2nd mortgage reaffirmation denied ?'s

[bluefin]

Filed a 7 and it was accepted. Today I went in for a reaffirmation for my second, but I am short $800 a month with it so it was denied. My first is through B of A for 259k and my second, thru WFB is a home equity line and 160k is outstanding, the house appraises for 360k. The judge denied reaffirmation and flat out told me I had WFB over a barrell (exact words). He also said it was my choice if I wanted to pay them, but I did not have to. At this point it really is not an option if I can pay them their $1970 a month, I can't afford the payment right now. I have the same story as everyone, pay reduction, no bonuses, and the hospital bills. I live in California so I know the laws are more in my favor. I have called WFB and so far they are not working with me.

My question is:
1. If I pay them $1000 a month without them agreeing to this payment?
2. Am I wasting my money?
3. Can they take my home away from me?
4. Is there a lein against my house?

My attorney told me to make my payments and stay current so I have. He also stated that he made calls to WFB and they were playing hard ball. I have read where the loan could be bought out by another bank and all efforts and payments are not counted because the reaffirmation was not signed.

Help!

[lillybell]

short refi?

I did a short refi on my second...they got an appraisal and I was underwater-the house appraised for 442 and I owed 575. They wrote off my second...Will they short refi for you???....but, my credit cards took hit with me trying to hold on to the home until they finally helped me and now the card allr aised my interest rates to 30%.

[StartingOver08]

OP, I'm not sure of your timeline. Have you been discharged from your Ch 7 yet?

Did you reaffirm your first or were you just trying to reaffirm the second (confused here)?
How much is your home worth?
Is the second completely unsecured now?
Are you current on your first mtg?

Why are you still making the payments to the second if you have been discharged in your BK 7? The judge was right! You are sitting in the catbird seat. WF has nothing. If you have a discharge, stop paying on your second. Check the posts by Relief (I think) where she is negotiating a lump sum payoff for something like 10% of the balance. It is an informal lien strip of the second.

[bluefin]

The entire process is over in 3 weeks. I had my meeting with the Trustee and let me file a chapter 7. Yesterday was the day we met for the reaffirmation on the 2nd and it was denied. The house in reality is worth 320's. If you do a search on the net it appraises for 380, but my property insurance just quoted me the value at 323. I am current on the first and second. I am assuming since the reaffirmation was denied it is now unsecured. My attorney said WFB could buy out my loan and take the house, not sure if he knew what he was talking about. Refinancing seems next to impossible since the BK is almost complete. Can I assume the second was discharged since the reaffirm was denied? Don't they have a lein on the property? Sorry for all the questions, but this forum is a great place for answers not to mention the confidentiality. Oh, no credit cards, they are gone. I reaffirmed the 1st and tried for the second but was denied.

[destitute]

the lien is still there but you are not responsible for the debt after discharge. It is extremely unlikely they would buy out the first. I would say your best bet if you want to keep the house is to pay the first but not the second. Save any money you can and after a few months contact the second and offer a cash settlement in exchange for them releasing the lien. A few other people on the board are currently trying the same thing.

[123ABC]

Im not sure how but I know my mom had her 2nd discharged in BK. She no longer has a 2nd...

[bluefin]

Lein

I know in a 13 they can strip the leins, but in a 7 I hear they can't. I will do as recommended, save and offer in the near future. My other question is how long will the lein last? Will I ever be able to sell my house? Thanks for the info and if anyone has anything else to offer, fire away.
Thanks!

[CCsAreEvil]

As nice and comprehensive this great BK forum is, I don't think there's enough "historic" info on this very issue since so many people are upside down on their mortgages in these current economic times (myself included with primary + HELOC).

I think the "lien" from the 2nd stays on there pretty much forever. $64 million question is... "will mortgage company on my 2nd force me to foreclose if I stop paying them?" Common sense would be... why would they force me to foreclose if they will pretty much get $0 out of the deal? I've read that sometimes the 2nd lienholder gets a small percentage from the 1st? Maybe 5%? I don't know.

Anyways, I'm still current on both... once my BK is over, I will determine if I should stop paying on the 2nd.

[HHM]

Ok

The lien of the 2nd mortgage (or more accurately, the security interest) survives the BK. Why you even attempted to reaffirm is beyond me. CCsAreEvil is correct, there is not enough history on the chapter 7/settle strategy to make any concise recommendation. But, what appears to be emerging is that you can probably offer a settlement to the 2nd between 5-10% for them to remove the lien at some time in the future. But realize, you cannot force them to do so. They can simply sit on it until you go to sell the house.

This blog post sums up the issues

http://askmethner.com/?p=450

[123ABC]

Not always true anymore. I think it really is case by case. My mom had her lien completly stripped and the debt discharged in her 7.

[hereforinfo]

I don't think you have WF over a barrel. Their loan is still secured by about $100k over and above the first mortgage. They wouldn't necessarily have to buy out the first ahead of time, they could just foreclose and auction the house. The first would then be paid from the proceeds of the sale, and the 2nd would get whatever is left. Even if they only get $30-50k after all the costs to foreclose and paying off the first, it's still something. No way are they going to take 10% and release the lien, leaving you with $85k in equity. If they don't foreclose, the lien will stay there until you sell the house and the amount may grow with interest and late fees, or if the property value goes up down the road it could be worth it for them to foreclose later on.

By the way, the insurance value isn't true market value. It's simply the replacement cost of the house and doesn't include the land value.

[liboton21]

What about if both 1st and 2nd belong to the same lender (BofA), should I stop paying on the second while filing Chap 7? I'm very much underwater located in Inland Empire, CA.

[bluefin]

I believe in California the laws are different and I a protected. I don't feel like I have them over a barrel, but that is what the judge said. It's not a comfortable situation to be in so I will see if WF offers in a few weeks after the the bk is final.

[HHM]

Not always true anymore. I think it really is case by case. My mom had her lien completly stripped and the debt discharged in her 7.

There is no legal mechanism in a chapter 7 to actually remove the lien, UNLESS, it was a non-purchase money security interest.

[hereforinfo]

I believe in California the laws are different and I a protected. I don't feel like I have them over a barrel, but that is what the judge said. It's not a comfortable situation to be in so I will see if WF offers in a few weeks after the the bk is final.

If it makes you feel any better, even if they can foreclose it doesn't mean they will. In fact I think it's pretty rare for a 2nd to do it these days, even with some equity. The chances of it happening are pretty slim. But you never really know what banks may decide to do later on after all this mess is cleaned up and they want their money. I wouldn't worry about it happening anytime soon, and hopefully you can work something out. One thing is for sure though, if they don't settle that lien will stay there and have to be paid in full when you sell the house.