Trying to settle discharged 2nd mortgage (DCU)

[iv65536]

Before I begin please understand that this is nothing personal I am simply going to try to give you the mindset of the people you are dealing with.

How big is WF and how big are you? What do you think your offer means to them? In these situations of Jr liens being discharged in BK and foreclosure being decline the loan is already considered a loss. People think they are fighting the good fight or making a difference by sending them articles of people being beheaded or offering $3k to settle the loan. In all honesty it is making zero difference. Any bank who has decided to just jump on the first offer that comes across the table is getting smoked right now and they quickly get off that band wagon. I know I mentioned this before but it bears repeating. Most people who threaten to walk away from their house are full of it. People are making the attempt because they want the house for whatever reason (future investment, sentimental value, convenience, etc).

I give this basic scenario and just ask the question of what would you do.
You have a lien that is totally underwater. On the flip side its not going anywhere. The account holder is current on the first and as long as the first doesnt foreclose that lien will be there forever. In that never ending time frame known as "forever" the market will eventually (no time frame as to when) come back. Would you just take any piddly offer right now to settle it? I mean these liens are like golden tickets. They are gonna hold on to them and wait for the right time to cash them in. Right now is not the time.

Anyone who wants to fire these types of scenarios and threats to a bank I strongly suggest to the bank to fire it right back. The customer wants to make a sly comment about letting the house go to foreclosure the comeback should be something like: "Make sure you bring a jacket. Its hear it gets cold that time of year in your area."

The point of the whole exercise is to show them that the "golden ticket" they are holding amounts to at best a lottery ticket and that the best thing they can do for their shareholders is to simply take the offer and move on.

In most cases, the redemption period in Minnesota is six months from the sheriff's sale. If I decide to stop paying on the fist mortgage, I will use that and the expected foreclosure timeline to determine when I stop paying. the only thing is that the first mortgage is involved in FDIC receivership and a loss-sharing agreement; I think I can use this loss-sharing transaction to pit the FDIC and the new bank against each other.

[Brazzy]

Before I begin please understand that this is nothing personal I am simply going to try to give you the mindset of the people you are dealing with.

How big is WF and how big are you? What do you think your offer means to them? In these situations of Jr liens being discharged in BK and foreclosure being decline the loan is already considered a loss. People think they are fighting the good fight or making a difference by sending them articles of people being beheaded or offering $3k to settle the loan. In all honesty it is making zero difference. Any bank who has decided to just jump on the first offer that comes across the table is getting smoked right now and they quickly get off that band wagon. I know I mentioned this before but it bears repeating. Most people who threaten to walk away from their house are full of it. People are making the attempt because they want the house for whatever reason (future investment, sentimental value, convenience, etc).

I give this basic scenario and just ask the question of what would you do.
You have a lien that is totally underwater. On the flip side its not going anywhere. The account holder is current on the first and as long as the first doesnt foreclose that lien will be there forever. In that never ending time frame known as "forever" the market will eventually (no time frame as to when) come back. Would you just take any piddly offer right now to settle it? I mean these liens are like golden tickets. They are gonna hold on to them and wait for the right time to cash them in. Right now is not the time.

Anyone who wants to fire these types of scenarios and threats to a bank I strongly suggest to the bank to fire it right back. The customer wants to make a sly comment about letting the house go to foreclosure the comeback should be something like: "Make sure you bring a jacket. Its hear it gets cold that time of year in your area."

[MrsDixon]

I got an email today that they denied my offer. They counter offered @ 30% of the balance on the loan. I think that we're just going to stop paying the mortgage and move after WF forecloses on the 1st. I hope they enjoy the $0 that they get from WF.

[CCsAreEvil]

So... Chase recently started calling and leaving voice mails on my cell (I don't think they have my current home phone). They've called 2 times now on different days. My 2nd lien is discharged (Dec 2009). I haven't paid them now for 6 months. I wonder if either there's a communication problem where the dept which is trying to contact me doesn't know the secured loan was discharged in BK or I wonder if they have an obscure method of telling me they will foreclose my house but NOT try to collect payment?

They left a number for me to call back, but I haven't tried calling them yet. Could it hurt me to call them back?

[MrsDixon]

I am trying to get across to the thick-headed holder of the 2nd on my house that I can stop paying the 1st and they would get nothing. I even alluded to sending the 2nd "to the guillotine" and included the URL to the Wikipedia article on Marie Antoinette (beheaded in the period of the French Revolution) in a letter I recently sent. I also included this New York Times article.

