Settling a 2nd mortgage in default

M

mselle

LoanSafe Member
Hello,

I've been all over these forums. I hope this is the appropriate place to post.

I quit paying on my 2nd in 2015. It was orig $22K. I paid it down to circa $12K. Now they want $26K.

I am not underwater. My first mortgage is up to date, owing $62K. Home valued circa $125K. I fear foreclosure.

I've been in contact with them recently, and they want a mountain of personal info: pay stubs, bank statements, etc. I do not want to provide this information. I have ~$12K I could offer as a lump sum.

What to do? I want the lien off my house, and the foreclosure fear off my back. I worry that once I provide all my info, they can garnish me, sue me, etc.

Help!?
 
Jzone

Jzone

LoanSafe Member
mselle said:
Hello,

I've been all over these forums. I hope this is the appropriate place to post.

I quit paying on my 2nd in 2015. It was orig $22K. I paid it down to circa $12K. Now they want $26K.

I am not underwater. My first mortgage is up to date, owing $62K. Home valued circa $125K. I fear foreclosure.

I've been in contact with them recently, and they want a mountain of personal info: pay stubs, bank statements, etc. I do not want to provide this information. I have ~$12K I could offer as a lump sum.

What to do? I want the lien off my house, and the foreclosure fear off my back. I worry that once I provide all my info, they can garnish me, sue me, etc.

Help!?
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Here's my sample letter I send to my debt collector/lien holder every time they send me a notice of the balance owed. Modify as needed.
-------------------------------------------------------------------------------------------------------------------

Dear XXXXX Homeowner Support Team,

This is in response to your letter of 10/20/XX.

My loan number is XXXXX.

I am asking for a settlement and release of the lien on my second mortgage.

As you are aware, this loan has been discharged in Chapter 7 bankruptcy in 20XX and is not collectable. In addition, your claim of holding an enforceable lien after bankruptcy may or may not be valid. However, if it is valid, I am willing to make a settlement offer to release the lien and avoid any possible legal expenses to either of us.

My financial situation continues to make it difficult to make ends meet. Unfortunately, it will be impossible to repay the original loan amount, maintain the house and keep property taxes and utilities current.

I have included copies of previous settlement offers made after bankruptcy to release the lien.

I would like to settle this loan for XX% of the balance when you acquired the loan through an assignment in May 20XX. The balance on the loan when it was assigned to you was $XX,XXX. I have included a copy of the balance from the original creditor which was submitted during bankruptcy to verify the loan balance.

I am offering $X,XXX, to release the lien.

I would appreciate your consideration to accept this proposal for settlement and release of lien.

Please contact me in writing only.

Sincerely,
 
C

Casey J. Dowell

LoanSafe Member
Normally this kind of settlement demands as high as 10-70% of your existing balance. That's why they demand you $26K. If you are not willing to pay this settlement fee, you can go for a silent accrual. If your loan is the default, a 2nd mortgage lender has the right to take action against you. This can happen when you late the payment, skip the payment and for the partial payment also.
I think the best solution is silent accrual.
 
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C

cookiemom

LoanSafe Member
Casey J. Dowell said:
Normally this kind of settlement demands as high as 10-70% of your existing balance. That's why they demand you $26K. If you are not willing to pay this settlement fee, you can go for a silent accrual. If your loan is the default, a 2nd mortgage lender has the right to take action against you. This can happen when you late the payment, skip the payment and for the partial payment also.
I think the best solution is silent accrual.
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Ok...so what if the 2nd was included in chapter 7 in 2007 and the lien transferred multiple times while still accruing interest.
 
