What happens if you stop paying the second mortgage?

[frmrdwn]

I can't find my loan docs anywhere. Ugh. They better turn up.

What happens if I stop paying on my 2nd mortgage? I need the funds for the first mortgage until I can file bk.

Do they put a lien on the first and wait for the home to sell to collect or are there other methods they can employ as well? Garnishments and the like? Can the second mortgage co. force me to sell?

[IBroke]

I can't find my loan docs anywhere. Ugh. They better turn up.

What happens if I stop paying on my 2nd mortgage? I need the funds for the first mortgage until I can file bk.

Do they put a lien on the first and wait for the home to sell to collect or are there other methods they can employ as well? Garnishments and the like? Can the second mortgage co. force me to sell?

What do you mean by "a lien on the first"? You can't put a lien on a lien...

Do you owe more on the first mortgage than what the home is worth? If so, it's unlikely they will do anything because they won't see a penny after a foreclosure. All the money goes to the first.

[frmrdwn]

I owe about 135k on the home. Zillow values it at about 220k (down from 250k at the housing peak, I bought it for 149k) if anyone will buy. My neighbor's home has been on the market almost two years and he is asking 35% less than it's assessed value, if that even matters. 2nd mortgage is about 55k. So, there is some equity.

Another silly question, but don't see it addressed in the first 4 or so layers of threads. Can I still file ch.7 if I get behind on the payments and everything moves into foreclosure? I'm probably overthinking it, but wouldn't the trustee see that since I have to move, I would be required to find cheaper housing and free up money for ch. 13? Don't think I'll ever dig out that way.

[lrprn]

I owe about 135k on the home. Zillow values it at about 220k ...

The problem is that Zillow is completely unreliable. The only way to know the true current value of your home is to have a professional appraisal done. (And btw, thumbs down on using your last tax appraisal to value your home too - these are notorious for over-valuing your property.)

So, there is some equity.

The key here is how much equity? Your state bankruptcy exemptions protect some equity in your home, and if you are lucky enough to have a state that has a wild card exemption, that can add to the total that can be protected as well.

Which state do you live in? And approximately how much equity do you think you may have?

Can I still file ch.7 if I get behind on the payments and everything moves into foreclosure?

No. If you want to keep the house after filing, you must be up-to-date on the mortgage payments on the day you file Ch 7.

I'm probably overthinking it, but wouldn't the trustee see that since I have to move, I would be required to find cheaper housing and free up money for ch. 13? Don't think I'll ever dig out that way.

You have to remember that when the law is involved, logic and fairness sometimes have little to do with what the law allows. Your trustee is not representing you - he/she is representing your creditors. Your inconvenience caused by moving and your needing to file Ch 13 to save your house is not going to matter.

You either qualify for Ch 7 and are up to date on your mortgage payments on Ch 7 filing day so you can keep the house, or you aren't. It's black and white in this particular situation because of the way the current bk law is written and interpreted.

[frmrdwn]

Oh, I know the trustee is not my friend! lol

I live in OR and I think the exemption is fairly generous (30 or 40k). I don't want to keep the house. It's sucking the life blood right out of me. I just want to be able to live in it long enough to file, save some money for another place (since I can't afford my life at the moment) and move on. It's just the difference between ch 7 and ch 13 that weigh heavily upon my mind. I have negative cash flow every which way you look at it and really don't want to go the 13 route if it can be helped.

Can the trustee tell me to move to a slum to fund a ch 13 because I am in foreclosure and will have to move anyway?

I know this has to be a common problem when people are behind in their payments. I just haven't noticed if they said they filed ch 7 or 13 once were discharged.

[lrprn]

I don't want to keep the house. It's sucking the life blood right out of me.

Ok....now we're getting somewhere! lol! If you don't want to keep the house when you file, then it won't matter if you are behind on the mortgage or not on filing day.

Here's a link to the Oregon bk exemptions on one OR lawyer's website - http://www.brian-wheeler.com/oregonexemptionlaw.htm (no endorsement of this lawyer is implied - it's just an easily understood source of information)

The key for you is going to be whether Oregon allows you to include your mortgage payments on your filing forms or not. Some bk districts have decided that if you are going to surrender the house, you can't count the payments. An experienced OR bk lawyer can tell you the answer to this.

I just want to be able to live in it long enough to file, save some money for another place (since I can't afford my life at the moment) and move on.

How long you can stay in the house after the mortgage company petitions the court to lift your stay and that is granted depends on the Oregon foreclosure law. Here's a link to that - http://www.foreclosure.com/statelaw_OR.html . Chances are you can stay in the house for at least six months after filing, perhaps much longer.

Can the trustee tell me to move to a slum to fund a ch 13 because I am in foreclosure and will have to move anyway?

No.

[frmrdwn]

Thanks for the quick response, lrpn. I am completely stressed.

