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Should I quit paying and settle

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  • Should I quit paying and settle

    Just a little background. Our chapter 7 was discharged in August of 2010. We didn't reaffirm our 1st and 2nd mortgage and still live in our home.We have never been late with a payment on either.Shortly after we were discharged Bank of America sold off our 2nd mortgage to Green Tree who are basically crooks in my opinion.The 2nd mortgage is almost $50,000 at 11.65% interest.Our home could fetch probably close to $200,000 if sold. I'm wondering if I should quit paying the 2nd and wait for them to settle? If Green Tree tried to foreclose they would be lucky to break even after paying $150,000. Any helpful thoughts would be appreciated.

  • #2
    Bigger question is who holds the title? Just because BOA sold the 2nd to GreenTree doesnt mean GreenTree has the title. In most cases like this, the title remains with the original creditor; however YMMV.

    First thing you need to do is find out if BOA still has it; second thing would be if they do, is either 1. get BOA to agree to take back the debt from GreenTree or 2. get BOA to give greentree the title so you can settle and get title released to you. What you should know is either way you're in for a long haul. DO NOT ACCEPT AN OFFER TO SETTLE unless you have 100% guarantee GreenTree has the title and will release. You want written / photo copy / court document proof they hold it along with BOA documents stating they released / gave the title to GreenTree.

    Those would be your first steps.


    • #3
      The owner of the house owns the title??


      • #4
        @ metoo:

        If there is a mortgage on the house, then the 1st mortgage lender holds title or deed. As to the 2nd mortgage, they would have a lien against the property subsequent to the 1st mortgage. The OP would have to get that lien released in order to settle. Not every lender who sells bad debt will release the lien to the junk debt buyer; these are things that need to be found out prior to offering / agreeing on settlement.


        • #5
          I talked to BOA and they hold the title to our home.The guy at BOA said he wouldn't recommend not paying Green Tree because they could sue for the 2nd mortgage.I told him it was my understanding GT could not sue because the 2nd mortgage was not reaffirmed after Chapter 7.Not sure what to do anymore.I just know I'm throwing $500 a month down the tubes to Green Tree.It wouldn't be so bad if the balance was going down but at 11.65% interest ,it's not.


          • #6
            Unless the vocabulary of mortgages is different in different parts of the county, YOU hold title to your home. BofA and Green Tree have liens on it. The 2nd lien holder absolutely CAN sue if you default. Your BK absolves you of liability for the debt, but does not wash their lien or ability to take the house. That said, you are correct that they would be much more inclined to work with you since a foreclosure would net them nothing and in fact cost them $.


            • #7
              It really depends on whether it is a Mortgage Deed or a Deed of Trust. A regular mortgage is just a lien against the property where the owner (person who obtained the mortgage by pledging the home as security) still holds title. In States where a Deed of Trust is used, such as North Carolina, title is held by a third party known as a Trustee.

              I believe that Illinois only allows a Deed of Trust. Florida only allows a Mortgage Deed. (Florida is trying to establish laws that would allow a Deed of Trust in order to "expedite" future foreclosures.)

              As for suing for foreclosure, a secured creditor, such as a second lien holder, can always sue for foreclosure in cases where the promissory note has been discharged in a bankruptcy. Please remember that a bankruptcy only removes your liability to pay the promissory note. it does not destroy the security that you pledged, which is the home. So long as the creditor goes for foreclosure only (or right of sale -- in a Deed of Trust), they are not violating the bankruptcy discharge.

              Since you have "some" equity above the first lien (BofA), it will be difficult to convince Green Tree, the second lien holder, to settle for what we typically suggest (which is 10% or less).
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog

              I am not an attorney. Any advice provided is not legal advice.


              • #8
                Thank you all for your help and information!


                • #9
                  I used to do business with a company similar to Green Tree. This particular company would pay pennies on the dollar from lenders like BOFA for nonperforming 2nd mortgages and then they would hand me the borrowers info and I would try to refinance them out of the loan. These guys were scumbags but if I could refinance the borrowers everyone won.
                  I don't know if BOFA sold your loan to GT for less than the 50K but there is a chance so don't assume GT has that much risk in the deal. That being said, GT probably doesn't want to foreclose either since there's not much equity there.


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