Jzone

Jzone

LoanSafe Member
In most cases, the lien holder is simply not doing anything. They hold the lien and can wait until you want to sell or refinance. In my situation, both my 1st and 2nd mortgage were discharged in Chapter 7. Continued to pay on the first but not the second.
2nd mortgage holders can foreclose but will also need to pay off the 1st mortgage holder. Unlikely, but as your equity grows the risk of foreclosure by the 2nd increases. My advice is to keep communication to a minimum with the lien holder. If you dont hear from them at least once a year, send them a letter (use the one above).
This has been going on for 10 years for me and I rarely get a reply back and no foreclosure notices. Legally, I'm looking at doing a quiet title action to have the lien removed. My guess is that the lien holder is waiting for me to sell and then they will cash in. But you never know, someday they might accept my offer.
 
C

cookiemom

LoanSafe Member
Jzone said:
In most cases, the lien holder is simply not doing anything. They hold the lien and can wait until you want to sell or refinance. In my situation, both my 1st and 2nd mortgage were discharged in Chapter 7. Continued to pay on the first but not the second.
2nd mortgage holders can foreclose but will also need to pay off the 1st mortgage holder. Unlikely, but as your equity grows the risk of foreclosure by the 2nd increases. My advice is to keep communication to a minimum with the lien holder. If you dont hear from them at least once a year, send them a letter (use the one above).
This has been going on for 10 years for me and I rarely get a reply back and no foreclosure notices. Legally, I'm looking at doing a quiet title action to have the lien removed. My guess is that the lien holder is waiting for me to sell and then they will cash in. But you never know, someday they might accept my offer.
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Thanks, I'm going on 15 yrs+ of never paying on this at all. They continue to tack interest on though. Can they legally do that after discharged in chapter 7 in michigan?
 
C

cookiemom

LoanSafe Member
Jzone said:
In most cases, the lien holder is simply not doing anything. They hold the lien and can wait until you want to sell or refinance. In my situation, both my 1st and 2nd mortgage were discharged in Chapter 7. Continued to pay on the first but not the second.
2nd mortgage holders can foreclose but will also need to pay off the 1st mortgage holder. Unlikely, but as your equity grows the risk of foreclosure by the 2nd increases. My advice is to keep communication to a minimum with the lien holder. If you dont hear from them at least once a year, send them a letter (use the one above).
This has been going on for 10 years for me and I rarely get a reply back and no foreclosure notices. Legally, I'm looking at doing a quiet title action to have the lien removed. My guess is that the lien holder is waiting for me to sell and then they will cash in. But you never know, someday they might accept my offer.
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So...I've been following your advice for YEARS now, with each new lender ly lien is transferred too. Now with specialized loans...they just visited my home requesting an inspection. Should I be freaking out? They have been tacking interest which is now high than original note, that was included in chapter 7 in 2008.
 
Jzone

Jzone

LoanSafe Member
cookiemom said:
So...I've been following your advice for YEARS now, with each new lender ly lien is transferred too. Now with specialized loans...they just visited my home requesting an inspection. Should I be freaking out? They have been tacking interest which is now high than original note, that was included in chapter 7 in 2008.
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What did they want to inspect? And did they say who they worked for?
 
C

cookiemom

LoanSafe Member
Jzone said:
What did they want to inspect? And did they say who they worked for?
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Just left a note on door, I was on a conference call and could not answer. Just thought it was Amazon dropping off package.

Note states: At the request of SLS and independent field inspector came by to inspect the condition of property.

I called the # posted, and it said it was a routine check on properties they service. Never have I seen this before though....
 
S

Survivor_IN

LoanSafe Member
Oh my. I bet you 20 bucks that "independent field inspector" is a newly created LLC (check your State SOS for the filing), instructed to state they are an official government rep from HUD or "whoever" and with no credentials at all. Traveling BPO service. They generally will report your property as vacant cause it bolsters a foreclosure. Oh, and they get a 300 fee for it.
 
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cookiemom

LoanSafe Member
Survivor_IN said:
Oh my. I bet you 20 bucks that "independent field inspector" is a newly created LLC (check your State SOS for the filing), instructed to state they are an official government rep from HUD or "whoever" and with no credentials at all. Traveling BPO service. They generally will report your property as vacant cause it bolsters a foreclosure. Oh, and they get a 300 fee for it.
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I am freaking the F OUT. How can I fight this?! So they can just chime in after all these yes take all my house equity...
 