It looks like OR has a 30k exemption on homes. I don't know what my home would appraise for, but it would be a close call in terms of having more than the 30k in equity. I owe about 135k on a 149k loan. Does the bank go by it's "real", appraised value or by what other homes are actually selling for right now? Who does the appraising? Like I said, my neighbor's house is similar to mine and appraised at around 215k, but he can't sell it for that (2 years now) and is asking about 160k and it's still sitting there.

How long would it take the 2nd mortgage (US Bank) to lay claim to the house to take action against me and what would that action look like? Do they get take forclosure action like a first mortgage co. would?

It should be a no-brainer, but given the choice, who do I pay first my first or second mortgage? Do I alternate paying them each month until one of them has had enough?

I must wait until April to file. My head hurts!

[lrprn]

Does the bank go by it's "real", appraised value or by what other homes are actually selling for right now? Who does the appraising?

When you file, you use the current market value at the time you file on your filing forms. Since you intend to surrender the house when you file, it doesn't matter whether your OR exemptions cover the equity or not.

The homestead exemption matters only if you want to keep the house after filing. You say you don't - case closed. File bk next April and state you intend to surrender the house.

How long would it take the 2nd mortgage (US Bank) to lay claim to the house to take action against me...

If your house is worth less than the first mortgage's current owed value, then your second mortgage isn't going to foreclose because if they do, they won't get any money.

If your hose is worth significantly more than what you owe on the first mortgage, then the second might initiate foreclosure actions.

...and what would that action look like? Do they get take forclosure action like a first mortgage co. would?

Regardless of whether your first or second mortage initiates foreclosure proceedings, the process will follow what it says in the OR foreclosure link I provided earlier.

It should be a no-brainer, but given the choice, who do I pay first my first or second mortgage? Do I alternate paying them each month until one of them has had enough?

If you want to be certain to keep the house out of foreclosure until you can file next April, pay the first mortgage every month until 1-2 months before you intend to file. Whether you pay the second depends on the current value of your house.

If your house is worth at least $10-20K more than you owe on your first mortgage, then pay your second as often as it takes to keep them off your back.

If your house is worth less than you owe on your first mortgage, then don't worry about paying your second. If they foreclose, all the money will go to the first mortgage and they won't get anything. Your second won't foreclose in this situation.

So we're back to getting an appraisal of your home's current market value. To get one, try this - look online at recent sale prices of comparable houses in your area (these are posted on realtor websites). While you're there, take a look at what's posted for sale in your area and those prices. These will give you a pretty reliable figure to use to make decisions.

[frmrdwn]

When you file, you use the current market value at the time you file on your filing forms. Since you intend to surrender the house when you file, it doesn't matter whether your OR exemptions cover the equity or not.

The homestead exemption matters only if you want to keep the house after filing. You say you don't - case closed. File bk next April and state you intend to surrender the house.

If your house is worth less than the first mortgage's current owed value, then your second mortgage isn't going to foreclose because if they do, they won't get any money.

If your hose is worth significantly more than what you owe on the first mortgage, then the second might initiate foreclosure actions.

Regardless of whether your first or second mortage initiates foreclosure proceedings, the process will follow what it says in the OR foreclosure link I provided earlier.

If you want to be certain to keep the house out of foreclosure until you can file next April, pay the first mortgage every month until 1-2 months before you intend to file. Whether you pay the second depends on the current value of your house.

If your house is worth at least $10-20K more than you owe on your first mortgage, then pay your second as often as it takes to keep them off your back.

If your house is worth less than you owe on your first mortgage, then don't worry about paying your second. If they foreclose, all the money will go to the first mortgage and they won't get anything. Your second won't foreclose in this situation.

So we're back to getting an appraisal of your home's current market value. To get one, try this - look online at recent sale prices of comparable houses in your area (these are posted on realtor websites). While you're there, take a look at what's posted for sale in your area and those prices. These will give you a pretty reliable figure to use to make decisions.

Thanks for the good information. I called four attorneys today and two of them repeated what you said. The other two were ... well, one was pretty grumpy and the other wanted me to file a chapter 13 and convert to a 7 two months later (?!).

According to the stats, my home could very well sell for zillow's appraised value. Comparable homes homes that sold were within a couple thousand dollars of zillow. Not always, the case, but it was the trend. I didn't look to see how long they were on the market though.

At any rate, it looks like my first mortgage has positive equity. I owe 135k on a 149k mortgage and will probably, eventually sell for 225k (down from 250k at the housing bubble high, but still not bad). It's probably because the homes were affordably priced to begin with and located in "well-established" neighborhoods. Just thought it was interesting.

Anyway, I meet with an attorney next week to develop an action plan- or inaction plan if you are one of my many creditors.

In the meantime, will alternate paying mortgages.