illegal and would be eager to that them on. I’m primarily a bankruptcy guy–I’ve had to learn about Fair Credit Reporting to keep my clients protected, but it’s not my main area.
Dorothy
Wow, what an amazing blog full of great info! Thank you so much for your time for all of us.
My house is valued at approx $440. First mort, with Citimortgage was just modified and just completed 3 month trial, conditions not quite clear yet but principle is $325 and all is good with them.
Second, owned by BOA, is 14 months behind and principle $180. I just received letter from them that they are forclosing but lost my promissory note and will be using a lost note affidavit.
Any advise on how I should play this? My goal is to keep my house for at least 15 yrs till kids out of school. Will BOA back down and offer settlement, maybe meet Citimortgages mod agreement??? They lost my note papers and are stating my interest rate at 3.5% which is lower than original agreement but want arrears, that I don’t have, to reinstate. I have a friend whose second was forgiven by BOA for $67,000 without so much as a phone call!!!!!!
Thanks for being such a good person in a world full of sharks.
Dorothy
Robert Weed
Dorothy:
Wow. Thanks for your kind words.
BofA is forgiving second mortgages that they don’t think have a chance at being paid–but it looks like they think there’s some equity in your house that they can get to.
I will tell you that I have NEVER actually seen them foreclose out of a second mortgage, but they may act differently where you are. So I’m not sure…I think you should contact them and ask if you cna apply for a mod and see what that gets you…other than that, I don’t know enough about your local situation to help much. Sorry.
Dorothy
Thank you again for your time. After a year of paperwork, they denied me a mod. I will take your advice and contact them with the terms of my first mod and ask if they will match. If not, I guess I’m headed to forclosure court and they will have an unsigned lost note affidavit….!
Thank so much for helping people!
Chris
We filed Chapter 7 in 2009 and the discharge was complete in October 2009. We never re-affirmed our second but have stayed in our house since. Now it is end of 2012 and I have been relocated to another city. We are still upside down in total debt to value. House is worth 230, first is 190, and second 97 (never re-affirmed second and I dont remember re-affirming first but it has been paid every month). What is our best option for getting out of this house and being able to purchase in our relo area?
Thanks
Robert Weed
Chris:
You’re a good example of why I tell people DON’T reaffirm the mortgages. (Check with your lawyer to make SURE you didn’t reaffirm the first.)
In terms of getting out of the house, you can just stop paying. I was explaining this to one of my clients last week–when he got it her said, Oh, like Paul Simon’s Fifty Ways to Leave Your Lover. The bankruptcy still protects you from them coming after you for the money.
You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free.
If there’s an association, make sure you keep paying that until there’s an actual foreclosure.
Now, you say you want to buy again at your new location–that’s trickier.
The current regulations are that you can buy again three years after a foreclosure; two years after a shortsale. Also two years after a bankrupycy, but you’ve already got that. The problem is the shortsale or foreclosure are both still in the future.
Or are they?..some people have been able to get loans by RENTING the place they are moving out of–and then qualify right away. That doesn’t always work, but I do NOT know why or why not. Maybe a lender in your new area can try that.
Otherwise a shortsale allows you to buy again sooner than a foreclosure would. Even with the bankruptcy, the second mortgage still have to approve the shortsale–but getting a little something if they do, is better than getting nothing at a foreclosure. The second cannot come after YOU for any money. So the negotiations are mainly between the two mortgage companies. An experienced real estate agent can help you through that frustrating process.
Harvey
Mr. Weed,
My ch7 was discharged in 2009. According to some of the sites that provide information on what your home is worth, my home is worth anywhere between $44-$54k. I have a 1st and a 2nd on it, I owe a total of $77k between the two. I don’t have any missed or non payments on the 1st and but I’ve missed numerous payments on the 2nd. I’m not tied to the home,I’ve considered moving into an apartment. But, in searching for an apartment I’ve noticed that most apartments are more than my mortgage. The only appealing thing about the search is I won’t have to pay landscaping fees, water, sewer or trash in an apartment.
I’ve considered refinancing if allowed, but are unsure of what refinancing will do to me. Can the home loan be modified or refinanced without me being tied to it again? How do you know or how can you find out if you fall up under the Joint State-Federal Mortgage Servicing Settelement? If, BOA would be sending any sort of funds as apart of the settlement or reducing the loan amount it would be worth it to stay.
Robert Weed
Harvey:
Good questions.
My recommendation to people generally is to pay the first, don’t pay the second.
See if the first will give you a modification that gets that payment down more. Then see if you can get forgiveness or a low ball settlement on the second.
Specifically, a new agreements with your existing lender on the first is still covered by the Chapter 7. For example, if they give you five years at a lower payment and then it goes back up–you can live there fore five years, move out when it goes up, and the bankruptcy still protects you.
On your second question, don’t know how to tell if you are covered by the Settlement. Sorry.
Penny
My bk has been discharged for a couple of years now. I have always made regular payments on my mortgage before and after the discharge even though I didn’t reaffirm the loan. I’ve been in my home for 11 yrs and I’m torn between staying and leaving. One minute I’m amped to move then the next I start dwelling on how this was my first home and I want to stay. I’m living paycheck to paycheck and I don’t want to continue living like this. I’ve taken the time to write down my bills to weigh the options of renting vs. home ownership, and renting may only shave off $100 per month. Do you know if I can get a modification to lower my payments even though I’m current & I’ve never missed any payments? Should I stop making payments to qualify? I’m a single parent and I would hate to come home one day and they have padlocked the doors with all our things locked behind the doors. How do I know they won’t file for eviction immediately and foreclose without processing or agreeing to the mod?
Robert Weed
Penny:
Before you get behind, you ought to see if you are eligible for HARP. HARP is the government’s modification plan for people who are current. Look here….http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx.
If not, and you need to go for HAMP, then you need to be behind. You will feel safer trying to get a HAMP mod if you bank the two payments that you skip..and only get two behind. Then, if they won’t work with you, you can catch back up in a hurry if you need to.
And PS, they don’t foreclose people who are two behind–you run up late fees, but they will let you sit two back basically forever….
Juan
Great Blog Mr. Reed. Some Questions.
State: Florida
Chapter 7 Discharge January 2010, 1st Mortgage Balance $ 136,500.00 Current, 2nd Mortgage Balance $ 54,000, Behind 4 Months. They are sending to me, Right to cure letters to collect the debt ( I thing they are Violating the BK Law trying to collect a discharged account sending to me those letters?) Both Mortgages Retained Both not Reaffirmed. Homestead Property. Property Value: $ 107,000 – 115,000 tops. As you can see the property is seriously Underwater.
Send already a letter to the 2nd mortgage lender asking for settlement (to begin the communication process) . Not a word yet.
Do you thing that they foreclosure in this scenario with no equity at all?
Can they sue me or garnish my salary on this Discharged Account?
I can pay my 1st Mortgage but not my 2nd. What else can I do? Just wait and see or send another letter to the 2nd mortgage lender?.
What are my options to keep the property.
Thanks
Robert Weed
Juan:
You are doing what I recommend. I don’t think the second will foreclose and I do think they will eventually offer you a settlement. But it’s scary–that’s why I say it takes nerves of steel. I’d wait a while before I sent a second letter–you don’t want to act too eager.
Your other question is easy to answer. No, they cannot garnish you for the second mortgage because it’s discharged in the bankruptcy. That, and the no equity, is why you have leverage to negotiate a settlement.
Good luck!
Andrea
My loan is with BOA. I tried a year or so ago after my bankruptcy to get a streamlined refi through BOA, but my house was/is underwater. I don’t recall the specifics but I didn’t get the refi. Can you tell me what the difference between a streamline refinance or refinance and a modification is? Will I under contractual obligation again by doing either?
Robert Weed
Andrea:
A refinance is something they do because they think you have good credit. A modification is something they do because they’d rather get paid a somewhat lower payment than foreclose and be stuck with your house.
Neither one, after a bankruptcy, re-obligates you. The bankruptcy still protects you if you decide later to walk out. (Now a refinance with a different lender, would be a new after-bankruptcy debt that then you could NOT later get out of.)
Phillip
Chapter 7, June 30,2007 in Ohio , didnt reaffirm. I had paid both morgages for years after bankruptcy,then stop paying my 2nd morgage about 3months ago. 1st is Wellsfargo, 2nd was with Homecoming, who gave it to GMAC. Now GMAC is in bankruptcy so I decided to stop paying 2nd morgage. I owe 32,000 on 1st and the 2nd I owe 36,000. I tried to get mod from Wells Fargo and was told, they wont give mod if you didn’t reaffird. GMAC lowered it from 14.5 to 8 % a few years back, which was still a rip off. I wish I would have found this blog then. Zillow said my house is only worth 37,200(mid) and 44,000(high) OMG. I got a letter saying I was in defualt and have until Dec 7,2012 in two days to aviod foreclosure. The total due is only 1800, but by them being in bankrupcy I don’t wont to pay. Do you think GMAC being the 2nd morgage will close? And what will they gain with the value so low? Are the fee to foreclse to high for GMAC to try? Is this where the nerves of steel comes in? Thanks
Robert Weed
Phillip:
Yeah, this is where the nerves of steel come in. The values here, and probably in Ohio, have improved the last year or so–so you are in a little weaker position than if you had sopped paying saying in 2009.
I doubt that the 2nd will actually foreclose you–like you say they have nothing to gain. I suspect the foreclosure system there is really clogged up and you have plenty of time to work out a big reduction of some sort. But I don’t know Ohio–I’m only guessing.
Good luck.
Lisa
Your blog is great! Here is my situation in GA:
We reaffirmed our 1st mortgage and have stayed and will continue to stay current since we want to stay in our home. We did not reaffirm our second mortgage and have not paid in 5 months since we filed BK. Our 1st mortgage has around $69K left and our 2nd mortgage is $75K. Our house is worth somewhere around $125. We just received a letter saying the 2nd is going after the Real Property and filing foreclosure. What does that mean to us?
Is it in our best interest to try to catch up and continue paying the 2nd? Or should we continue to not pay it and hope they settle at some point? Can they buy out our 1st mortgage since it is less than the 2nd even though our home isn’t worth the total of both? Just trying to see what our best options are at this point. Thanks!
Robert Weed
Lisa:
Don’t know much about Georgia law–but based on the values, there’s a real danger they will foreclose.
Just as an example, if there’s a foreclosure sale at $100,000, the first would get paid in full and the second gets $31,000. Just under half of what you owe them. If they think they are going to get nothing from you, they will foreclose. Don’t know who they are or what their policy is in Georgia, but it looks to me like you need to make them an offer that’s a lot better than $30k.
Somebody who is familiar with your area might have better insight than me.
Lisa
wow – thanks for the quick response!
Our 1st is with BOA and our 2nd is a HELOC with Regions, not sure if that makes any difference or not.
Can they really try to foreclose even though we are current with our 1st mortgage and or 2nd is a HELOC? Or would they try to buy our 1st mortgage from BOA and then foreclose?
I’m thinking we will call Regions to see if we can begin making some sort of payments again. I don’t want to risk losing our home.
Eileen
My bankruptcy was completed in July I have a first mortgage with U S Bank and a second with Wells Fargo Bank I did not sign a reaffirm letter with either bank I tired to get a loan mod with wells Fargo and they turned me down because my income is 48% of my loan I was also told by WELLS FARGO to stop working over time and stop paying on the second. I owe 108,999 on my first and 32,000 on the second my house was appraised at 160,000. I live in Alabama. I don’t know what to do I have never been late before. But I am getting older and sick and really can’t keep on working the way I have been. Will they foreclose because there might be $19,000 in equity but my house does need repairs Thank You Eileen
Robert Weed
Eileen:
Your own lawyer should have a better idea of what they do in Alabama than I do. But I would be really nervous in Virginia that the second would foreclose with that much equity.
If you can’t afford to pay both then I’d pay the first and not pay the second. But I’d also figure at some point the second will foreclose you, so be ready to find a cheaper place to live.
Heidy
Good afternoon Mr. Weed
I filed Bk on 12/6/12 have 341 meeting on 1/15/13. I am on time on my 1st morgage with boa. Taxes and insurance are included in the payment. I received an statement which states that I’m not obligated to pay but it shows my monthly payment. It does not shows my escrow. It only shows my pay off amount. I’m planing on keep paying my 1st. I just don’t know now if I pay my monthly payment how will they distribute or sort the payment meaning will the continue paying the taxes and insurance or would that change with bk.
I do have a second mortgage but I haven’t pay it since 2009. It was with boa, but they sold it to old republic bank. At that time was 85,000 now is 117000.
I’m not reafirming this house but am thinking paying 1st mort.