S

Survivor_IN

LoanSafe Member
cookiemom said:
*years not yes
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Just posted in a cross thread...

Jzone said:
Mortgages are a secured loan. Secured by a lien on the property. The lien will not go away until it is settled/discharged/paid etc. You can check who the lien holder is at your county register of deeds. This is a legal document and is recorded with your county clerk. Fraudulent recordings do happen, but are very rare.

Simply not paying your mortgage/Heloc and having it "written off" means nothing to you. It's an accounting procedure that shows its "uncollectable". This is where state laws vary on what can happen next.

In Michigan, after you stop paying, you are still legally liable for the debt. This is "secured debt" like a home, and not "unsecured debt", like a credit card. In Michigan, there is no statue of limitations for a debt secured by a mortgage. A lien holder can keep that lien for 20, 30 , 50 years or more and it is still valid. Check your state since some states only allow a secured lien holder 7-15 years to enforce the lien.
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From what I've found Michigan has a couple of options, both judicial and non-judicial. Requirements on non-judicial need to be reviewed because no one wants a surprise notice on the door with a sale date or sale notice that such foreclosure is complete (but alas a right of redemption but such requires one to allow access for inspection.)
It does appear that the SOL on a contract/mortgage is 10 years which is something worth fighting in a judicial foreclosure. Michigan Legislature - Section 600.5807

Edit - part of this non-judicial (?) process is posting on the property (such as sale date in 3 weeks)- not sure what they trying to do with "intent" notice - may be scare tactic may be quasi-notice but notices should be specific and also in compliance with CFPB notices
 
S

Survivor_IN

LoanSafe Member
There is a also new debt collection law where they have to notice you whethor or not the item being collected is beyond SOL. (Fair Debt Collection Practices Act) I am unsure whethor this includes mortgages. But it should. From my review, in non-judicial foreclosure in Michigan, there are multiple filings involved and they would need to file the security agreement. I believe this is "the note." (versus the mortgage which is likely already filed) Keep abreast of County records for such things related to your property and name searches.
 
C

cookiemom

LoanSafe Member
Survivor_IN said:
There is a also new debt collection law where they have to notice you whethor or not the item being collected is beyond SOL. (Fair Debt Collection Practices Act) I am unsure whethor this includes mortgages. But it should. From my review, in non-judicial foreclosure in Michigan, there are multiple filings involved and they would need to file the security agreement. I believe this is "the note." (versus the mortgage which is likely already filed) Keep abreast of County records for such things related to your property and name searches.
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I'm even more confused lol
 
S

Survivor_IN

LoanSafe Member
I would probably continue with JZone technique too.

Second lender has HUGE hurdles to be successful in foreclosure. They can not claim 100 percent of the property interest for "their lien" to complete a foreclosure. Would need subjugations and all sorts of paperwork. They are threatening you to see if you got a Christmas bonus or future tax refund (with that new baby on board) in my opinion. Financial stalking is common for them. Please ensure your property is securely locked and a ring doorbell monitor (cheap and easy) would be nice way to track people on your porch looking in your windows. You may need a restraining order against second to prevent "surprise" inspections as they currently have no rights and "no judgement against you" in order to do this. No wait, instead... Can also send a legal request to "opt out" of information sharing. I always got these notices at the end of the year. fyi. This may help somewhat to prevent them from using unknown third parties and re-reporting false information by unknown third parties. That's all I got. Hang in there.
 
S

Survivor_IN

LoanSafe Member
cookiemom said:
I'm even more confused lol
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We don't know if they will try to foreclose without initiating a (judicial) lawsuit or not. But they DO have to file certain documents in a NON-judicial action. Edit - possible to contact your county clerk to get information via phone on how to track such filings
 
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