You sent them that article? LOL. Gutsy for sure.

[iv65536]

I am trying to get across to the thick-headed holder of the 2nd on my house that I can stop paying the 1st and they would get nothing. I even alluded to sending the 2nd "to the guillotine" and included the URL to the Wikipedia article on Marie Antoinette (beheaded in the period of the French Revolution) in a letter I recently sent. I also included this New York Times article.

[BROKEDED]

To the original poster, enjoy your new found money. I doesn't sound like they're in a mood to foreclose so if it were me, I'd save the money for negotiations or for a down payment elsewhere. As long as the the first is underwater it sounds like you can enjoy partially free rent.

Of course if the market stabilizes and you continue to pay on the first, you are essentially bailing yourself out and negotiating may be more difficult with the second.

[BCA2009]

My theory on it is you have to be for sure ready to walk from 1st if 2nd doesnt play ball,be confident of this when talking on the phone to them,dont give up.

I would hate to move, but I'm willing to take the risk. There is plenty of stuff to rent around here. I could also catch up all of my missed payments and start paying them if I decide to try and stay. I doubt they would go thru with foreclosure, if I brought it current and started making payments.

But the house is worth about a third less than what I owe on, so I hate the idea of continuing to make payments on something that will be years and years before the value might come back.

[BCA2009]

BCA, I might be missing some information from an earlier post from you, but I don't think they can contact you about the mortgage note since the 2nd has been discharged in BK? I think we have to contact them 1st?

Anyways, I'm at about 6 months now having stopped paying on my 2nd. Balance on 2nd is $110k or so. Today, Zillow claims my home to be worth $20k over my 1st. The only thing I've received/heard is a letter at about 3 months of non-payment. It was just a default letter (I don't think it was an actual NOD where they will officially foreclose).

I'm still current on my 1st. I'm also trying to decide when's the best time to contact Chase (my 2nd) to offer a settlement. I'm thinking later this year. I'm still taking the risk of maybe the 2nd is already moving forward with foreclosure proceedings.

On another note, a home on my street has been empty for about 2 years. The NOD was barely placed on that home's front door this month.

I don't expect them to try to collect, but because there is some equity, I expect them to send a default letter or something eventually or NOD. I will use that as an opening to try settlement. It may not work, but I'm going to try.

[dm415]

My theory on it is you have to be for sure ready to walk from 1st if 2nd doesnt play ball,be confident of this when talking on the phone to them,dont give up.

[CCsAreEvil]

I expect it will be a while before they contact me, but I will keep you updated as it progresses.

BCA, I might be missing some information from an earlier post from you, but I don't think they can contact you about the mortgage note since the 2nd has been discharged in BK? I think we have to contact them 1st?

Anyways, I'm at about 6 months now having stopped paying on my 2nd. Balance on 2nd is $110k or so. Today, Zillow claims my home to be worth $20k over my 1st. The only thing I've received/heard is a letter at about 3 months of non-payment. It was just a default letter (I don't think it was an actual NOD where they will officially foreclose).

I'm still current on my 1st. I'm also trying to decide when's the best time to contact Chase (my 2nd) to offer a settlement. I'm thinking later this year. I'm still taking the risk of maybe the 2nd is already moving forward with foreclosure proceedings.

On another note, a home on my street has been empty for about 2 years. The NOD was barely placed on that home's front door this month.

[BCA2009]

In theory there is no net value on the balance sheet. In practice, that's not the case. Speak to some people in the industry. DCU is popping up in several lists as problematic and massaging their balance sheets to look better.

There's a good chance DCU securitized the loan anyways, and doesn't really care about one particular loss. In a securitized loan situation they can't just decide to settle the loan because it makes sense -- things get much more complicated and options limited.

That's why I cautioned against not following their advice to submit the packet. More likely than not it's a required process to show X, Y, Z before anyone has authority (either by the board or investors) to modify/settle.

Your modern HELOC is a very complicated piece of financial wizardy. It is no longer the case that you go in and speak with the loan officer who pulls some files, runs some numbers on the calculator, and can make independent decisions.

Points noted. Common sense and good business practices are no longer required to run businesses. They'll just let Uncle Sam Bail them out.


Ok, just for hypothetical purposes. How would the bank know if you didn't fill out that paperwork correctly. If they are just requiring it because it is part of the "process". How would they know if any of the information was incorrect?

Just thinking outloud.