It is under water value is $216k. I owe 375,000 on the first and 117,00 in the second.
I agreed to a loan modification on September 2011 I have been on time for one year only on the 1st. Thank you Mr. Weed
Robert Weed
Heidy:
Don’t know your complete situation, but from what you tell me, it looks like you are thinking clearly.
lee
Mr. weed
I have several questions
1st of all I left my home in august of 2010 and I filed chapter 7 in 2011. it was discharged in may 2011. In april of 2012 I got a letter from Owcen Mortgage and they told me they brought the loan from chase my 1st mortgage company and they would be taking over. I explain to them I included the house in bankruptcy and they ask me to fax it over. I did. I did not hear anything from them since i fax over the bankruptcy discharged letter,but then i continue to get letters from them and then i finally call and they asked me if i wanted to the property back. I said is that possible they said yes. I submitted all the paperwork for the modification and was approved. Now since I had move out of the house I had not been in it for 2 years. Ocwen lock it up. They finally gave me the code to get in on 11/25/2012 and inside the home all the cooper was gone and they were holes in the home. I call them and they said they had not been in the home and that I was responsible for the house repairs. So I stop talking to them. Is this correct? I am still responsible for this house even though I have not leave in it for 2 years and 3 months.
Robert Weed
Lee:
Thanks for sharing your story. It reinforces that lawyers should tell people, don’t move out! https://robertweed.com/blog/after-bankruptcy/file-bankruptcy-stop-paying-dont-leave-that-house/.
Let me help you understand it this way…it’s really nobody’s responsibility to fix the damage. (Other than the people who wrecked your house, of course, but they probably will never be found.)
BUT, you are living there. So if you want it fixced, you need to fix it.
Now here’s the good news, you can move out again and not have to pay Ocwen. Because of the bankruptcy, they cannot enforce the loan mod if you don’t want to pay.
tom Clark
Mr. weed
I am 3 months behind with my 2nd mortgage servicer BOA and investor BONY. I am current with my 1st mortgage servicer BOA & investor Fannie Mae. Both loans were originated by Country Wide. i achieved a successful Mod about a year ago on my 1st, making it a little comfortable to pay. The property is worth about 219K and the balance on the 1st is 229K and the 2nd is 54k. I plan to keep the property and settle on the 2nd couples years down the road. However, i received an intent to foreclose from BOA by being behind on the 2nd a month ago, which i have ignored. I am currently over whelmed with other unsecured debts and will like to file for BK chapter 7 to get a clean start. I plan not to reaffirm both mortgage loans and stay current with my 1st. I lived in MD and, i just spoke to a BK lawyer about filing for Chapter 7 and she said the only way i can file for chapter 7 and keep my home is to get caught up with the 2nd payment. What is your opinion on that and will also like a referral for BK lawyer in MD if you don’t mine.
Thank you
Tom
Mr. Weed
I am 3 months behind with my 2nd mortgage, the servicer is BOA and investor BONY. I am current with my 1st mortgage; the servicer is BOA & investor Fannie Mae. Both loans were originated by Country Wide. I achieved a successful Mod about a year ago on my 1st, making it a little comfortable to pay. The property is worth about 219K and the balance on the 1st is 229K and the 2nd is 54k. I plan to keep the property and settle on the 2nd couples years down the road. However, I received intent to foreclose from BOA by being behind on the 2nd a month ago, which I have ignored. I am currently over whelmed with other unsecured debts and will like to file for BK chapter 7 to get a clean start. I plan not to reaffirm both mortgage loans and stay current with my 1st. I lived in MD and, I just spoke to a BK lawyer about filing for Chapter 7 and she said the only way I can file for chapter 7 and keep my home is to get caught up with the 2nd payments. What is your opinion on that? And I will also like a referral for BK lawyer in MD if you don’t mine.
Thank you
Robert Weed
Tom:
My analysis is different than the lawyer you talked to on the phone. Here are two Maryland lawyers I think are good.
In Maryland, I can suggest: Tanya M. Kripetz, Kensington, Maryland 20891 (301) 474-1900. Or Ronald Drescher, 410-484-9000.
http://www.drescherlaw.com/bio/ronald-j-drescher.cfm.
http://www.manta.com/c/mmcsqtz/tanya-m-kripetz-law-offices
Bobby
Mr. Weed – My 1st & 2nd mortgages were discharged via Chp. 7 B.K. 6/2008. I’ve stayed in my home since then, but have not re-affirmed the 1st or 2nd. I’m 4 mos. into your “nerves of steel / just-don’t pay 2nd strategy”. 2nd with Green Tree (servicer for BOFA). I’m current on 1st mortgage. My figures: 1st-$131,700; 2nd-$39,200 (total $170,900). A.C.V. of home is apprx. $120-k, $135-k at best. Apprx. $35.9-k to $50.9-k upsidedown. As anticipated, Green Tree’s calls have been relentless & harassing (multiple violation of Fed. & State D.C.P.A. & Fed. B.K. violations), despite their knowledge of Chp. 7 B.K. discharge. Green Tree advised they would foreclose. I shared my figures w/them – advised they would just lose money (no equity – unsecured debt). They told me they would contact 1st holder, negotiate that down, foreclose & sale the home. I told them they can’t legally do that ( correct ?). Nonetheless they are unrelenting. At 3 mnth mark I did invite them “verbally” to make me a settlement offer. They asked what I had in mind – I told them to make me an offer. Instead of an offer, 2 wks ago [ 4 mos. behind ] got default letter from Green Tree – “referring your case to foreclosure” – “G.T. has right & intends to initiate foreclosure”. Based on figures quoted above, and the just-don’t pay 2nd strategy I can’t see why Green Tree would foreclose – nothing for them to gain! My research into Green Tree’s practices indicates the following: They bend the truth to its breaking point. In regards to BOFA serviced 2nd mortgages, at the 4 mnth mark they send the “default letter / intent to foreclose”. My research further indicates what they don’t disclose is if there is under $10k in equity in the home they won’t do anything and will charge it off at 180 days (2 more mos. in my case), and just wait it out. This strategy does take “nerves of steel” ! Although relentless myself I am naturally a little nervous. QUESTION: Do you really think Green Tree (as the 2nd lien holder) will follow through with foreclosure. They have nothing to gain. The debt was discharged, so they can’t sue for deficiency or atty fees/costs. Are they bluffing, hoping I will pay and get caught up?
Robert Weed
Bobby:
Thanks for sharing this with everyone, because it really does take “nerves of steel.”
I think they are bluffing. I also think you should fight back–like you say they have multiple, willful violations of the bankruptcy discharge and possibly the FDCPA. You need your bankruptcy lawyer, or some other lawyer, to go after them for the discharge violations and see how they like that. Make them fork out a couple thousand bucks–mostly to legal fees–for their illegal conduct.
Clifford Than
Dear Mr. Weed – Like your fruitful blogs and particularly your passion.
Situation:
– Ch11 (not eligible for 13) in 2010 converted to 7 in 2011, discharged early 2012, off all unsecured with 1st and 2nd left on home with different lenders. (2nd lien strip-off was approved while in 11 for no equity)
– Now in red hot RE SF area, house value (est. $1.3M) is above both 1st (1M) and 2nd (0.2M) combined. Current with 1st for 12 months, no payment for 2nd since filing. Just notified that 2nd is being transferred to new loan servicier.
– Awaiting next action from the lender/servicer. Intend to keep house for at least 5years. Do-not-pay strategy apparently won’t work here and house value won’t come down anytime soon.
Question: What will be the best strategy in dealing with 2nd for their possible action (ultimately foreclose presumably)? wait and negotiate? start cooperative negotiation? file Ch11 again? (now with only two major creditors, 1st and 2nd; any new repayment plan will have to done in 5 years – worse than paying 2nd over years)
Thanks!
Robert Weed
Clifford:
Sorry–I’m not going to be much help. Northern Virginia is a high cost of living and expensive real estate area, but nothing like San Francisco. (Also, while real estate has been improving here, I think the sequester is going to stop that.)
So my experience doesn’t help you. My only thought is maybe the people who would deal with at the second lender do not know how strong real estate is there. And so they may not know what leverage they have with you.
So I think you’ve analyzed the situation right, but your guess is better than mine on what to do.
Sharon
In my Chapter 13 filing, I am getting my 2nd mortgage stripped since I was upside down in my home when I filed bankruptcy 2 years ago. He told me to stop paying it and I haven’t paid since July 2011. My attorney said that an adversary hearing will occur, but when? Each time I ask him, he says it will happen. I have 3 more years left on my chapter 13 and am anxious to know. Also, if at some point during my bk13, my house is no longer upside down, can the 2nd mortgage lender come back to collect all the money that I have not paid since July 2011? Thank you.
Douglas88
Thanks you for the info , I am in a simular situation as others on this site . My discharge was in january 2011 . Both my first and second mortgage were discharged . I am 2 months behind on the first , but no payments for 2 years on my second . Once , my case closed I contacted CITI Mortgage on my second . They would not accept any payments and told me that they would foreclose when the market improved . My house is upside down $157,000 and that is the amount due to CITI . In january of this year , I received a letter from a second mortgage recovery lawyer requesting payment . I sent a certified letter requesting the loan documents . It has been 2 months and no response . If they produce the documents , how do I find fraudelent errors in these documents ? Thanks Douglas88
Robert Weed
Douglas:
Around here, there are two lawyers who try to attack the loan documents–one seems better qualified than the other. (This is Virginia where judges are not real favorable to that kind of thing.) Personally, I know nothing about it. Sat through a couple classes, but it didn’t take.
But I don’t know of any national group or place to send you to find a lawyer that does that where you are—hope you can find one and that you have good luck.
Annissa
Mr. Weed,
I live in VA and have filed Chapter 7 April of 2010. My 1st and 2nd mortgage was discharged and did not reaffirm. However, been paying both on time and had I known what I read now could have save money on my 2nd by not paying. Anyway, I am looking to sell my house which the bank does not have a problem with. I am just trying to figure out if when I pay off do I have to pay the 2nd off as well or is that considered already written off or do I have to pay both off? What I am unsure is if the debt was secured or unsecured or even if that matters.
Your comments would be highly appreciated.
Thank you!
Al from SoCal
Mr. Weed,
I went through Ch. 7 BK and I haven’t paid my 2nd going on a year now (about 6 months post BK). I’m a veteran and have my first through Cal-Vet, my 2nd is with Bank of America. I was hoping to use the settlement method, but prices here are slowly rising and currently my home has about 35K of equity (my first is 175K and my 2nd is 60K, home is valued at 210K). My lawyer said BofA is not entertaining any offers from anyone at the moment re: 2nd settlements and to “season the debt”. What do you think? Also, when I got my 2nd Cal-Vet made them sign something that says their 2nd loan is “subordinate” – does any of that matter? I heard there are different rules for veterans but I’m not sure. Any info is appreciated.
Robert Weed
Al:
Your own lawyer will be more familiar than I am with Southern California. And unlike the lawyers for many of the people who comment here, your lawyer gave you his best advice.
I can’t improve on that. (And sorry, being in Virginia,I don’t know what Cal-Vet is.)
Just go back to what I say–not paying and then trying to negotiate takes nerves of steel.
Robert
I was discharged Chapter 7 bankruptcy back in November, 2012. I reaffirmed an auto loan and another loan. I did not reaffirm my first and second mortgage. They are both with the same bank. Both mortgages have always been current. Bank stated I could keep paying the mortgages even if I did not reaffirm and that there would be no action of foreclosure. I was divorced in 2010 but my ex wife and I still own the house. She gets the payments reported on time on her credit report as was explained to me by my attorney. I don’t have an issue with that. Both loans are shown discharged with no balance on my credit report as I did not reaffirm but still make the first mortgage payment and the ex wife the second. The ex wife just advised me that she will no longer pay the second mortgage beginning in August. It will hurt her credit of course as I was discharged and although remain on the deed am no longer responsible for either mortgage. The house is appraised well below the $400,00 that we paid for it. First mortgage is $270,000 and the second is $20,000 with an appraisal of $240,000. Both are owned by BB&T. I reside in Virginia. My question is what is the probability of the bank foreclosing if the second mortgage payment is no longer made? The ex wife will take the hit on her credit score as I am discharged. I planned to refinance after two years of my Chapter 7 discharge as that is a requirement to qualify for an FHA loan. My credit scores did take a hit but are climbing already in just 6 months and have reached the minimum of 620. Thanks.
Robert Weed
Robert:
Good questions. My guess is BB&T will not try to foreclose out of the second mortgage, because there’s no equity at this time. I’d hope that if they are not paid for a couple of years, they would then accept a low ball offer to settle–that’s my “nerves of steel strategy.”
