2nd mortgage settlement

[laurannm]

We have two mortgages, first with Citi and 2nd with First Horizon. Both mortgages were IIB and not reaffirmed as part of our Ch7 two years ago. At this point we are about $120k underwater, making the 2nd wholly unsecured. We have remained current on both mortgages. What are the chances of being able to settle the 2nd mortgage with First Horizon?


Thanks!

[Pandora]

Bigger question is if you discharged both mortgages - why have you continued to pay the 2nd for the past 2 years? You could've saved all of that money towards offering a settlement of pennies on the dollar to the 2nd in exchange for a lien release - assuming you wanted to keep the house given its underwater so much.

Is the 120K your 2nd mortgage?

[laurannm]

Thanks Pandora

Yep, that $120k difference is the 2nd mortgage (it might even be more, I am just basing that on what I have seen for values on Zillow and other websites, perhaps I should get an official appraisal done?). You are right, I probably should have stopped paying and save that money, but I was always afraid they would attempt to foreclose, and without a plan in place of what we were going to do living-wise, I didn't want that to happen. That being said, I suppose that as long I took those payments and put them aside, I could always catch up payments if push came to shove?

[Pandora]

Ok, first - what is the 1st mortgage amount? The main reason 2nd's foreclose is if the house value is above what you owe the 1st or if the 2nd is larger than the 1st in relation to the value of the home. The other way they could foreclose is once equity comes into play by paying the 1st down, which could be many many years down the road, if ever.

No need to get an appraisal - you'd be wasting your money. Also no need to "catch up" payments to the 2nd if any of the above applies. Try to offer to settle but know that to do so, you must have all of that money available to you upfront to do so. Start low - around 5% and go up from there, but no more than 20% if possible.

So you owe $120K to the 2nd mortgage? Its a bit confusing as you have it written above because you've stated that the 120K is based off of the estimated value on Zillow ???

[laurannm]

First mortgage balance is $298k. It's a 10-year interest only loan, meaning I only have to pay the interest for the first 10 years (we have 4 years left). Then in 4 years, we start paying principal and interest. Right now I believe the house to be valued at around $280k.

So it sounds like a decent strategy might be to stop paying the 2nd, save that money and then start the settlement process

Thanks again

[Pandora]

ouch... I/O loan. have you checked around to see if a rental would be cheaper since it all will adjust shortly to principal + interest?

Might be worth checking out

Good luck to you!

[laurannm]

Yep, I/O loan....we have been actively looking at rentals, but they are about the same price as what we are paying now. We have started to consider moving out of state (currently in MA), to cheaper part of the country

[msm859]

Unless you decide to stop paying on your second and then approaching them a few months down the road you probably have a minimal chance at settling with the second.

[pcmbates]

we are getting ready to file a chapter 13 w/a lien strip of our 2nd mtg...we too are upside down. Just paid for a full appraisal, awaiting the results....
also, we were in an I/O loan w/our 1st mtg (M and T bank) and they wanted so desperately to not have any I/O loans associated w/them, that they "streamlined" our mtg. to a 5% fixed for the life of the loan....payments aren't cheaper than the I/O...but at least we are paying some principal.
I remember seeing what our payment was going to be when we switched to Interest and Principal and was in shock....it was insane..and we absolutley would have lost our home if we had to pay that....yes...our stupidity got us in that mess...but luckily got out.
Good luck!
Michelle

[laurannm]

Agreed msm859, and I think this why we might take this approach and stop paying the 2nd and approach them in a few months and see what our options are

[considering7]

Question...I'm getting ready to file a non-consumer Ch7. I have a steady income and after debts are discharged will be able to continue paying my mortgage payments. Spouse and I want to keep the house, and plan to stay here for many years. I am curious about the idea of settling with the second once the Ch7 discharge is complete, in an effort to reduce the amount underwater I am on the house.

My question is: Which of the following would give someone the best chances fo settling on the 2nd:
a) Continue making payments on the 2nd throughout the period (4-5 months?) between filing and discharge of the Ch7? Then after discharge, stop making payments for the first 2-3 months, stop paying on the 2nd and try to settle?
b) Stop making payments now (at the start of Ch7), wait for the discharge. Then approach the 2nd bank post-discharge and ask for a settlement?

[nichole04]

I would stop paying the 2nd and offer a settlement in about 3 months or so. I settled my 2nd mortgages for 5% and I stopped paying my 2nd mortgages after my 341 meeting during chapter 7. I settled with citimortgage after 4 months of missed payments and after my chapter was discharged.
considering7-I would go into the chapter 7 current on all mortgages then stop paying the 2nd after the 341 if you know the
2nd mortgage is totally underwater. Offer a settlement 3 months or so after you stop paying and after the discharge. You can see my post about this under my name nichole04-settled 2nd mortgage. Hope this helps.

[jarguello]

I filed chpt 7 and 1st and 2nd mrtg were discharged and not reaffirmed! A couple of months ago I found out that the second mrtg with Citimortgage is not recorded at the county's registrar of tiltles, I have not pay them in about 2 years now debt has been charged-off and with their recovery departmnt which doesn't do any type of settlemnts and they have shown no interest at this time in foreclosing b/c it doesn't make any economic sense to do so and they aren't persuing any collections, garnismnt, judmnt etc.. either b/c debt has been discharged.
My questions are these: 1) Is Citimortgage able to record the mortgage now and foreclose after discharged? 2) Since mrtg is not recorded properly and they don't have a valid lien againts property, they have no choice but to file a judicial foreclosure which will entail a judgement, and wouldn't that be consider a violation of the discharged injunction? 3) Is citimortgage out of luck since debt has been discharged? I have try so hard to find the anwers to this questions, it seems as if every lawyer has a different answer different philosophies. Please Help me. Second mrtg please just go AWAY!!