PS. Not that it would effect our conversation, but the OP was with DCU. My loan is with Chase.

[jadams]

In theory there is no net value on the balance sheet. In practice, that's not the case. Speak to some people in the industry. DCU is popping up in several lists as problematic and massaging their balance sheets to look better.

There's a good chance DCU securitized the loan anyways, and doesn't really care about one particular loss. In a securitized loan situation they can't just decide to settle the loan because it makes sense -- things get much more complicated and options limited.

That's why I cautioned against not following their advice to submit the packet. More likely than not it's a required process to show X, Y, Z before anyone has authority (either by the board or investors) to modify/settle.

Your modern HELOC is a very complicated piece of financial wizardy. It is no longer the case that you go in and speak with the loan officer who pulls some files, runs some numbers on the calculator, and can make independent decisions.

[BCA2009]

You are neglecting the third option. They wait. Values may come back up. You may need a quick sale and have to clear the lien, etc. Even though it's been discharged, they can still play your desire not to leave the house against you and hope for a better offer. If they wait, they won't really be worse off.

Once you document how unlikely a value recovery is, and the real possibility you'll just let it go to foreclosure -- they'll likely come around.

By accepting the settlement they are locking in their loss, losing the possibility of future gains. You and I may realize how unlikely that possibility is, but they need to be able to document and substantiate that to their members/investors. And it has accounting implications too. They have your loss on their books, but also the asset at it's previous inflated value. Once they take the settlement they need to fully realize the loss that is currently "hiding" in a way.

I'm sure the only problem here is the credit union needing to determine how low of a settlement is acceptable vs taking the chance, however remote, that the future will be better. Once you satisfy the beauracracy with their stacks of paperwork, things should start falling into line.

It is a business decision. If they wait and don't take an offered settlement, thay are giving up the time value of the money they could have recieved from the settlement. In other words, they could take the settlement amount and reinvest it. They have to decide if they are better off sitting on this bad loan or get what they can and move on. They have already written the loan down to fair market value. In the case of a totally underwater loan. The market value is basically zero. Whether or not the original loan is still on the balance sheet as an asset with a 100% reserve against it, if it has been totally removed from the balance sheet (both the asset and the reserve), makes no financial difference. It is not "hiding" a loss. They is no net value on the balance sheet.

As far as providing the bank with your personal information, the bank doesn't need this to decide whether or not they are going to settle. In any business decision both parties want as much infomation as possible to get a better out come for themselves. The bank would love to know that I have lots of money saved up and now have a high salary.

I would love to know that the bank is in a desparate cash flow situation and needs cash any way it can get it and will accept 5 cents on the dollar. But they are not going to tell me that.

I'm not going to tell them my personal financial situation. The banks are not accepting settlements out of the goodness of there heart because you are in dire straights. It is a business decision.

I'm going to wait until they contact me (or at least a 10 months to a year) before I offer them a settlement. They may tell me to pound sand but I am going to offer them something that is fair. I don't expect them to just give away the lien rights to my HELOC. I will offer them close to what they could get in foreclosure (there is some equity in my loan). In order to gat that equity, they have to foreclose, buy out the first, sit on it a while, then pay realtor fees. I will offer them the same as they would get after all their legal and realtor fees. They either will or won't take it, But they can avoid the risk of investing more money and putting the house on the horrible Florida real estate market by taking my offer. I'm hping that it will be to my benefit that there is some equity (about 60K) in my loan. They want that money and may not want to sit on it for a long time. Our real estate martket is not expexted to rebound for a long time.

I expect it will be a while before they contact me, but I will keep you updated as it progresses.

[jadams]

You are neglecting the third option. They wait. Values may come back up. You may need a quick sale and have to clear the lien, etc. Even though it's been discharged, they can still play your desire not to leave the house against you and hope for a better offer. If they wait, they won't really be worse off.

Once you document how unlikely a value recovery is, and the real possibility you'll just let it go to foreclosure -- they'll likely come around.

By accepting the settlement they are locking in their loss, losing the possibility of future gains. You and I may realize how unlikely that possibility is, but they need to be able to document and substantiate that to their members/investors. And it has accounting implications too. They have your loss on their books, but also the asset at it's previous inflated value. Once they take the settlement they need to fully realize the loss that is currently "hiding" in a way.

I'm sure the only problem here is the credit union needing to determine how low of a settlement is acceptable vs taking the chance, however remote, that the future will be better. Once you satisfy the beauracracy with their stacks of paperwork, things should start falling into line.