I’m guessing, I’m a lawyer, not a lender–that you hurt your chances of refinancing if you don’t pay the second. And if you need the ref–are YOU in the house, you didn’t say–you might want to keep paying. It doesn’t sound like the payment is much.
If the value moves up a little and you rebuild your credit, you might be able to refi in two years–I’m GUESSING that your chances would be better if you do pay the second. If you had a bigger second, I’d go with nerves of steel. But all these suggestions are shots in the dark.
Lisa
I am from Michigan and my husband and I are upside down in our house and we have an equity line that has been an interest only (36,000) will balloon in 5 years and 30k in credit cards. We were just able to refi the house last April 2012 in the Obama HARP program and they would not touch the 2nd. We started building a garage building next to our house and borrowed the money from 401K and feel like we are in over our heads now. We have no kids and do not want to move, we built our house 11 years ago and plan on staying here forever. I just want to make sure that no one can take our home away, so the question is if we file Chpt 7, can the 2nd mortgage kick us out of our house?
We just took loan from 401K to build garage – mu husband would have a mini stroke if we threw all of this money from his 401K out the window for nothing.
What is your best advice? Play the no paying the 2nd game?
Robert Weed
Lisa:
Don’t know where you are in Michigan, but obviously some areas the real estate values are really low.
See if your husband can get that money back into the 401k–postpone the garage until you have talked to a lawyer who is familiar with your area.
Decide whether to play that “no paying the 2nd” mortgage, after you talk to somebody who knows more about property values in your area than I do.
Good luck.
Amanda
Hi
we filed for bankruptcy in September of 2007, we got discharged in 2008. We did reaffirm our first mortgage debt. I am not sure about the 2nd mortgage. We have been on time and paying both up until a year ago. The 2nd mortgage we stopped paying about 6 months ago. My husband had lost his job and we could just never catch up. We live in NJ and we have been regularly getting calls from our 2nd mortgage company PNC and they said we have until the end of the month to work things out with them. (I don’t know what happens than, there was just an implied threat.) Our first mortgage company GMAC has already sold our mortgage debt to another company. They have not been harassing us like PNC. Our house is worth about 150k and our 1st mortgage owed is about 176k (without fees) and our 2nd PNC is about 40k without fees. I am worried about them garnishing my husbands wages. Can they do that? We are perfectly aware that we are going to have to leave and eventually rent a place for a few years. I am just hoping that they can not garnish our wages and we are trying to have nerves of steal and eventually making a settlement. Does the bankruptcy clearing of our debt in 2008 help us at all now?
Robert Weed
Amanda:
You really wrecked your life if you did in fact reaffirm those mortgages. Go talk to a lawyer in your area and have them look and see if you really reaffirmed and if all the paperwork was filed with the court. “I’m not sure” is not a good answer when $40,000 is at stake and somebody can look it up in two minutes.
Amanda
what happens if we did reaffirm both mortgages?
Robert Weed
Amanda–you need to talk to a lawyer in your area.
Terry
Mr. Weed,
It’s been 3 yrs or more since my chp 7 has been discharged. I didn’t reaffirm the 1st or the 2nd mortgage. I haven’t paid on the 2nd mortgage in 1 year. I want to know if I can refi my 1st now without being tied to the home again and it negatively impacting the ch7 or the 2nd.
Robert Weed
Terry:
If you refi your first mortgage–with a new bank–that would be an after bankruptcy debt. You’d be stuck with that. Later, if you needed to sell, the second could block the sale unless you settled up with them. I don’t know how much you owe on the first, or the second, or what your house is worth. Or how long you plan to stay.
I’d be real nervous about refinancing, until I’d settled with the second mortgage. It might be smart; it might be risky. You need to think real carefully and balance it all out.
lisa-anne
Bought house 2011 but never moved in due to owner’s covering up massive termite problem that made house unlivable(owner financed with 50,000 down). Real Estate attorney recommended I allow foreclosure (house only in my name)as never lived in house. Now in 2013 owner’s received summary judgement against me. Judge ruled that the crime of coverup and disclosure didn’t matter but my walking away did. Trying to find bankruptcy attorney as judgement is for 97,000 plus about 30,000 attorney fees(theirs). No one will take case so am doing it on my own. Parents buying a house will be mortgagee we will be mortgagor with little down. Husband has MS. Am I allowed to spend my personal money to make house wheelchair accessible and then be able to file Chapter 7 as all assets will be used up. I am filing an appeal on summary judgement to buy time but hope by time runs out I will be judgement proof and then in about 24 months can file.
Robert Weed
Lisa:
Wow. I don’t know why no one will take your case. You need a lawyer. You NEED a lawyer.
You need to handle your bankruptcy very carefully BEFORE you get into these family transactions to buy you another place. There are way to many moving parts–just from what you’ve told me–for you to try to do this on your own.
Dianne
Let me add my voice to those that say this is an awesome resource for those of us in this situation. Your comments are thoughtful and spot-on; for people who are regularly ridiculed for going bankrupt or who hear “why should you get off paying when I can’t ” you are a breath of fresh air.
I am sad that after reading all your answers, it seems like I will continue to be stuck. Have a first with OWB for $333k and a frozen equity line with chase for $96k. The banks say my house value is $433k, but that’s not realistic. About $380-$420 is possible. Regardless, it’s enough over the first that Chase will probably foreclose.
I am in New York and my bankruptcy was discharged July 2009. Chapter 7. I have until December 2015 before the equity line flips into its 20-year repayment period.
I have been begging one west for two years to modify or refinance, but they will not. HAMP denied me because I wasn’t late, and OWB dos not yet write HARP in New York because of CEMA regulations. When I started begging to refinance rates were 3.25; today they are 5.5, higher than my current 5.375.
I put 20 percent down on my home and hate the idea of losing it all. I am 57, but my steps are 11 and 12. A bad situation all the way.
Thanks for letting me vent.
Robert Weed
Dianne:
It is a bad situation all around, but thanks for sharing.
JUDY
I have a home we did a bankruptcy 7 in 2007, we are current on our 1st mortgage, owing about 119,400. Our Second
home equity loan will be up next year, in August 2014. We can’t pay back the whole 28,000 due on the second. Our house value went down since the appraisal of the 2nd mortgage about 40,000 to 60,000. But the value of the home if we can get it,
which I doubt since 2 other homes here went from 125,000 to 135,000. Just been paying the interest of about 70.00 a month on the second, which now I think I shouldn’t, but my question is, should I give them a offer of settlement now, or wait till next year, or should I file chapter 13.
Robert Weed
Judy:
Good question, for which I don’t have a good answer. I don’t know what’s the best time to approach them with a settlement. It’s a shot in the dark.
JUDY
Do you think I have to much equity to make a offer, and do know if you can file chapter 13 on a second mortgage and keep your home.
JUDY
Robert Weed
You can file a Chapter 13 to knock the second off the house if you can show the court the house is worth LESS than the $119,400 you owe on the first–sounds like it might be close. Certainly you want to get an appraisal and not do anything to fix it up.
Whether an offer makes sense depends partly on local market conditions–here in the DC area values have jumped up–don’t know what they are doing where you are.
JUDY
1 more question please, can I file chapter 13 if I can’t show the court the house is worth 119,400, And make payments on the second loan in my chapter 13 Bankrupcy over 3 to 5 years.
Thank you
JUDY
.
Robert Weed
Judy:
Yes.
Bruce
Just discharged out of BK….. I did not reaffirm any debt Only me, not wife who still maintains high credit score and would like to keep it….
home value approx $ 500k
My First mortgage w CITI 305k Only myself on loan
2nd 236k. Joint account This heloc rolls over every 35 months My wife and I just signed new agreement another 35 months they even bumped rate up additional 1%. …..I am thinking maybe rescending this contract. 3 days “right to “. ….. My payment went up $150 mo. My citi primary loan interest only…..will go up dramatic 945. Mo due to principal being required according to original agreement….modification looks to be very difficult without being late in payments……
We may want to keep home up to another 5 years and I may want option to buy additional mtn home… With minor improvements we can sell home and net over owed amount….unless rare economic shift
Did we make mistake signing new agreement(advantage I build credit?) would old interest terms apply if no new agreement and Is no new agreement possible with their 35 month program and justo pay old terms ?
Can primary mortgage foreclose if I only pay interest while trying to modify? I presume this could injure my future plans to get new loan within 3 years? Thx. Great blog here BTW
Robert Weed
Bruce:
Two think. First, I do NOT thinking the new thee year agreement on the HELOC will help your credit score. If it’s with the same outfit you had all along, it should still just how bankrutpcy on you. Current on the wife, who did NOT do bankruptcy.
Your bigger question is what if you had NOT signed a new three year. I haven’t seen the papers so I am just guessing. But my guess is the whole Heloc would be due. In other words, they’d send your wife a bill for the whole $236,000. So you don’t have much choice but to sign what they put in front of you, unless or until your wife’s credit, plus yours, plus the value of the house is strong enough that somebody else would want your business. In three years, when this HELOC expires, you should be able to price several different lenders and take your best deal.
Can the primary foreclose if you pay interest only while you try for a mod. Yes. If you are late they can foreclose. From what you’ve said it looks like there’s plenty of equity for them to get, so not much incentive for them to work with you. Since you are current, and have been current, you should check your eligibility for HARP. http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx.
Also, since your wife’s score is good and there’s lots of equity for the first, she MIGHT be able to get a new loan at today’s interest rates. You ought to at least try.
Good luck.
Bruce
Thx. I appreciate the informative timely reply.
Jane
Mrr. Weed,
We are kind of in a similar yet different situation than most I have read. We live in Michigan and we have two mortgages. One for 25k, one for 105k. We are not behind in any mortgage payments. House is upside down by probably 70k, and is in need of major repairs of which we cannot afford, probable mold and prior undiscovered asbestos floor tiles in leaky basement to name a few. We do not want to stay in house. We have been advised by a bankruptcy lawyer to file Chapter 7 to eliminate house debt and allow home to go in to foreclosure and walk away. What advice would you give us?
Robert Weed
Jane:
What they’ve told you makes sense. Based on what you have told me.
If you want to live for free for as long as possible, I often tell my clients to stop paying and wait until just before the foreclosure, then file bankruptcy to stop that foreclosure. And see how long it takes them to start again. Here in Virginia, that usually gets between three and seven more months.
If you need to live for a LONG TIME for free, I sometimes split husband and wife. Stopping the first foreclosure with one bankruptcy, and stopping the second with another.
Having said all that, let me put in a plug for my approach. I NEVER give advice, except to people who have filled in my 37(!) page form, met with my paralegal for an hour, and THEN met with ME. I want to be sure I have a complete picture of people’s situation, and a face-to-face discussion of their goals, before we work out what to do.
Whether this delay as long as possible makes sense for you depends on a lot of things. Here are just a few…
How old are the kids and where are they in school?
How are your cars holding up and when will you need to buy again?
Are you in danger of getting sued on your credit cards?
Do either of you have or need a security clearance?
Do you have a place you want to move to?
How soon do you realistically plan to buy a house again?
So my answer to you is NOT advice, but just some things to talk about with your husband and your lawyer.
Jane
Thank you for your reply. Perhaps my use of the word “advice” was not what I intended, I really wanted to know your opinion on the advice our attorney has given us. Delaying anything isn’t really a great need for us. We have a place to rent for as long as we need until we are able to purchase it. Our kids are young, 6 and 8 years old so moving them to a new school at this age makes a lot more sense then when they are older. Our cars are good, one is a lease that is up next year, the other is only a year old and has low miles. We are not behind in any bill of any sort, our only real issue is wanting to get out of this house with all of it’s problems and being so upside down in the mortgage. Bankruptcy is scary to me, but I also don’t see any other way out of here.
Mike R
To: Robert Weed
From: Mike R
Re: 2nd mortgage modification after BK
Filed BK 7 four years ago; did not reaffirm either 1st or 2nd. The 1st was with Chase and modified loan and have been current for 2 years. The 2nd (LOC) was with HSBC. The loan has been probably written off and I don’t know the current lender. As advised by BK attorney we have not made a payment since BK. I appreciate your characterization of “Nerves of Steel.”
Because we have been in property for 20 years and would like to stay. I want to prepare for lender initiating any action against the property. The property is in a desirable area where prices may have risen; but the soil is unstable causing structural damage. Our house has had some damage, the floors are not even and there is always possibility of more. Depending on the structural engineer, they might say no problem or be careful. When we bought house some buyers were put off; therefore the true value is not reflected in Zillow. Taking into account the latter, I would estimate value at $310,000. The 1st is $275, 000 and est. 2nd LOC at $100,000. I see 3 options from best to worst:
1. Make a cash settlement offer to release 2nd… We could probably come up with $20,000.
2. Do a loan modification. We are in a reasonably strong income position. We could use chap. 11 to leverage our negotiating position.
