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Will 2nd Foreclose on Upsidedown Mortgage?

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  • Will 2nd Foreclose on Upsidedown Mortgage?

    My 2nd mortgage was discharged in a Chapter 7 bankruptcy two years ago. I understand they can still foreclose because they still hold a lein on my question is ~ will they?

    1st Mortage - owe $130k - no late payments, completely up to date
    2nd Mortgage - owe $30k - many late payments, but still paying

    My house is currently worth $40k - $60k MAX! So, does anyone know what the chances are that the 2nd mortgage will actually go through with a foreclosure (as they are threatening to do now) if I stop making payments to them?

    Thank you!

  • #2
    since they are 2nd in line, when the house goes into foreclosure the first gets first grab at whatever monies are from the proceeds of the sale of the house...the second will get anything else, if there is any money left in the pot.

    if you listed both the 1st and 2nd in the bk and it was discharged and you didn't reaffirm either mortgage, you should be good to go!

    i would stop paying if you didn't reaffirm them...both including the second, as most likely if your house has no equity they are shouting as loud as then can now to get whatever money they can.

    i would just tell them...wait in line ...if anything is left after the house forecloses i'm sure the 1st lien holder will give you what's left after they are paid...until then...that's it.

    best of luck!!
    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


    • #3
      Thank you Tobee! I reaffirmed the 1st mortgage and am current on it with no late payments in six years. I did NOT reaffirm the 2nd mortgage, and it was discharged in the bankruptcy.


      • #4
        Originally posted by NeedHelp71 View Post
        Thank you Tobee! I reaffirmed the 1st mortgage and am current on it with no late payments in six years. I did NOT reaffirm the 2nd mortgage, and it was discharged in the bankruptcy.
        also, just a suggestions...if you did have an atty handle your chapter 7, you may want to give them a call and see and hear their view on the situation!!

        keep in touch and let us know how you make out!
        8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


        • #5
          Originally posted by NeedHelp71 View Post
          I reaffirmed the 1st mortgage and am current on it with no late payments in six years. I did NOT reaffirm the 2nd mortgage, and it was discharged.
          Something else to keep in mind is that your house might be upside-down now, but eventually as you pay it down and as the market improves, there will be equity. The second lien-holder could initiate a foreclosure at that time.

          Your first mortgage payment is really just a rent payment because unless you pay off the second, they're not going anywhere and eventually they can and proably will foreclose.

          Also, not sure how you valued your property and how the second lien-holder values it, or if you're close enough to the line for that to matter at this point.

          edit: there are forum members who were able to get their second mortgages to go away by offering them a much lower percentage - 20 cents on the dollar type thing. Maybe this is something to bring up with your attorney as well.
          There are two secrets for success in life:
          1.) Never tell everything you know.


          • #6
            You're in Michigan, which is much like Ohio is, as far as the real estate market goes, which is pretty much in the crapper. ;) I don't think the market is going to improve any time soon, I would say it's at least 10 years before we see the values back to what they were pre-boom.

            For you, I'd probably keep paying the first (especially since you reaffirmed) and just pay attention to where your numbers are (ie, how much do you owe vs where the market is in your neighborhood). Before you get close to evening out, I'd offer the second a cash settlement. As long are you still owe more than it's worth, they would likely agree to a settlement because then they don't have to wait anymore for some money. And if you're still paying them all along (just behind), I'd guess they'd love to clear their books of you. But who knows, they might like to hold the note for another 15 years and foreclose on you. Even once you are even with what the market says your house is worth vs what you owe, they still would likely wait until there is significant equity in it. It doesn't do them any good to threaten to foreclose if they aren't going to walk away with a red cent.

            Our second has threatened us before to foreclose on them. I called their bluff by saying "Great, I'm sure the first mortgage will be thrilled to know that you're going to pay them off so that you can foreclose on the house. I'd like to call them up and let them know how fortunate their going to be, who should I tell them will be handling this?". LOL, they quit calling after that. They were calling daily, multiple times per day (we're behind, but still paying). Now they call maybe once a month? And DH just tells them (he usually gets their calls) that we can only do what we're doing and they'll have to get in line. And then they tell him to have a nice day. They must have noted our account that I told them to go ahead and do it, to stop threatening and to be prepared to get nothing, because they're oh so nice now.


