Heloc question

[mmptysmom]

Filed 11-26....not eligible for lien stripping for Heloc(2nd) as home value greater then 1st mtg balance...WF holds both which are included in my 13 filing but I intend on keeping my home without reaffirming.Does anyone have experience with settling the 2nd under these circumstances? The value of both 1st and 2nd combined equal value of home..if I were to stop making payments on the 2nd are they likely to foreclose or be more willing to settle?

[justbroke]

Are you saying that your Chapter 13 Plan lists the second, or will list the second, as "surrender"? That is the only way you would not pay the 2nd in your Chapter 13. Also, if you don't pay the 2nd (with intention to surrender), then that extra money could be used in your DMI calculation (potentially increasing your DMI).

If you intend to pay the 2 mortgages "outside" the plan (meaning not through the Trustee), and fail to pay the second mortgage, it could cause problems in your Chapter 13. They could seek leave from the automatic stay and proceed with foreclosure. Since the value is there the second could still foreclose and make "some" money rather than be totally out of money. Not one person can tell you what the 2nd mortgage, which you say is also with Wells Fargo, will do in this situation.

It is all speculative. If you don't care to lose the home, then you just stop paying. If you care about what will happen and want to keep the home, you will need to pay and stay on time. Remember, the 2nd mortgage will not be discharged unless you listed it as surrendered in the Chapter 13, or you obtain a lien strip because the 2nd mortgage is wholly unsecured.

Otherwise, I'm confused about how you are not reaffirming the mortgages.

[mmptysmom]

They were both listed on my petition and I am not reaffirming either but paying outside of my plan.I am behind on payments for both but will pay thru BK 13 payments.My 1st mtg balance 77k...Heloc $7k...home est value $85k..I do wish to keep home as rent is much higher then my mtg payment.Filed Bk13 because of CC debt,back taxes and was being garnished. The terms of my Heloc suck and my payment is covering mainly interest.I was just wondering if since I've filed that would give me leverage to try to settle the Heloc? I'd rather settle with them and turn that over to trustee as Dmi for 5 years them pay WF for ever at present interest they are charging me. Does that make sense?

[justbroke]

I see what you're trying to do. I just can't speculate as to what WF would do in that situation. If the HELOC is actually discharged but still has value, the lender will likely figure that out and any settlement is not going to be very low. Additionally, your bargaining power for settlements while inside an active Chapter 13 is not that great. The debt is not yet discharged. Typically, people who are able to negotiate with the 2nd are those that file Chapter 7, actually discharged the 2nd, and the 2nd is almost worthless (with respect to how much is secured by the property value).

Since you are not yet confirmed and you say that you have pre-petition(?) arrears, I do not know how that is going to work without including the 2 mortgages (at least the arrears) inside the plan (paid through the Trustee). If they are not provided for in the plan, the lender, WF, is likely to seek relief from the automatic stay (RFS). That could be in conflict with what you want to do, which is basically a (Chapter 7) "stay and pay".

It sounds like a nice plan, I just (personally) don't see how it works. Even if your plan to "stay and pay" does work in your Chapter 13, you must still be willing to lose the property. I guess that's the bottom line..

[LadyInTheRed]

I'd rather settle with them and turn that over to trustee as Dmi for 5 years them pay WF for ever at present interest they are charging me. Does that make sense?

Not really. WF has very little insentive to settle. Unlike a Chap 7, the HELOC will not be discharged in a Chap 13 unless you surrender the home in your plan, so you will have personal liability if you default. You have to default before they will settle. Since you want to keep your house, the small chance of saving some portion of $7K plus interest just to increase your plan payment by an amount equal to the monthly payment on the HELOC is not worth the risk of defaulting, not getting a settlement and WF foreclosing.

[justbroke]

LITR. You state that much better than I could ever have done. Thank you.

[mmptysmom]

Thanks.

[mmptysmom]

Any one know if there is any way to do modification to combine the 1st and 2nd????

[justbroke]

There is no such thing as a modification to combine two different debts. That is because both are separate and entirely separately enforceable contracts. The way to combine two different debts, is by consolidation. Consolidation requires a new loan that would pay of the old loans... consolidating them into a single debt (and contract).

The likelihood of refinancing both into a new loan could be difficult if the home does not have the requisite equity. Keep in mind that refinancing the debt would keep you on the hook with a new post-petition mortgage.

If you could discharge the debt, that may be the better option.