3. Walk away (could this be done amicably without getting a foreclosure on credit?
Please advise
How do we find out lender without triggering a foreclosure?
Mike R.
Robert Weed
Mike:
Your questions are better than my answers.
I do not KNOW how to find out who owns your LOC now. Call HSBC I guess with the last account number you have for them–the one listed in the BK, and see if they can tell you anything.
Now you say that there’s unstable soil with some structural damage and possibly more to come. Do you think you could get a very conservative appraisal at $274,000. You could file a Chapter 13 to remove the LOC. Send notice to everyone high and low having anything to do with the property, including the names on the mortgage or deed of trust.
That might smoke out someone who claims to own the LOC. And even if they decide they want to contest your appraisal, that would open up negotiations.
You CAN walk away without damage to your credit–the credit report would just show BK back four years ago, like they are showing now. You could NOT get approved on a new mortgage until three years after your first forecloses. Not reflected on yoru credit reprot, where it won’t show. But the actual foreclsoure on the land records.
You didn’t say how old you are or how much longer you’d want to stay in that area.
Continuing to do nothing remains an option.
Good luck.
David
Dear Robert
My update is I did your nerves of steel approach and have just gotten my release of lien copy from the court offices.
My lawyer advised against it but you were correct. I kept my 1st going fine but simply ignored the 2nd with WF and now it’s gone. 5 years after my 7.
Thank You Thanks You.
Giving hope to those with so many concerns we can barely cope.
Robert Weed
David, that’s great news! Glad my blog helped!
Rhonda A.
Mr Weed,
I am so glad i came across your page. I would like some advice. We are in the process of beginning to file Chapter 13. We were hoping to have the second mortgage stripped. We have 1st mortgage of $198,000 and a 2nd Mortgage of $49,000. We are current on the first mortgage but we are 2 years behind on the second. We just got a letter from BOA that they are transferring the 2nd to another company this month. I obtained a CMA last week that valued out home at $200,000-212,000. With this new information, it doesn’t seem that we will be able to get the second stripped. We cannot afford the second mortgage at all since we are now down to one income. What options do we have at this point? We want to stay in the home.
Thank you.
Robert Weed
Rhonda:
The CMA’s sometimes run high, so I’d pay for an appraisal…see if you can get down to $197,000.
If you can’t. your option is what I talk about in this blog. File the Chapter 7 and then offer a low ball offer to the second.
Where’s your bankruptcy lawyer in all this? What does he say?
Justin Wilson
We live in Arizona and in Nov 2011 we received our Discharge Order for our Chapter 7 BK. Our 1st and 2nd were not re-affirmed. The $450,000 1st with Huntington Bank has a $397,000 remaining balance and we have never missed a payment. Our 2nd for $185,000 with US Bank was a balloon and was due in Sept 2013. However, mistakenly we continued to make payments on our 2nd from discharge until Jan 2013 when we stopped making payments. We are both approximately 68 and intend to stay in our home for many years (currently valuated at $595,000) also in 2-3 years we would like the ability to either refinance or do a reverse mortgage.
I called the US Bank in July 2013 and was told the loan was “charged off”. I do not know if US Bank sold the note to a collection agency but I have never been contacted one.
Two questions. first, what should be my communication strategy with the holder of the note, and secondly what should be my strategy for negotiating a cash settlement?
Robert Weed
Justin:
Everything I know about strategy–which isn’t much–I have in my blog.
Lisa
I filed chapter 7 in virginia in 2004. I signed a reaffirmation on my 2nd mortgage because they agreed to lower the interest rate from 23.869% to 9.5%. I did not reaffirm the 1st mortgage both at the time was with Beneficial Mortgage. Since then they I have divorced and relocated my ex husband stayed at the home. He no longer can afford the 1st mortgage. The 2nd has been paid down to 4700.00. Can we payoff the second and surrender the home since the first wasn’t reaffirmed, will this affect my credit if so how? Please help!!
Robert Weed
Lisa:
Yes! wow I am sure glad the second is almost paid down. If that get paid off you can let the first foreclose and no negative impact on your credit. You should CHECK though and be sure that the first is not reporting on you–it should show nothing since the 2004 bankruptcy and therefore should have dropped off your credit completely. This link https://robertweed.com/2013/08/20/the-credit-report-you-need-is-the-credit-file-disclosure/ explains where’s the best place to check that Beneficial is NOT reporting that first mortgage.
Cherie
My house is in active foreclosure. About 3 years ago I signed a Dodd-Frank certificate when I went through the HAMP program. To my understanding, I thought my 2nd mortgage was forgiven (20,000). Now that I am in foreclosure, it appears they added 20,000 back on to the total balance of what I owe on the home. I’m really not sure if they added back onto my loan modification or just when my foreclosure became active. Can they do this? I live in IL.
Thank you.
Cherie
Robert Weed
Cherie:
I’d need to see the paperwork to have any idea. You need to talk to a lawyer there in Illinois.
Cherie
I also wonder if I would be better off to file Chapter 13 or go with a debt consolidating company to keep my house. What is the difference between the two?
Thanks again…
Cherie
Robert Weed
Cherie:
Chapter 13 is a LAW that the creditors have to follow that gives you time to pay your debts. Debt consolidating companies have a HOPE that they can TALK your creditors into working with you. Would you rather have a LAW or TALK on your side?
Heather
Hello Sir,
We had discharged chapter 7 2008. We have paid our first mortgage up to date. A website says our home in OHIO is worth 80,600 and our first mortgage is now down to 76,340. Our second mortgage was sold to Greentree (mutters – horrible people). My husband suffered sudden cardiac arrest this year and had to leave his job. We obtained save the dream for our first mortgage but still owe 30k to Greentree. Greentree does not participate with Save the Dream so… Right now it looks like we have a megre 4k in equity through Save the Dream. we were hoping Save the Dream would do a catch up payment to Greentree and hadn’t paid in three months (because we had no money of course) and they are getting vicious. They have sent us a Notice of Default which said they would accelerate the loan if they did not get 750 dollars by the first. Well, I gave them half my paycheck (250) two weeks ago and stated I would pay them another 250 each pay. I don’t even know if we can do it. I MAY be able to pay it at the end of January with a student loan but… we are really struggling here.
I told my husband to offer 3k tomorrow in hopes they would maybe settle. I am not sure they can do anything to us while we are in the “Save the Dream” program which is paying our first mortgage for us and we have a family of 7 making 18 k a year on my wages so not paying that second mortgage would give us some money to buy oh….you know..toiletries and food lol. Please advise. We are having a panic attack here. We NEVER want to leave our home. This is the home I plan to haunt when I die.
Thank you for assisting us. Your expertise is greatly appreciated.
Respectfully,
Heather P
Robert Weed
Heather:
You definitely need to talk to a lawyer….usually those websites, like Zillow, run a little high. If you can show that the house is worth less than the 76,340 you owe on the first mortgage, you can use Chapter 13 to kick the second mortgage off your house. I explain that here. http://robertweed-bankruptcy-and-second-mortgages.info/.
Heather
Hello there again sir,
We decided to try a settlement first. We offered 2170 dollars…which works out to be about 10 months of payments. Keep in mind we had this mortgage for 30 in 2008…….and it is still 30 k! We really need this break. When I spoke to the attendant she said she would send us “short sale” papers for the offer we just made. I am not understanding what she means. I thought short sale was to…foreclose or sell the property… is that the case? At least she didn’t tell me to go fly a kite.
We are hopeful. I told her that our house is upside down and this was our offer to to settle.
I would do a chapter 13 and our lawyer who helped us with the chapter 7 absolutely should have advised us of this because we would have been in better position at that time. Now however, we have worked our butts off improving our home by our own manual labor so if someone comes in they will see it is worth more. Not only that but a CAC came in and weatherize our home giving us a new furnace and making our bills go from 300 dollars to 55 in the winter! I think if we had someone come in and appraise it would only strengthen Greentree.
I hope this works!
Shirley Evans
Hi, I filed bankruptcy in 2010 with a 1st and a 2nd, did not reaffirm, both are up to date. I just refinanced 1st to lower payments. Now what I want to do is stop paying on 2nd and offer a settlement. Both 1st and 2nd are with Citimortgage and so is the new refinance which I have a Feddie Mac or Fanny Mae. Now I am thinking that the 1st is no longer under the bankruptcy rules but the 2nd one still is so can this plan work or is it going to backfire on me? I am in MN and retired plus would like to stay in my house for several more years yet before the nursing home….haha. Thanks
Robert Weed
Shirley:
I’d need more info about how much you owe on the first, what the house is worth, before I’d tell you specifically to stop paying the second. But if you read my blog you have the info you need to make your own choice. Obviously by continuing to pay for three years you made it harder to settle, because they think you can afford to pay.
Shirley Evans
Mr.Weed, I owe on the 1st $134,800 and owe on the 2nd $24,535. The estimated market value for 2014 is $130,700. I was afraid to stop paying but now I have built up some nerve. Do you think that even though I have paid for 3 yrs there is a chance to settle? Thank you for your help.
Robert Weed
I think its worth a try.
Shirley Evans
What is the worse case scenario if I stop payment on the 2nd? Plus do I need a lawyer to work out the settlement for me? Thanks so much. I am leaning towards……it’s worth a try.
MIKe Lewis
Hello, I have just come off a bankruptcy discharge,I have 2 mortgages 1st @$145000 2nd @$34,000
I wanted to do a settlement on the second one if possible for $3400- is that reasonable ?
And can I refinance the 1st mortgage with another lender 2 months after a discharge (chapter 13) ?
The home is now only worth $99,000 after we purchased it brand new in 2006 for $175,000
Robert Weed
Mike:
I think $3400 is a reasonable offer for a second mortgage settlement when the home is worth only $99,000 and you owe $145,000 on the first. In general I don’t recommend approaching them right after the bankruptcy because I don’t suggest looking too eager, but my experience is with only a handful so really who knows.
I don’t see how you can refinance your first mortgage with a new lender if you owe $45,000 more than the property is worth. Besides wanting to see some years of good credit after the bankrutpcy, they want to have the house worth at least what you are trying to borrow.
Most courts, if you were in Chapter 13, would have let you knock the second mortgage completely off the house. So I wonder why you were in Chapter 13, if not to do that? But there could be many different reasons why it made sense.
Lisa Davis
Hi Robert, Our 5 year Chapter 13 will be discharged this September. We have been paying the second mortgage outside the Chapter 13 but have missed a payment here and there, when I call the recovery group that now is now managing the 2nd they say all is fine. What will happen when the Chapter 13 is discharged? Will the recovery group start harrassing me? If so what recourse do I have? Thank you for your insight.
Robert Weed
Lisa:
Yep, when you get out of the Chapter 13, if you missed some payments on the second, you will be behind and they will start to harass you. So you’ll need to figure out how to get current.
Raphael Serfaty
Question: Hello Mr. Weed, I have a specific question and would appreciate a quick answer as I have to make a decision.
I live in Maryland. I filed for Chapter 7 in 2009 and my second mortgage with PNC Bank was discharged. Last year, after a couple years of not paying the first and second mortgage, I applied for the HAMP program and was able to reduce my first to a manageable payment. I then applied for the 2MP which I qualified for and made my 3 trial payments on time. PNC just sent me all the docs to sign for this 2MP. Included in these docs are a Truth In Lending Disclosure (TILD) form showing a Balloon Payment 33K less than the one shown on the official document they are asking me to return to them notarised. As this seemed fishy, I called PNC and they told me that the 33K was the amount that had accrued since I stopped making my monthly payments. My question is: Can they claim this sum of money after the chapter 7 discharge or am I only responsible for the amount recorded in court that has my home as a collateral (which is the amount that they have stated in the TILD – “Interest Bearing Principal” + ” Balloon Payment” = Amount recorded in the court papers)?
Other facts: This second loan is a HELOC interest only with 2 parts, one at a fixed rate and the other at a fluctuating rate.
Although I do not have much equity in my home I do want to keep it.
Thank you very much!
Raphael
Robert Weed
Raphael:
You owe what you owe. Your Chapter 7 does not cut off or freeze the total that’s owed on the mortgage. If you stop paying the balance keeps going up.
They cannot come after you personally to pay it, but if you want to work out payments and keep the house, you owe what you owe. (If they want, then can reduce the total, ut that’s very rare. Don’t think I’ve ever seen it with PNC.)
