Re-Negotiate 2nd HELOC after Ch. 7

[HowardZackey]

Hi,

My wife and I were discharged Ch 7 about 6 weeks ago. We have not paid our second mortgage on our home - HELOC $175,000 for the past 6 months. First mortgage also has been brutally behind, but just paid it up current.

As far as I know, there was never any re- affirmation or communication with the second HELOC lender. They finally sent a certified letter demanding some back payments a few days ago or else.

I fully intend to keep the home and have no trouble paying the current amount due but...

I would like to negotiate the loan and was wondering if anyone could help at least with some general guidelines.

I asked my BK lawyer to do it - he said he would before, but now he claims to be too busy...

House Value: $520,000
First loan: $390,000
Second loan: $175,000

After estimated liquidation calculations, the second loan lender could recover 90,000 to 100,000 tops in foreclosure and probably substantially less in reality.

I am in a position to purchase the loan straight out if necessary...Is it possible, what are my options? Any suggestions?

Thanks

[tcreegan]

....no love from the forum for you....

I think you answered your own question, the 2nd is looking at getting 90-100K out of a foreclosure so they will not be in a hurry to settle for much less. Depends a lot on what homes in foreclosure are bringing in your neighborhood, often much less than open market sales. Get a real estate agent to do some research for you and take that to the 2nd lender to begin negotiations. The biggest hurdle is probably finding the right person at the 2nd lender....."Do you have the authority to negotiate a loan settlement?" "No, not take an application or enter things into the computer, do you personally have the authority to negotiate terms?" "Then may I speak to someone who has more authority than you?"

Good luck with it,

Tom in Colo

[justbroke]

As written, I think you answered your own question. With that much equity, the second is probably better off just foreclosing upon the property. As stated, the key will be trying to get a settlement. More than likely, if it's a HELOC, it will just be written off and probably sold to someone else. Since your loan is discharged, from the bankruptcy, you may be able to deal directly with the bankruptcy department or someone else who has more authority.

I can't clearly see anyway out of this for you with that much equity. As suggested, you may want to find the true value of your property by getting a Comparative Market Analysis (CMA) to see what the house could be sold for today.

[HowardZackey]

Thanks for the comments. I guess what I was really asking was is there any precedent for thier willingness to negotiate and if so is there an accepted ratin of recoverable debt to acceptable payment / settlement? Put another way, am I already fighting an uphill battle just trying to negotiate a settlement?

Thanks

[newbie2]

Thanks for the comments. I guess what I was really asking was is there any precedent for thier willingness to negotiate and if so is there an accepted ratin of recoverable debt to acceptable payment / settlement? Put another way, am I already fighting an uphill battle just trying to negotiate a settlement?

Thanks

Willingness to negotiate goes hand in hand with the amount of money they would receive if you walked away. In your case, there is quite a bit that they would receive. (You have equity in the home). Those that are successful negotiating a buy out of the 2nd mortgages are those that don't have any equity, or very very little. Yes, you would be fighting an uphill battle. That doesn't mean you shouldn't try and see how they feel about it. Who knows, you could be surprised at the outcome.

[justbroke]

I guess what I was really asking was is there any precedent for thier willingness to negotiate and if so is there an accepted ratin of recoverable debt to acceptable payment / settlement? Put another way, am I already fighting an uphill battle just trying to negotiate a settlement?

Yes, this will be an uphill battle if you have that much equity. The HELOC lender would seek to recover the equity, probably as a minimum (less reasonable fees incurred to foreclose). Since you have already discharged your personal responsibility to pay, this may the situation more precarious. This is such that they have no recourse to come after you for the difference from foreclosure (because it's discharged) so it is probably in their best interest to foreclose.

The lender will also weigh other factors, such as appreciation. The homes in my area have started to appreciate again and my home is back at the price that I paid for it. A lender could wait to foreclose and then pounce when the situation was "ripe". You are technically already "ripe" for foreclosure since the lender could actually recover a lot of their loss if the value holds upon foreclosure. It's a tough spot.

However, nothing I say, or others say, should prevent you from trying. I would, again, be prepared with an actual market value of the property before engaging in any conversation.

[tcreegan]

Hi again HZ,

Here is some advice I gave another poster:

First get an appraisal acceptable to the 2nd lender (call and ask who they use), then get the payout amount from the 1st, then find out what foreclosed homes comparable to yours have been selling for (get a real estate agent or go the courthouse and pull records), then (and this might be the hardest) find a person at the 2nd lender who actually has the authority to negotitate terms on a settlement.

Appraisal minus 1st payout minus 10% for sale costs = the highest you should go

Foreclosure sale prices minus 1st balance (not payout) minus 20% sale costs = your target

Start about 10% lower than your target and go for it....

Tom in Colo

[HowardZackey]

Thank you for your responses.

With regard to the 10% or 20% of sale price, I assume that you are referring to the total sale price or value of the house, implying somewhere between 10 to 20% of the total vale of the house to be considered "overhead" for the bank in the event of foreclosure?

Thanks

[tcreegan]

Hi Howard,

You got it right, take 10-20% off the value/sale price for cost of sale.

More if it is a foreclosure price (gotta make a profit right?)

Tom in Colo