Possible to Negotiate With 2nd Mortgage

[RickInMich]

Hi,

I know this is a long shot, but I was wondering if anyone has ever heard of negotiating with a 2nd mortgage. We got a 125% loan from Ditech a while back, and now we'll be filing Chapter 7. We're definitely prepared to let the house go back since we obviously now, with both mortgages, owe more than it's worth.

We owe $106,000 on first and $43,000 on second. Our house might be valued around $130,000, but our State Equalized Value is for $120,000. So at best, we have about between $14,000 to $24,000 equity over and above the first mortgage.

What I was curious to know is would Ditech "settle" for the 24,000 instead of quite possibly losing ANY equity if we let it go into foreclosure. I'm assuming they don't care at all. But has anyone ever heard of a mortgage company settling that way? I think we could even get a "gift" from my wife's parents and pay that 24,000 off if they'd settle that way. Not sure if a trustee would allow that anyway.

I'm just thinking out loud, I guess. Anyone heard of such a thing?

Rick

[B12]

The BK part of it, I do not know, I am sure the forum experts will offer their knowledge.

But, as far as the value of the house is concerned....a house is "worth" whatever a willing and able buyer will pay for it. No other appraisal matters. It is worth what the market will bear, market value.

Lien holders on the house stand in line to get paid. The house is sold and the 1st lien holder gets paid, anything left, the 2nd lien holder gets paid, etc.

I am confused as to your statement about the 125% Loan to Value, though. Is there another lender who holds the second loan or did Ditech do the first and second loan together?

[Boscoe]

If you can afford the house, would you consider keeping it? I would recommend you do that, and then do NOT reaffirm the house, so you won't be liable for the debt should you decide to (or need to) walk away.

I would not be confident at all about having the lenders work with you. Even in this market, they don't seem too eager to bail out the borrowers, even if it means a bigger loss for them.

I would either stay in the house, say you will reaffirm but then don't. Or, just surrender the house and let all the debt be discharged in your bk. Dealing with the lenders is most of the time an exercise in futility. Especially now with the terrible real estate markets.

[RickInMich]

Thanks, Boscoe. I was thinking it was probably futile, too. We probably could afford the house with first and second, but the problem is all the upkeep. It's an older home, and we are forever putting money into it. The neighborhood is starting to go down hill (city crime is creeping closer) and I just have to believe the value will only begin to go down. I am definitely thinking of not affirming. But someone here pointed out that if we didn't affirm, but wait too long to let it go, if we decide to let it go, that we'll take a double hit on our credit. It was said that if we let it go during the bankruptcy, future mortgagers will look at it as one incident.

B12, first mortgage is with Countrywide, second with Ditech. Ditech was loaning 125% of the value of homes for second mortgages (may still be, I suppose.) So if you had a house worth 100,000, owed let's say 75,000 on the first, they would loan you up to 50,000. So you owe 125,000 on the house, or 125% worth the value. We were stupid!! We did it.

Rick

[B12]

Let the house go. Not only are you a victim of predatory lending, you are in a declining local market. Double whammy.

I am with CW, not in an upside down situation yet, just even right now, and I am letting the house go. Why? because I see the market severely declining. I can either deal with it now and get it over with, or deal with it now, and then deal with it again next year. My take on life is simple......move forward.

I do not honestly see the market recovering for a good 6-8 years. I have seen this before in the late 80s.

I love older houses, have renovated quite a few over the years. Go rent "The Money Pit." You need a good laugh.