Raphael Serfaty
Thanks for your quick response, Mr. Weed… Is it worth asking them (PNC) to have the TILD corrected to reflect the actual (higher) Balloon payment they have on the official documents?
adam
I have a first that is current and a 2nd I stopped paying on in 2009. It was noted on my TRW as a charge off, Now the second was auctioned off and they are saying I have to get out of the house. I was not notified properly about any auction and did not have time to do any bargaining with the second. The bank that charged it off was not the same bank that auctioned it off. There is equity at this time. Is the sale legal since it was charged off?
adam
We are in California.
Robert Weed
ADAM:
I don’t know what California law is on a second mortgage foreclosing you. I do know that a “charge off” means you do still OWE the money. I explain that here. https://robertweed.com/2011/02/11/bankruptcy-discharge-or-charge-off-whats-the-difference/
Cynthia
I’m in Ch 7 BK right now — just had the meeting with the trustee so it should be discharged in a couple of months. I’m in California and need to decide if I should reaffirm my first mortgage. I understand that attorneys rarely, if ever, say to reaffirm but here is my reasoning:
1st mtg balance is $250k
2nd mtg (HELOC) balance is $65k
Home value is approx $375k and values are rising. All payment are current; never late.
As you can see, there is equity in the home so I don’t have much fear of a deficiency in the event of foreclosure. What does worry me is that the HELOC will reset in a few years and I will need to refinance. I’ve been reading of the trouble people are encountering when they go to refinance and the mortgage was not reaffirmed.
I know it doesn’t have to be reaffirmed in order to refinance but I also know that lenders like to play hardball sometimes.
I definitely don’t want to reaffirm the HELOC but in my situation do you think it would be okay to reaffirm the first? Having the positive payment history reflected on my credit report will help my scores and I would like to be able to use BofA’s online payment system again.
If I reaffirm the 1st, and not the HELOC, will I encounter the same refinancing troubles as if I reaffirmed neither? Do you, or any of your clients, have any experience with this? 1st is with BofA. HELOC is with Chase.
We want to live here indefinitely. Renting a place would be more expensive than our current mortgage payment. Our PITI payment is manageable for us so we are not worried about falling behind..
Thank you for your dedication to your blog.
Robert Weed
Cynthia:
You are more familiar with real estate values in California than I am. Based on what you say, if you were my client I would NOT try to talk you out of it. I wouldn’t recommend it, but I wouldn’t argue if you decided on your own to do it.
Diana
Mr. Weed,
I am going to file Chapter 7 in a month or so. I have a 80/20 and my 1st is $127,000 the 2nd is $26,000 the value is about $145,000. What is your opinion on this I would like to put the second in the Bankruptcy, but the Lawyer wasn’t to sure? Is this possible to put the 2nd in Chapter 7. I am wanting my payments lowered because my first went up, so it is hard paying 2nd.
Diana
Robert Weed
Diana:
Your lawyer knows a lot more than I do. More about your plans: Will the kids soon be out of high school? Are you near retirement? And more about real estate in your area. Are values continuing to climb? Do houses sell quickly?
And your alternatives: Where would you live if the second booted you? Could you offer a cash settlement to the second, if they started to foreclose.
My short answer. I’d be nervous, too.
Gordon
I live in Georgia and have not paid my second mortgage for 34 months. I was discharged from chapter 7 7/2010. my first mortgage is current thanks to family help I just got a job after being unemployed for 2.5 years. My first mortgage has a $100K balance and Second is $42K the home is now worth about $139K. I tried to get my second Wells Fargo to do a refinance and they said no my loan was charged off. what can I do?
Robert Weed
Gordon:
Good question for which I do not have a good answer. Save some money so when you do hear from somebody at Wells Fargo–or somebody who bought the loan–you have some tools to negotiate.
You also might want to send in a RESPA request and ask who now owns the loan, and see if that gets you any useful info.
But I don’t really have anything like a complete answer for you.
Christa P.
This is an amazing site Robert! Lots a great questions and answers. Here is my question, My chapter 7 BK was discharged in 2011, I am now ready to buy a house 🙂 I currently have a rental property that I continued to pay the 1st but not the 2nd. Chase has put a lien on my rental property but I am not worried about Chase foreclosing because the house it still under water. My question is this, can I buy a new house with a lien on my rental property? Or do I need to settle and have it removed first? Thank you in advance for your help!!
Robert Weed
Christa:
You need to ask your lender that question. Here’s what I understand. The banks are very nervous about getting people into a house who already have one–there was way too much of that going on back then. So they need proof that your rental really is rented and turning a profit. Will they overlook that you aren’t paying the second mortgage; will they overlook that lien? I don’t know the answer to that. Sorry. You may have to shop several mortgage companies before you find one who will approve you.
(What this means is that I’m worried about the second mortgage not being paid and the judgment lien, but I’m not in the business, so they may look at it differently.)
Christa P.
Hi Robert,
Thank you for the answer. I will talk with my loan officer about it today and let you know how it goes.
Nicole
Hi Robert,
I want to stay in my house. I filed Ch 7 and was discharged early this year. Current on the 1st and running behind on the 2nd. the house could be worth $165K maybe, 1st owe $149K and 2nd $65K problem is that they are both with the same lender. They have been my lender for 10+ years. Will they likely go ahead and want to foreclose since they hold both mortgages and the house pulls just over the value?? Suggestions?
Robert Weed
Nicole:
There’s no reason to expect that the first and second mortgages talk to each other, even if they are coming form the same bank. (At least not if it’s somebody big like BofA. If it’s a local credit union they do.)
I don’t know the real estate market where you are….and I don’t know how old you are or how long you want the house. And I don’t know your lender. So my shot in the dark is that the second won’t foreclose you in the next couple years but there’s a good chance they would sometime in the next ten. That’s the best guess I can give you and it’s not much. Somebody familiar with your area might have a different guess.
P White
I filed bankruptcy in 2009 and was discharged in 2010. I only had a second mortgage and paid for three years thereafter. I decided I wanted to move and our housing was not up yet to cover the amount of the loan. I let the house go back. I am now renting a house. But since the second mortgage was under the bankruptcy of Chapter 7 does it still remain under that bankruptcy even though I paid on it for three more years?
Robert Weed
P:
Yes, paying it does NOT end the bankruptcy protection. You can sign in blood under the full moon and not forfeit the bankruptcy protection. More on that here. https://robertweed.com/2012/01/16/does-bankruptcy-still-protect-me-if-i-get-a-loan-modification/
Jay Iak
good day. we filed ch7 in ‘10 and stayed current on 1st mortgage, and stopped paying 2nd around same time of ch7.
Current 1st balance is 190k and house worth about 180-190k in IL. 2nd mortgage balance roughly 70k. (was in 2010) do I need to send a letter to the lender to allow them to contact me? I heard that they don’t have legal right to contact me after discharge, correct? Is it safe to send them a letter, and how would I word it correctly?
How would I go about sending an offer to them, and how does it give them right to communicate w/ me after the discharge? Can you touch base on this please? I’d like to settle with them, eventually; to satisfy that lien.
Thank you,
Robert Weed
Jay:
I’ve told you everything I know here. And I can’t be a lawyer for people who aren’t in Virginia. Sorry.
Alison
My husband and I had a Chapter 7 BK in MN discharged in September, 2009. We had a first and second mortgage, and did not reaffirm. We have paid on the first mortgage continuously to Bank of America, no late payments. I paid on the second mortgage to Fifth Third Bank for three years, and then stopped (paid them 10%, hoping they would settle). They have ceased contact with me, and did not release their lien, I checked at the County Recorder Office today. I would like to refinance my first mortgage, but nobody would help us in the past because the second mortgage is no longer up to date. Are there lenders that would refinance the first mortgage with the second in arrears? Both companies lose out if we walk away now, I would like to stay in the home, and understand any equity down the road would go to the second mortgage. We are underwater with the second mortgage at this point. We are still slightly underwater with the first mortgage. We have no children, mid 30’s, but rent would cost the same, if not more, than our first mortgage in our area.
Any insight is much appreciated.
Robert Weed
Alison:
Think you know now that paying Fifth third without some deal was just throwing money away. Are you able to offer them a cash settlement now? Otherwise I don’t know of anybody who would refi the first while the second is still there, although you can keep trying.
Alison
I forgot to mention our house is assessed at $144k with the county, we owe $158k in the first, and $54k on the second. I paid them at least $6500 on the second mortgage during the three years I paid after the BK discharge.
The interest rate on the first is 5.625%, which is why I would like to refinance, our credit scores are back around 720. But due to the second mortgage in arrears, nobody will refinance me.
Is it worth trying to get the second mortgage to release the lien? Maybe state we paid them over 10% a few years ago, the house is still underwater, and explain that I am looking to possibly short sale the house, and understand they can block a short sale due to the lien?
My vote is to stay in the house due to rental properties being priced so high, my husband says let’s walk away, rent for a few years, and then have the ability to buy again. If I could refinance, I could pay an extra $200 per month towards my student loans, and seems like a better use of my money.
Robert Weed
The fact that you paid them money you didn’t have to will NOT motivate them to release the lien now. (If anything it will make them harder to dela with.) You’ll need to make a new offer.
Alison
Thank you so much for your insight. I really appreciate it.
Jill
I realize that you are not in CA but your blog and the posts are really helpful and would love to hear what you think.
I live in CA and have a discharged Chapter 7 in May 2011. We are current on our first mortgage but stopped paying our second mortgage since 2010. Our home is valued at 540K. We owe 445K on the first and 160K on the second.
Are we in trouble for a foreclosure?
What can we do to stop it? We cannot afford to pay for the second mortgage at this time.
We have included both mortgages in Chapter 7 and have not reaffirmed. We have kids and would like to stay at the house for a longer period until we can get back on our feet. Do you have any suggestions?
Do you think this would be a good time for us to negotiate on the second given that we have a little bit of equity?
Thanks!
Robert Weed
Jill:
My advice is to wait a couple years and you’ve done that. You say, though, we cannot afford to pay for the second mortgage at this time. There’s no point in trying to negotiate unless you can offer them something. Can you pay half of what the payment was?
All this is a shot in the dark. There’s just no telling.
Jill
If we are able to pay half, what would be our options? We live in CA and looking for a good lawyer. Is there anyone you are able to refer to us that could help us?
Thank you for the reply.
Robert Weed
Jill:
I’m glad I’m giving you some things to think about but I just don’t know enough to give any specific advice. And don’t know any mroe about California lawyers than I know about California law–sorry.
dave
I live in Ohio, I am 12 months into a 13 where the second mortgage agreed to have it peeled off…Due to irs debt and my income they cannot be paid in my plan thus forcing a dismissal. I am current on my first mortgage, I don’t know what to do…The irs wont negotiate my debt while in the 13 either….The irs debt was not included in my original plan this was a slip up. I also wanted you to know that..
Dave
Robert Weed
Dave:
I don’t know what to add. You see your situation real clearly. You just have a tax problem that won’t go away. Maybe you should talk to a tax lawyer. I don’t know enough about you to say anything.
dave
Thanks Me Weed. My other question is if I reaffirm on my first and bankrupt the 2nd with having no equity will I have time to reconcile with them.
Robert Weed
Dave: I don’t know enough about your situation to answer that. And I am terrified of reaffirming anything. You need a long talk with your lawyer before you do that.
Paul
I live in Illinois, I owe 240k on my 1st, and it’s worth 257k. I also have a 2nd mortgage with BMO Harris, bal. 121k I have 6 yr old twins and want to stay in my home but can’t afford to pay the 2nd. I missed the window of opportunity to strip the 2nd with a chapt.13. Do you recommend I file a 7 and deal with the lien in the future? Home values on the rise and don’t want to be uprooted, please advise, thanks.
Robert Weed
Paul:
I recommend you talk with a bankruptcy lawyer about whether you should file Chapter 7 and deal with the 2nd lien in the future. But I’d need to know a lot more about you and about Illinois before I could RECOMMEND anything more.
John
Hi Mr Weed –
Your posts are excellent and much appreciated. In the post above, you mentioned that in the 2010 Fannie Mae manual that “You have to be two years after the bankruptcy (with extenuating circumstances), but you have to be three years after a foreclosure.”
It appears in Fanny Mae’s most recent Selling Guide (July 2014) that they have amended this (or perhaps they did so actually in an earlier revision after 2010):
B3-5.3-07: Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit (07/29/2014)
https://www.fanniemae.com/content/guide/selling/b3/5.3/07.html
Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit – Fannie Mae.pdf
“If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied.”
So, if the mortgage debt was not reaffirmed in bankruptcy, then the clock starts at bankruptcy discharge regardless of whether there is a subsequent foreclosure… Do you agree?
Thanks for all you do,
John
Robert Weed
John:
Wow! I had NOT seen that. My first reading is that you are right. I’ll contact the people I know in the mortgage business and see what they say. Thank you!!