            • #7
              NeedHelp - are you sure you signed a reaffirmation agreement and not just the page that said "Statement of Intentions"? It's hard to imagine the 'powers that be' not advising you against this when you may be as much as 90k underwater. Especially since nothing was done about the 2nd.
              Last edited by debee; 11-18-2010, 12:33 PM. Reason: diction/clarity
              There are two secrets for success in life:
              1.) Never tell everything you know.


              • #8
                I did call my attorney. He stated that he's had several clients in Michigan just stop paying their 2nd mortgages and the 2nd mortgage companies have done nothing because the housing market in Michigan is so bad and the mortgages are so far under water. However, he cannot 'guarantee' they will not try to foreclose, he just said they would be stupid to do so because they'd have to pay off the first mortgage first of $130k, just to try to go after $30k.

                Debee - I'm "positive" I signed a reaffirmation agreement with Citimortgage (my 1st mortgage). I signed (2) reaffirmation agreements, one with Citimortgage and one with GMAC to keep my car. My 2nd mortgage with GMAC Mortgage was discharged in the bankruptcy and on the bottom of my statements from them they have the following:

                "Our records indicate that you have filed for bankruptcy protection. This statement applies to our lien on your property and is being provided for informational purposes only. If you choose to continue to remit payments, please include the coupon below with any payments you send."

                I'm just nervous to quit paying it alltogether. I'm a single Mom and I need my house. However, I've taken a huge pay cut and have to beg/borrow/and steal to try to make this payment every month.


                • #9
                  Sounds like it's time for you to play a game of chicken. As tobee, bk2009, and your lawyer have all said, GMAC would be stupid to foreclose at this point because it would cost them money to go through a foreclosure proceeding and they wouldn't recover anything. So not only would they be out the 30k, but also all the expense of foreclosing on top of it.
                  There are two secrets for success in life:
                  1.) Never tell everything you know.


                  • #10

                    Your first mortgage payment is really just a rent payment because unless you pay off the second, they're not going anywhere and eventually they can and proably will foreclose.

                    Can you provide any examples of this actually happening. in my extensive research, i have found none, particularly where the 1st and 2nd are held by 2 different banks. since it would require the 2nd to buy out the 1st at auction, they are throwing good money after bad. it will be a long-long time until this market recovers so the banks are offering settlements. a bird in the hand today is worth 3 in the bush many years from now, and right now cash is king
                    Stopped Paying CC's 2/2009. Retained Attorney 1/10/2010 Filed 1/23/2010. Discharged 5/19/10 $187K CC, $240K 2nd,$417K 1st, No asset Ch-7


                    • #11
                      Originally posted by albacore44 View Post
                      Can you provide any examples of this actually happening...
                      I wouldn't know where to look except down the road after this meltdown has run its course and there is enough equity back in property to make it worth the lien-holder's while. Maybe we'll see it then.
                      There are two secrets for success in life:
                      1.) Never tell everything you know.


                      • #12
                        Since it is obvious you plan to stay in the home long term, you need to plan long term. If you stop paying your 2nd, down the line once property values increases there is a chance they will foreclose. There is no reason they would while the first is still under water, but they will either sell the note off to a junk debt buyer or they will hold onto it in hopes real estate turns around. If this were me, I would stop paying the 2nd and save that money. After a few months of "we're going to foreclose" letters, I would offer to buy the lien for 5%. Just point out that they have a worthless lien, you want to "do the right thing" but you can't afford to pay them the full amount. They will definitely settle, the only question is how much they are willing to let the worthless lien go for.

                        You both want the lien to go away, they want money from it and you want peace of mind. They won't negotiate as long as you are still paying them. To buy peace of mind, I would be willing to find $1500-3000. Realistically it is the best they will ever get for the lien and you will be free of them forever.


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