Second Mortgage After Discharge

[MoMoney428]

Hello all,

I was discharged in May of this year (filed Chapter 7). In my bankruptcy, I did not reaffirm both my first and second mortgages. It is my understanding that although both mortgage companies cannot come after me for the debt, they hold liens on my home and can foreclose if I don't pay.

My second mortgage is due to mature next March - I have about $3,000 remaining. If I needed to skip one payment (since I don't have it due to an unexpected emergency), how likely is it that the second mortgage will proceed with foreclosure? I read somewhere (I don't remember where) that in order for my second mortgage to foreclose on my home, they would need to pay off the first. Also, I don't have a lot of equity in my home due to refinancing a few times (big mistake but it's water under the bridge now).

I have a message into my attorney but just curious if others have had a simiar experience.

Thanks so much!

Beth

[BobMango]

If your home is worth less than the first mortgage, then the second holder will do nothing. In any case unless your home is worth way more than the balance of both loans I'd say the odds are long that the second would initiate foreclosure proceedings, particularly for that amount. In any case it will be months and you should have plenty of time to make up the default. Good luck.

[MoMoney428]

Thanks, Bob. I'm thinking the exact same thing!

[LadyInTheRed]

Perhaps you can use this as an opportunity. Since the debt is discharged, the bank may be inspired to negotiate after you miss a payment. If you can get $1500 or $2000 together within a couple of months, you may be able to get them to take it in full payment of the loan.

If you don't want to try to negotiate, just contact the mortgage company and let them know what is going on. They are more likely to work with you to get the loan paid in full than they are to foreclose.

[MoMoney428]

Thank you all for your responses! I actually received a letter yesterday from Wells Fargo that basically states that they know I am no longer responsible for paying the outstanding balance on my home equity account but since I've made payments after my discharge, they have reason to believe that I may wish to remain in my property. They further state that I may be eligible for a modification which may consist of one or more of the following:

--- a lower interest rate;
--- a lower monthly payment amount;
--- an extention of the maturity date of the account; or
--- a combination of the above.

I would rather settle but of course that's not provided as an option. So far, I've only missed one payment. Since I only owe them $3,000, I am wondering if I should call them now to see if they'd settle for 10% which I know is low balling but I could try. Or, would I be better off skipping a few more payments and then seeing if they'd take the 10%? I thought I might be in a better position if I wait a few months. They'll see I'm not paying and may be more likely to take me up on my offer. The only thing that scares me is that they may want to foreclose BUT after the first mortgage is paid, I'm not sure how much that would leave them. It might be more trouble than it's worth for them to foreclose. How much equity would need to be in my home for it to be worth Wells Fargo foreclosing? There could be up to $39,000 in equity and that's only if they could get top dollar. Any thoughts?

[Pandora]

They'll see I'm not paying and may be more likely to take me up on my offer....

How much equity would need to be in my home for it to be worth Wells Fargo foreclosing? There could be up to $39,000 in equity and that's only if they could get top dollar. Any thoughts?

You owe only $3K to the 2nd, is that correct or is it supposed to read $30K? If its $3K and you have anything over $5-10K in equity (adding in fees for foreclosure) IMO, then the equity is there to foreclose as is the real possibility that they just might act upon it. Dont count on you not paying as a means to force their hand... if you do that, you need to be willing to take the chance of receiving foreclosure papers in the process and have cash on hand to bring your account current.

If you cant get them to settle, then consider trying to work out a temporary forbearance of 2-3 months given its such a small amount owed. That way you can still pay it off in full and get the lien released as paid in full.

[MoMoney428]

Thanks, Pandora! You read it right - I only owe $3K to the second. I'd rather not chance it and have them foreclose on me when I only owe them $3,000. My payments are a little over $300 a month which is putting a strain on me so we'll see what I can work out with them.