Robert Weed
John:
I’ve checked and you’re right. Fannie announced that change on July 29, 2014. Thanks for bringing it to my attention.
Here’s the link to the announcement. https://robertweed.com/wp-content/uploads/2014/08/FANNIE-MAE-CHANGES.pdf
Steve
Mr Weed,
I have a question regarding my 2010 Chapter 7 bankruptcy (Colorado):
I have a first and second mortgage. I did not reaffirm the mortgages. I have stayed in the house and continued to pay my first mortgage. I have not paid anything on my second since before the bankruptcy. There value of the home has increased significantly. I am nowhere near being upside down. The second mortgage is about $20k. I have not heard from the second lender at all and I have not contacted them in several years. I am concerned they will exercise their right to foreclose since there is now equity in the property. I am in a position where I can pay the monthly amount or settle for half of the amount owed on the second. I don’t want to sell but would if that is my only choice if I want to keep the equity.
Any advice is appreciated. Thank you.
Robert Weed
Steve:
This is a shot in the dark for me, partly because I don’t see seconds around here as small as $20K. But my guess is that you should approach them and offer say $5000 and see what they say.
joe
I filed chapter 7 in November of 2012. my 1st mortgage is 349000.00 and 2nd is 99000.00. After sandy hit us I had no choice but to borrow from S.B.A to help fix the home because insurance did not give us enough to repair. So now I have a 3rd in the amount of 30000.00.Since the bankruptcy I have made all my payments on time, but now the market value had dropped to 454000.00. I almost feel like walking away from the home, or if I stop paying the 2nd and the 3rd on the house will they try and foreclose? Would they take a settlement? Any advise would be appreciated.
Robert Weed
Joe:
Sandy hit harder where you are, obviously, than it did around here. So I had to look it up.
I’m THINKING that you got the SBA loan for $30,000 AFTER you file your Chapter 7. If I’m right about that, then if you don’t pay the SBA, they are going to go after you for their money. You are stuck with them.
What if you stop paying the second? That is covered by your bankruptcy, so they can’t sue you. Will the second foreclose? Based on what you said, it looks to me like there’s still equity in your house after the first. So, they certainly COULD.
Would they take a settlement? Any answer I can give you is a shot in the dark. It partly depends on how long and hard it is to foreclose where you are, and I just don’t know. And what do properties go for in foreclosure sales in your area. I don’t know that either.
joe
yes i did do the sba after bankruptcy I do understand i will have to pay that. But actually the first has a 3960000 and the second has the 99000. So there is no equity there, so I am thinking maybe I can offer a settlement? How long should I stop making payments before I make them an offer? How much do you think I should offer?
Robert Weed
Joe:
My general rule is they need to have two years experience of getting nothing before they are in the mood to deal.
But that’s based on my experience here in VA, and the foreclosure procedures and the real estate values here. Both of those will be different where you are. So I just don’t have anything more I can tell you–I have NO idea about whether they are going to want to negotiate or just foreclose.
joe
ok ty for your time
Katherine
I filed chp 7 in 2009. I got a loan mod on the first. I took a 15% pay cut. 2nd mortgage was with a credit union. I stopped paying the second. My pay got restored 4 years later. My first is now at 185,411.00. the second was for $75,000. I have not been contacted but do believe my house may be worth 230,000 to 240,000.00. Do you think they will negotiate on the second.
Forgot to add I am in California. It has been 5 years since I have not paid the second.
Robert Weed
Katherine:
I really have no idea, but it could be worth a try.
YVONNE
Hello I filed chapter 7 and did not understand reaffirming in 2009, I believe my attorney made a mistake and had me sign to reaffirm the second with mortgage. However I was paying the second along with the first and then they started calling me saying I was behind. After 3 month of arguing I found out that the attorney never sent them the sign affirmation. So I stop paying. Now they had sold it to another company and they called me and said I reaffirmed. What should I do. House is worth 30,000 first mortgage is 78,000 and second is 28,000. Thank You so much.
Robert Weed
Yvonne:
First, have someone who knows what they are doing to LOOK in the court records and make sure you didn’t reaffirm.
Second, you should talk to a lawyer in your area about suing the “new” second mortgage people for calling you. That’s an FDCPA violation. A good place to look, is here. http://www.naca.net/find-attorney.
Third, well you just read my blog on not paying the second mortgage. Depending on how long you want that house and if you EVER think the values are coming back up, you might offer them a tiny cash settlement. Or you might do nothing.
Inesa
Hello,
I am real estate agent helping a client. My client had 2 mortgages on her home. She filed Chapter 7 BK in 2009. She stopped paying the 2nd mortgage after the BK discharge. I obtained the credit reports from Transunion and Experian. The 2nd mortgage is reported as Charge Off account as of July 2009. Balance $0. Last reported 07/2009.
I called the creditor PNC Bank to negotiate this account. PNC Bank could not locate the account by Social Security Number or the account number. So my best guess is that this account has been sold to collection agency right around July 2009. However PNC Bank doesnt have any information about this account and to who it was sold. I combed through 2 credit reports and did not find any other creditor reporting this account. I understand that its against the law to collect on it due to the BK protection. The lien is still on the title of my client’s home. The only way to remove this lien is by locating current creditor and settling the account. My big question is how can I locate the owner of this account or is there another way of clearing the title of the home?
Thank you very much in advance!
Robert Weed
Inesa:
Good question. That’s more a real estate law question than a bankruptcy question–at least I hope so, because I don’t know the answer. You’re right that the bankruptcy left a lien on the house–but I have no idea how to locate the owner of the lien.
Besides trying to settle, it MIGHT be that there’s a statute of limitations. A real estate lawyer in your state would know better than me.
kurt
Hi Bob,
Thanks for taking my question. I filed Chapter 7 11/2011. Current on 1st and have not paid on 2nd in 5 years. Owe 255,000 on second and we have agreed on a settlement for 25,000. My question is will I be taxed on the difference (230,000 ) ?
Kurt
Robert Weed
Kurt:
No, there’s no tax on the debt forgiveness settlement–because no debt is forgiven. The debt was wiped out by the bankruptcy. Now they might send you a 1099–so your tax guy will need to be ready to show the IRS that the debt was discharge by the BK. There’s a tax form to use. I have a link to it from my page here. https://robertweed.com/2010/02/03/bankruptcy-foreclosure-1099-a-and-1099-c/.
Dawn
My husband and I filed bankruptcy in May 2012 which was discharged in July 2012. We included both our 1st Mortgage thru Bank of America and our 2nd Line of Credit thru HSBC. Neither loans were reaffirmed. Today I received a letter from HSBC “Notice of Waiver”, they refunded to me 2 months of my payments. I called the recovery number listed in the letter to ask why the refund and what was going on with my loan. The woman “Angela” told me that we owe nothing, there are no funds due, that they were releasing the lien and in about 8 weeks we would need to go to the county recorders office to pick up a copy of the released lien. I am very confused and a little nervous as “Angela” said this is good news for you. I can’t help but feel like they are up to something and my house will be foreclosed on. Have you ever seen or heard of this? I live in Oregon and we are current on our 1st owe $108 worth $180 and our second is an interest only loan that we have been paying on since 2006 with a remaining balance of $130??
Any insight would be helpful. Thanks.
Robert Weed
Dawn:
Bank of America started doing that a couple years ago. This is probably the same.
More info here. https://robertweed.com/2012/10/29/after-bankruptcy-why-did-bank-of-america-forgive-my-second-mortgage/
Tony
Hello, I had a Bankrupcy back in 2003 which released me from my 1st and 2nd mortgage. We have not missed a payment on the first but had to stop paying on the 2nd back in 2009. The 1st is with BOA and the 2nd has been sold a few times but now is shellpoint. Last year (03/2014) I noticed my fico went down form 780 to 658 overnight. I got a credit file and it shows Shellpoint as the owner of the 2nd mortgage and that I’m over 180 days late. I sent the credit co. (Expr) a dispute and copy of the discharge dated 2003. I was told the file is legit and has to stay on my file. I would like to settle this debt. I do not know where to start. or how to get this removed from my credit report. I was told they cannot contact me and if they do they are trying to get me to reaffirm the debt. Can I contact them without reaffirming the debt and how does a settlement work. I also need my credit file to be corrected and at least show 0 bal. and not behind. I am going to cash out my life ins. to settle this debt. 2nd Mort is about 30K would they settle for less?
Robert Weed
Tony:
Shellpoint and the credit bureau are both potentially FCRA violations. You need to find a lawyer who does Fair Credit Reporting law in your area to set up a case.
That would pretty much force Shellpoint to have a lawyer contact your lawyer. And that MIGHT be the time to also try to negotiate a settlement on the second mortgage. At least that’s how I’d tackle it.
One place to look for a lawyer who does FCRA law is here. http://www.consumeradvocates.org/
Tony
Great Article. We filed a chapter 13 in 2008 and it was discharged in 2013. We were apparently protected by the bk because we stopped receiving calls and written communications from our second mortgage with citi. We were able to do a modification on our first mortgage and have remained current since that was completed in 2009. We are now trying to refi and add my wife, a veteran, to the loan and the 2nd still has a lien. Our credit scores are great and we haven’t paid the second since 2007. As a matter of fact it doesn’t even appear on my credit report anymore. What advice do you have to have the lien removed since the initial balance of 25k has been discharged?
1st is 160k + 30k balloon from fees
home valued at about $206 and we live in VA
Robert Weed
Tony:
Glad you liked my article but I don’t have any more specific advice to give you. Sorry.
Anabel
My father filed for Chapter 13 Bankruptcy 2 years ago and has 3 more years to go. This year he will have paid off his first mortgage (CitiMortgage) but still owes $150K HELOC (Bank of America) which is an interest only loan, meaning that when the loan matures (also this year), he will have to pay a lump sum or they may foreclose. Question is, since the first mortgage will be paid off this year and the property value is around $160K will Bank of America automatically foreclose on the property or does the bankruptcy protection continue untill the 5 year repayment period ends in 2018?
Robert Weed
Anabel:
I’m not sure how your lawyer wrote a plan, providing for a mortgage that balloons during the Chapter 13. What happens when that loan matures depends on what’s in the Chapter 13 plan, and maybe partly on the attitude of your judge. Sorry I can’t say more than that.
Christopher
We filed for Chapter 7 Bankruptcy in 2010 and was discharged in 2012. We had a business that failed and had a 1st, 2nd and 3rd loan/lien on the property. The 3rd was an SBA loan which after the Chapter 7, they released the lien after I made a few phone calls. The 2nd mortgage is with Wells Fargo which is the one I am having trouble with. I have attempted numerous times over the past 3+ years to settle. To be honest, my initial offers were small. We owed $165K on the second and I started with offers as low as $4K. Most recently I offered them $12K and my last offer was $16,500 which all were rejected. My question is how much do you think it will take for them to accept an offer? I have heard .10 cents on the dollar but my last offer was that and got rejected.
The home values in the area have come back to the 2004 levels, but does not cover the full amount of the second mortgage. Plus, the house really wouldn’t come close to appraising for that since it needs so much work. Do you think it would be beneficial to have an appraisal done on the house to support only offering .10 cents on the dollar?
When we ask the Wells representative, they aren’t able to negotiate nor give us much info since it was a chapter 7 bankruptcy. All I have been able to get them to say is as much as we can afford or 80% of the original loan vale.
We really like the area and are willing to put the money into the house to stay here, but it not worth it if we have to shell out a ton of money to release the 2nd lien. Any advise or strategies would be greatly appreciated!!
Thank you, Chris
PS
Something I left out is I am a stay at home dad with my two children and have been out of work since 2010. One of my children is disabled. I don’t know if this plays into the decision making but for the most part I have left this out of the letters until the last one. Does it make a difference if I mention this?
Thanks again, Chris
Robert Weed
Chris:
You have agreat questions and thank you for sharing.
But I really don’t know. When I tell people it sometimes works, that REALLY all I know.
Sam B
How about a scenario where I am not underwater with either the 1st or 2nd mortgage? First mortgage amount is $181,000 and the 2nd is $8,900. House is worth about $240,000 so plenty of equity. Both are current. Looking at Chapter 7 with my attorney.
Robert Weed
Sam
Here in Northern Virginia I’d be real nervous about not paying the second on those facts.
joey
I had a lien put on my house back in 2007. I filed for bankruptcy in 2012 they put a lien on my house for $53000. I just want to get this off my home, what do you think I should offer on this to get rid of it?
Robert Weed
Joey:
Your guess is better than mine. I don’t know what your house is worth, how much you owe on the first, what the market is like where you live–don’t even know where you live, but wouldn’t know anything about it anyway.
I’ve told you all I know.
Jeff Stange
We filed Chapter 7 and we were discharged in 2008.
Our first is with PNC, Our second is with B of A (Heloc). We did not re-affirm either the second.
We tried to negotiate a restructure through B of A but they were never willing to help us.
They stated that our loan was tagged bankrupted and there was nothing they could do about it.
We believe this was incompetency at the time as the recession was just coming on in full swing and no one knew anything at B of A.
We tried to look at a refinance or settlement but the issue of no re-affirmation and a bankruptcy tag by B of A seemed to stop us from being able to do anything.
It was recommended to us that we stop paying the second to make them get serious about negotiating with us.
If we didn’t they’d just say no anyway. We stopped.
But, without warning or contact to us, they charged of the loan.
Once this occurred they stated that they would not settle. We could only buy the loan outright.
We tried several years ago again to refinance the first under the harp program, but B of A would not subordinate.
We would like to try to refinance the harp again and build equity and or pay they second in some manner until I can afford a conventional re-fi without going into a jumbo loan.
I called B of A and I was told again that the loan was charged off and the debt resided in the bankruptcy department. They would not do a settlement on it.
I called the B of A Subordination department. They said that I was probably denied due to a waiting period post charge off, a B of A policy.
The loan officer stated in that looking at my first refinance attempt that I was denied due to not reaffirming the loan.
We do not want to fail in this next Harp refinance attempt, but I can’t help but feel the re-affirmation will be the issue again.
Seems that I cannot and or do not want to re-affirm at this point.
1st = PNC = 220K
Second = B of A = 253K
Market estimate of home 575K
Constantly hitting the walls, been trying for 8 years. We had hoped for stories like yours to be true but it never happens.
What else can I do here?
Thanks so much –
Robert Weed
Jeff:
Sorry I don’t have much to add. But I’m hoping you have saved $50,000 or more by not paying the second.
Yes it is too late to reaffirm any of the debts. At least the law is clear it’s too late and most judges read it the way I do.
Each state will have it’s own rule on how long a mortgage company can let you go without paying before they forfeit their mortgage claim. You should get somebody local to research that for you. I think most places it’s twenty years, but you need to KNOW if you are close in your state.
Kim
Hello Mr. Weed, I was wondering if you could help me with a question I have. I live in Minnesota and had a Chapter 7 that was discharged last year. After the discharge, we stopped paying our 2nd mortgage. We recently had a hail storm and the claims adjuster for our insurance company assessed that we do indeed have hail damage to our roof and they will pay to replace it. My problem is that the check will be made out to my husband and myself, our 1st mortgage company and unfortunately, our 2nd. The first will be no problem as we have continued to make all payments. I don’t think the 2nd could keep the money being that the debt was discharged in the filing, but I have no doubt I will have trouble getting them to endorse the check. Do you know of any recourse that I might have in getting them to do so? I already contacted my first and they said there is nothing on their end that they can do to influence them to sign it. I understand I live in another state and laws vary, but any information you could give me would be greatly appreciated. I have looked to your blog many times for answers and you give wonderful advice. I only wish you were in my state so I could have you as my attorney. Thank you in advance for any advice you can give!
Robert Weed
Kim:
That’s a great question–I don’t know the answer. Well, the second wants the roof repaired, too. So maybe they will sign it–over to a repair company. Or can you ask the insurance people to write the check to a roofer, rather than to any or you? I’m just thinking aloud here, I’ve never had that problem.
Kim
Thank you for such a quick response! The claims adjuster already checked with the home office to see if we could have the work done first, then give us a check made out to only us, thus bypassing both mortgage companies. He was told we “could not deviate from the normal protocol”, so unfortunately the check has to have them on it and be endorsed by both. I am worried about them because they have a reputation for being notoriously difficult to work with (Green Tree), but I guess all I can do is give it a try. I think I will go into their local branch, rather than trust mailing it to them. I’ll probably never see it again! Thanks again for your help and for offering such a great site for people to get information to help us back on the road to financial recovery!
Robert Weed
I hate Greentree, too. Good luck.
Abigail Daranyi
Hello, I filed chapter 7 and got discharged in Sept 2012. I included my house which had a first and second mortgage. My house got modified after my bankruptcy with Bank of america in feb 2013 and they forgave 60K from my 190K loan. The 2nd loan was also under Bank of America but they sold it to another company before the modification was completed. I stopped paying for the 2nd loan since I filed for bankruptcy and never contacted the 2nd mortage company. On Dec 2014 I get a letter from the 2nd mortgage company stating they have sold my loan to another company and provided their information. My question is: The value of my house has started to go up and is pretty close at almost covering the cost of both loans at this point since the first mortgage forgave the 60K. Since I’ll be dealing with a new 2nd mortgage company is it safe to reach out to them now to offer to settle the 46K loan with them with a 7% or 10% before the market continues to go up or will they more than likely not want to settle since they just adquired the loan?
Robert Weed
Abigail:
That’s a great question but I just don’t know enough to tell you anything. Any advice I cold give you is just a shot in the dark.
Chris
Robert I filed bankrupty 1/9/2008, and live in GA i was paying on my second mortgage for years and the last 2-3 year stopped paying , paid a few payments over that time. Recently i contact my second and they agreed to a settlement of 1/2 of the original amount on a 5 year payment program or a lump sum payment.
I am selling my house and there be will be enough to pay the settlement amount and acutually enough to pay the original amount. Obviously I would rather pay the lesser amount at closing, as I need the money to move somewhere else.
When we go to close are they going to go after original amount or settlement amount , I have a letter stating the settlement amount.
thank you,
Robert Weed
Chris. You should show that letter to a real estate lawyer in your area. And maybe line up that lawyer to come with you to the closing.
Tina Hernandez
Hi Robert!
I filed BK in March of 2011, discharged in July of 2011 when I lost my job. I have a 1st and a 2nd both with Chase that have been modified under HAMP. Prior to me filing I was in the middle of getting the second modified when I filed BK. This of course stopped everything. I stopped paying the second but continued the first.. The mod lady I was dealing with told me that she couldn’t do anything until it was discharged and to call back after it was done. So I did. I wanted to see what had happened to it. Come to find out it was charged off in Dec 2011. They ended up unwinding the charge off and modified the debt. I payed on this for 3 yrs. I never stopped paying the first. Always current. Until recently we had a hardship. My husband had brain surgery and his income was cut in half. It’s a work comp related injury that is in the works however, he has to get state disability in the meantime. Fortunately he is ok and should be returning to work. I drained my savings and took out a 401k loan to survive. I fell behind on my 1st mortgage…a rolling 30-45 days. As soon as I get the funds I make the payment. Chase started charging me a late fee on the 1st. Is that legal to do on a discharged debt? I plan to get current as soon as he returns to work. I didn’t reaffirm anything. As for the second mortgage I haven’t paid them since this past March and I haven’t heard a word from them. I do have a cease and desist filed with Chase so they can only contact me via mail. As of today, I haven’t received anything from them. A statement every now and then but no offer to settle. What do you suggest I do with that debt?
I plan to sell the house in the 5 yrs. Currently valued at $700k. I owe $385k on first and $140k on second. Property in OC, CA. Your advise is greatly appreciated.
Thanks!
Robert Weed
Tina:
You probably have more rights in California than you would in Virginia, where I am. So I really can’t give you any advice. Sorry.
Mike Campbell
I see that most of the questions involve ch 7. I am about 2 years into a ch 13 and have a question on refinancing my 1st mortgage on a harp program. We did not reaffirm the first or 2nd. The 2nd mortgsge was icludef in the ch13 but was not stripped out and was basically just not going to get paid at all. I understand that there may be a lien on the property.
If I refi the first and the 2nd agrees to subordination what is my possible credit situation after the plan is complete and or what could happen if at the end of the plan I just walk away from the new loan then. Right now if I let them forclose I have to pay alot more into the plan since my house payment is relatively high and keeps.my payment into the plan at a liveable size.
Robert Weed
Mike:
The Judges here would NOT allow a Chapter 13 that just said the second was “not going to get paid.” So I have no experience to help me answer your question. Sorry.
Jake
Hello,
I have a second mortgage with Green Tree now Ditech. I received a chapter 7 discharge in November of 2010. I have not paid the second mortgage since. Second is for $30,000 and I currently owe Wells Fargo $135,000 on the first. Current value of the house is around $100k. First mortgage has been paid monthly the entire time. I recently contacted Ditech to talk about a settlement. They informed me that they would need a hardship letter, two months bank statements, 2 years tax info, 2 months paystubs and 401K information as well as a current appraisal. I feel like they are just trying to get all my financial info. Is all of this needed in order to settle? or should I just send a hardship letter and a settlement offer?
Thanks
Robert Weed
Jake:
I’d do what they ask for. Obviously you WANT them to see the appraisal.
Kellen Young
I have a second (HELOC), which was used to purchase my home in California. I am current on my first mortgage, but I have not paid the HELOC in 7 years. My equity has gone up, so I am no longer underwater. I receive daily calls from a collection agency and occasional letters from them. I tried to settle with the HELOC, but was turned down. Now I just ignore them. They have not tried to foreclose yet. I do notice on my credit report that the collection agency has put an incorrect date of last payment, making it seem that I made a payment just a few years ago. I understand that that keeps the debt newer. The last payment was actually more than 7 years ago. Any advice?
Robert Weed
Kellen:
The big issue is if they leave you alone too long, they HELOC becomes unenforceable. I have NO IDEA how long that would be in California. But you need to find out.
In terms of the collection agency putting the wrong date, that can be both an FCRA and FDCPA violation. You need to talk to a lawyer in your area who does that kind of work. One place to look is here. http://www.consumeradvocates.org/find-attorney.
But that’s a lot less important than finding out what what point the HELOC becomes unenforceable. Might be twenty years. But maybe it’s seven. I just don’t know. You NEED to find out.
Jeffrey Vaughn
Robert, I am very stressed and need help, I have a 1st and 2nd mortgage with Wells Fargo, the 1st has about 80,000 left on it and the 2nd around 20,000. My ex-wife was paying the 2nd and stopped in April now this thing is $2800 behind and they want the full amount and will not allow me to make a 378 payment on the website or in a local branch. I live in SC where they from my understanding do not garnish wages, also the first is in my name only and the second is in my name the ex-wifes name however I did a Quitclaim deed deeding her off and filed it with the county I live in. What can I do or is there anything at all I can do? Thank You!
Robert Weed
Jeff:
You MIGHT have some specific right under Carolina law that I don’t know about. But it sounds like you can file Chapter 13 and get three or five years to catch it up.
Bill
Hi Robert, Great site! I filed chapter 7 BK 2 years ago. My first mortgage is 230,000 while my second mortgage has 18,000 remaining(i constantly am paying it late). The issue i have is that the value of my home is about 235,000. I obviously cant refinance, so should i just not pay the second mortgage since im now underwater in the property.
Robert Weed
Bill:
I really can’t tell you what you “should” do. You “can” stop paying the second mortgage–that’s my nerves of steal strategy–and you can hope you can settle up in a few years. But I can’t promise you that will work. You need to make your own decision.
Jan
We filed Chapter 7 in 2012. 1st Mortgage and HELOC was discharged. My husband reaffirmed the 1ST Mortgage and we tried to settle with the HELOC and they refused on multiple times tried to work out reduced payments prior to filing Chapter 7 they refused. Tried again after Chapter 7 and as our lawyer recommended ask if they would take a reduced payoff and they refused.
They have recently sent a letter of foreclosure to me and not my husband. They house has gone up in price so if they do take action they would break even or at a small loss. They house has repairs that are needed that we are unable to make due to money challenges. So they would have to fix them in order to break close to even on the sale of the house. Since there is still a 1st mortgage that has been paid on can they take action on foreclosure? Is there anything I can do to save me from losing the home? We would not be able to afford to rent anywhere else the rent rate here has gone sky high crazy. Will it be just the last balance of the HELOC that will have to be paid? Or are they charging interest and late fees?
And if this is the amount they are looking to recoup then they would short themselves if they foreclose.
Why wouldn’t they send something under both our names? My husband will be 65 in December and was forced to retire in 2012, I was told that this may be why they are doing this now.
Can you help with any recommendations or advice? I live in Washington State. (West Coast)
Any help would be appreciated.
Thank you.
Jan
Robert Weed
Jan:
I can’t add to what you’ve said. Like your lawyer I often recommend asking for a reduced payoff and I’m sorry they didn’t take it.
They will be charging the whole amount, including interest and late fees. The only sure way I know of to save the house is to pay them–and you can’t do that. (Chapter 13 would give you five years to catch them up, but it seems like that’s out of the question.)