[MoMoney428]

Just got off the phone with Wells Fargo. They said they'd accept a settlement but I need to make the first offer of course. The rep I spoke with (who was extremely nice) gave me a fax number where I can fax a letter. I need to provide a hardship explanation along with the offer and they'll either accept it or counter offer. We'll see how it goes. If that doesn't work out, I'll call back to discuss options for a modification. I know I don't owe them that much but when your salary isn't what it used to be, $300 a month is a lot of money!

[MoMoney428]

Good morning (or afternoon depending on your location) all!

Thought I'd follow-up regarding my settlement with Wells Fargo. Great news! They accepted my $310 settlement offer. I only owed them $3,100 but I wanted to get rid of these $300 a month payments because I was having trouble making them each month. I can't believe this worked! I figured I'd try because I had nothing to lose. They mentioned they'd be sending me a 1099 but that it's procedure. Since I didn't reaffirm and the mortgage was included in the bankruptcy, I don't believe I will need to pay state and federal taxes, at least that's what I determined through my research. Worst case scenario, I figured out what I'd owe if I did need to pay taxes and I can take care of it when the time comes. Can anyone shed some light on this? I have a message into my attorney as well but like to hear what others have experienced.

Sometimes the saying "Ask and you shall receive" is true!

Have a great weekend everyone!

[IamOld]

MoMoney that is incredible news!!!

Re the 1099 - no you will NOT owe fed taxes because you were insolvent at the time...there is a form you'll need to include with your fed tax return for 2011 - http://www.irs.gov/individuals/artic...179414,00.html

Good morning (or afternoon depending on your location) all!

Thought I'd follow-up regarding my settlement with Wells Fargo. Great news! They accepted my $310 settlement offer. I only owed them $3,100 but I wanted to get rid of these $300 a month payments because I was having trouble making them each month. I can't believe this worked! I figured I'd try because I had nothing to lose. They mentioned they'd be sending me a 1099 but that it's procedure. Since I didn't reaffirm and the mortgage was included in the bankruptcy, I don't believe I will need to pay state and federal taxes, at least that's what I determined through my research. Worse case scenario, I figured out what I'd owe if I did need to pay taxes and I can take care of it when the time comes. Can anyone shed some light on this? I have a message into my attorney as well but like to hear what others have experienced.

Someone the saying "Ask and you shall receive" is true!

Have a great weekend everyone!

[MoMoney428]

Thank you for the information, IamOld! I am very excited!

[pcn]

How were you lucky enough to find the right people to talk to? Can you please tell me the department name? We are with BOA, but maybe that will help guide us. I seem to go in useless circles whenever I try to talk with anyone at BOA.

[LadyInTheRed]

Congratulations, NoMoney428! Thanks for the update.

pcn, you might try contacting the office of the President at BoA. People at loansafe.org have contacted that office for help with mortgage modifications. I'm sure they can help with settlement offers too. Contact info is at http://www.loansafe.org/forum/bank-a...president.html. I haven't read that thread in a long time. You might want to skim through it to make sure the original email is still correct.

[MoMoney428]

Thanks, Lady!

PCN - I contacted the Well's Fargo Home Equity Bankruptcy Department that's listed on my monthly statements (I opted to continue to receive statements) and spoke with one of the reps. I read a couple of threads on this forum about others who have settled their second mortgage and had luck so thought I'd give it a shot. I asked the rep if they'd accept a settlement offer and he said absolutely. I just needed to write a letter stating my offer and the reason I'm not able to afford the payments. It wasn't a long letter either. I low balled them thinking that they probably wouldn't accept the first offer but low and behold, they did!

Good luck and let us know how it works out for you.

[keepsmiling]

Actually, there is a small chance you MAY owe taxes.
It depends on if you have substantial retirement accounts. While those do NOT count in a bk, they DO count for purposes of determining solvency when it comes to 1099's. So if you were "insolvent" for bk purposes by 100K, but had 150K in a 401K or IRA.... you would probably owe taxes on the 1099 amount.

It's small potatoes, but I wanted to clarify. And hey-- CONGRATS! on a nice little settlement! Just goes to show, you don't ask, you don't get.