Now I’m in Virginia where foreclosure is very easy–one of the easiest states. You might have rights I don’t know about there in Washington. You really need to talk to a lawyer there.
Marla
I live in Los Angeles, California and have a similar situation. I filed for Chapter 7 in November 2009 and was discharged as of March 2010. I have a first mortgage and HELOC both with the same bank and have not reaffirmed the loans but in order to keep the property, I have been paying the first mortgage. This property is in a Stock Cooperative however we are in the process of converting to Condo and I need to make decisions regarding the property very soon.
A few years ago, I contacted the bank and they told me they had written off the second as uncollectable (because I stopped making payments a few years before). While they said that, they never actually removed the lien on the property. At this moment I understand I have a few options:
1) Call the lender and ask them to remove the lien on the property. If they don’t want to without paying it off – try to negotiate a settlement for a lower amount. If they agree to a settlement, this might affect my taxes in that the settlement amount may appear as income and I may be taxed on the entire amount that is forgiven. There’s also another potential issue that the $60,000 loan amount may have been accruing interest and late fees all these years that it has gone unpaid.
2) Do nothing and wait to see if I am able to keep my existing mortgage through a CRA which the condo conversion attorney is trying to obtain with Fannie Mae. This would allow me to keep the current terms of my mortgage while converting the stock certificate into a grant deed – paper work to make the conversion final.
3) Put the unit up for sale now. When it sells, I will have to pay the outstanding amount of the first and second mortgages including late and interest.
I am inclined to pursue #1 at this moment. Can’t hurt to ask if they will remove the lien from the property. If they don’t, see what it will take to get them to remove it.
Is there anything you recommend instead of or in addition to what I have outlined above? What is the likelihood that the second will ever really go away?
Thanks in advance for your assistance.
Robert Weed
Masia:
I like no 1, too.
You have analyzed it well, except for one thing. You will NOT be taxed on the amount that was forgiven because it was wiped out in your Nov 2009 bankruptcy. If you get a debt forgivness 1099- you need to remind the IRS about the bankruptcy. I have more about that, here. https://robertweed.com/2010/02/03/bankruptcy-foreclosure-1099-a-and-1099-c/
Latasha
This blog is so informative! I’ve been very responsible in maintaining good credit all of my adult life and I’m now contemplating filing a chapter 13 bankruptcy mostly because of my second mortgage and want to know your thoughts. I live in Maryland and my first mortgage is with WF and I owe $137K. My second mortgage is with Bank Of Amer and I owe $42K with interest only payments until 2018. Comps in my area for same exact house have sold for $130-$135K in past year. I stopped paying my HELOC in August. Plan to file in Feb because I had to purchase a new car beginning of August for reliable transportation. Will my credit score drop because I stopped paying the HELOC payment? All of my other bills (credit cards) including my mortgage are paid every month on time. I’m really hoping they will just write it off. Do I go ahead with my Bankruptcy if I don’t get offers from them soon? I really appreciate your input!
Latasha
Sorry for 2nd post but forgot to mention the reason why I want to get rid of the HELOC. I need a bigger home ASAP with aging mother and growing family. It seems like my only option if I wish to buy bigger over the next 3 years or so. So if i file 13, I can sell hopefully in next few years without being upside down or rent and purchase a bigger home. After it is discharged, I can sell it and not owe 2nd mortgage company anything, correct?
Robert Weed
Latasha:
You are two strategies. You explained one. You file a Chapter 13, get rid of the second mortgage. Then when the C13 is done, you think you’ll have some equity. You can sell and buy another place.
The second strategy would be to file Chapter 7 now, give up the house. Rent for a couple years; and then buy another place. The Chapter 7 strategy would get you back to good enough credit to buy a house FASTER than the Chapter 13. But it doesn’t get you any equity. And it would involve making two moves, instead of just one. And I don’t know, obviously, how your eligibility is for either Chapter 7 or Chapter 13.
You need to make sure you have a lawyer that explains both choices to you; and then you pick the one that fells right.
Michele
I filed Chapter 7 in 2009 and it was discharged in 2010. I reaffirmed the 1st Mortgage and not the 2nd. The second mortgage has been sold or transferred at least 4 times. The last company agreed to a $4,000 settlement and sent me settlement agreement and then the loan was sold. I received a letter from an attorney last week stating they were going to foreclose on the property. The balance discharged in Chapter 7 was $49,000. They are trying to say I owe that plus late fees, interests, etc. totaling $89,000. I’ve asked the new lender to produce the Note to show proof they are the new lien holder and they have produced the old Note and a RESPA letter. I’m open to trying to settle with them but now they are asking for personal financial documents (tax returns, pay check stubs, etc.) to be filled out and I’m not okay with giving that information. I want to see first that they are in fact the lien holder (there is nothing filed at the register of deeds in Union County, NC with their name as a lien holder) and then try and settle the debt for a reasonable amount. Any advice?
Robert Weed
Michelle:
I don’t know enough about your specifics to give you any specific advice. You might want to talk to a lawyer and show them the $4000 settlement agreement and see if you can successfully claim it’s still in force.
Dave
I live in my property in California. I filed Chapter 7 in 2012 and it was discharged in Jan 2013. Had a first mortgage with large bank and a HELOC with PNC that was around $200k at the time of the chapter 7. Never re-affirmed anything. Kept up payments on the 1st so the family could stay in the house (we like it and the area) but using Zillow as of today says I have $129k positive equity after paying off the 1st. Even with a 20% error margin PNC could get a reasonable amount of cash back assuming they bring the property up to par. I havent been fixing anything that has broken, outside paint is flaking off and inside needs new floors, bathrooms, painting etc. The concrete slab also has a flaw in it that builder was sued for. PNC have never contacted me regarding the lien on the property. Would it be wise to write to PNC and indicate i would like to open discussions with them about removing the Lien for a payment (the loan was discharged so its not settling that debt) or would this highlight them to do research on my property to actually see what they might be able to get out of me. Ideally I’d like to settle for 3-5% otherwise continue to save to try and purchase another property in the 2017 time frame 4 years after my chapter 7 discharge. I really dont want to wake the sleeping lion but if banks traditionally keep an eye on all their distressed properties I dont seem the harm in it. I just dont fancy a foreclosure and then waiting another 3 years +. I did approach one mortgage broker last month who said my credit was actually pretty good apart from the bankruptcy on it.
Robert Weed
Dave:
Here’s what I can tell you. At least some lenders will approve you for a new mortgage, even if the house you are is hasn’t foreclosed. Don’t know why some will and some won’t.
On the sleeping dogs, it’s a shot in the dark. I’ve told you the little that I know, can’t give you any more definite advice–especially since it looks like values have recovered more where you are than they have where I am.
Sandra H.
I live in Virginia and my home is in Virginia. My first (Nationstar) and second (Citi) mortgages total approximately $300,000 and the value of my home is approximately $260,000. Both mortgages were discharged in Chapter 7 bankruptcy in February 2015. I am considering not paying my mortgages, saving the money and moving. My understanding is that, although the mortgage companies will eventually foreclose, they cannot collect from me. Before I make a decision, could you inform me if there is anything else about the process (negative or positive) I need to know. My property taxes and homeowners insurance are included in my mortgage. I’m assuming I will have to continue paying them. In that case, should I just contact the insurance company and county directly to arrange payments? How long does the foreclosure process take in Virginia from the time of last payment until I have to vacate the property? Thank you so much!
Robert Weed
Sandra:
Glad my post was helpful.
I have some more info, here. https://robertweed.com/2011/05/18/file-bankruptcy-stop-paying-dont-leave-that-house/
Michael J. Guerrera
Hello Robert. in 2006 we tried to sell our home$359k market in Sac. Ca. area. Our agent (my brother’s father in law) said all offers were not worth entertaining so we decided to purchase the home we were looking at purchasing and wait for a buyer to pay close to what we were asking. That never happened and no offers came around at any reasonable amount. So we had already purchased the home we wanted at $620k. Three months went by, not any luck on the sale of our original home. We then had no option other than to rent it out, it sat empty and we could not afford two house payments. Wamu (our lender on our first home which we were current on) did a 80/10/10 on us for the newly purchased home.
well, after renting out, the first home to three different renters, it did not go well and we were forced to do a short sale on the newer home in 2012. That went ok, loosing our dream home was the worst part for my wife. We then moved back to our original home which made things easier on our budget. Humbled, yes that too. So now we are doing well with exception of the 2nd on our first home of $69k that we owe still. In Ca., it’s so expensive and hard to get by, we are having a making ground and getting ahead. Do we have any chance against WaMu with predatory lending?? I know they must have made us look better on paper with our income, we are small business owners with a six table pizzeria, had no savings to put down on that house of $620k. What was I thinking? Other than trying to make my wife happy… Just feeling locked down. Our income has fluctuated from 40k to 80k both of us. Just looking for some options. Thanks for the blog, Michael
Robert Weed
Michael:
All I can tell you is that you’d have a better chance in California that you would in Virginia. How much better, I have no way of knowing.
Lori
I have a question, Mr. Reed. I’m wondering how a second mortgage company can contact you to negotiate after you’ve filed bankruptcy? I read that they can’t contact you unless and until you give them permission by a written letter. But your article indicates that if you wait long enough after stopping payments and ignore them, they’ll possibly send you an offer to settle. Are they allowed to if you’ve filed bankruptcy and didn’t reaffirm the loan but just agreed to keep the house and make the payments? I stopped making payments with my second but remain current on my first for about three years now and have never heard a word from them. Now I’m worried as I’m no longer under water and am wondering if they’re going to realize this and come after me!
Robert Weed
Lori:
You might want to reach out to them–it sometimes works, that’s really all I can tell you.
Sara
We haven’t paid our discharged (via Chapter 7 in 2012) second mortgage with PNC for over 4 years now (we modified our discharged 1st via HAMP) and continue to pay that one. Should I bother contacting PNC to see if they will settle or forgive the debt now that the value of our house has increased substantially increased to double what we owe on both loans?
Robert Weed
Sara:
Anything you do is a shot in the dark. So I can’t give you any specific advice. I just don’t know enough to even give you a good guess. sorry.
Andy
Hi,
Bankruptcy discharged 2009, had 1st and 2nd, continued to pay 1st Mortgage, did a Mod on 1st Mortgage and 2nd Mortgage, could not pay any more on 2nd, stop paying, they have never contacted me since. I went down to the Courthouse and it stills shows a lien from US Bank for the 2nd Mortgage. We don’t plan on selling for another 2 1/2 years after the kids graduate from High School. Is there any way to get a release of the 2nd Mortgage which was about $30,000. 1st Mortgage is at about $109,000 and our house is worth more than that. Is there any statute of limitations in Minnesota? Will I ever be able to get the lien released without settling or paying anything on the 2nd?
Robert Weed
Andy:
There probably is a statute of limitations on not paying a mortgage n Minnesota, but I have no idea what it is. Sorry. So I can’t guess whether you are close to it or not.
John Lopez
I keep hearing about not paying second loan after bankruptcy what about the first mortgage. Is that discharged also and the lien is left.
Robert Weed
John:
The debt is discharged, but the lien is left. I’ve explained it the best way I know how. Talk to your lawyer for more info.
Merl
Mr. Weed, I just want to express my gratitude for how thoroughly you have analyzed so many different people’s unique situations here on your website. It really helps create a full picture of the process that homeowners are going through for others such as myself who may not have experienced some of them and are looking at their options regarding 2nd mortgages and Chapter 7. I know you must be tired of repeating yourself and I hope you will see that the story I am going to share does have a unique twist to make it worth answering. For some reason my bank stopped accepting payments through their website on my second mortgage around the time my Chapter 7 was in the middle of being processed unbeknownst to me. When they shut down all access to my HELOC through the website I recently called them and asked how I would make payments now. The customer service representative of the bankruptcy department’s reply was that they hadn’t received a payment for 3 months and had written off the balance although they still owned it. They also said that I was no longer responsible for making any interest payments and that all payments that I made going forward would be applied to the principle. Is this correct information? I understand that you may not know specifics of California BK law but if it really is the case that interest would not accrue after bankruptcy and missing a few payments, would that not affect my other mortgages as well? The reason I am bringing this up is that some people on your discussion board seem to be worried about late fees and interest accruing but I have recently been personally informed by multiple banks that they can no longer charge a late fee after a Chapter 7 either. Do you have any information that could help clear this up? Thank you for your valuable time
Robert Weed
Merl:
It must be California law, if it’s anything. I think interest, late fees, all that on your second mortgage would continue to accrue after the Chapter 7. Not as to you, personally, of course, but as to the balance of the second mortgage as it is attached to the house. If several have told y