2nd mortgage charged off by original creditor/can debt collector foreclose

Welcome to the LoanSafe Forums!
Get free mortgage help today. Since 2007, the LoanSafe forums have helped millions of homeowners over the last 13 years either save their homes with a loan modification, obtain a short sale, forbearance, or walk away legally from their underwater mortgages.
Register for FREE

nonsibi

LoanSafe Member
Feb 25, 2021
1
0
1
Hi all. This site is a wealth of information, but I couldn't find anything relevant to my situation.

I had a first & second mortgage with HSBC/Beneficial. Stopped paying on second and they eventually charged it off around 2010/2011. Balance was about $7500. First mortgage was eventually transferred to Fay Servicing collecting for New Rez. That is current and will be paid off in less than 5 years.

A few years ago, started receiving collection notices from Ditech, then Greentree and most recently Shellpoint. The last collection notice from Shellpoint was about 2 years ago. Shellpoint, I understand, is now a part of New Rez. My question is can they foreclose on the second mortgage. I can't figure out if it is with a 'legit' mortgage company or debt collector. Second mortgage is not reporting to any CRAs. Is there a statute of limitations on this (either as a mortgage or debt collection)?

Thanks in advance.
 

HelenCr

LoanSafe Member
Feb 25, 2021
3
0
1
I don't think second mortgages are a debt that falls off of a property with a charge off. I'm not a professional by any means but I have been following foreclosures and have seen many, many foreclosures lately with Shellpoint in the Plaintiff section of the Notice of Defaults as sort of a 'second' in the description. Yes, 2nd mortgages can foreclose on a property even if the 1st is being paid on time. However, that being said, per state and federal law, notices must be sent to the property owner and/or publicized if a property is being foreclosed upon regardless of lien position. And eventually, a notice of foreclosure posted directly on the structure. Two ways to find out if there is a second lien/mortgage on your property is to either have a title company or attorney run a simple title search which would cost a few hundred dollars, or go to the courthouse yourself and look at what is on record as a second mortgage/lien. I don't think I would try and contact the entities that sent those notices because that would give them official notice that you received the notice and allow them to legally start action if that makes sense. If you try to sell the property, the second mortgage would pop up if there is one. I hope this helps.
 

Survivor_IN

LoanSafe Member
Jun 2, 2008
317
28
28
Yes, they can foreclose, but typically seconds do not. You likely have a defense of the Statute of Limitations if they do sue for FC. This SOL is dependent on your State law. (can be anywhere from 5-15 years but average 5 in most States) With that said, all they (2nd lienholder) have to do is wait for you to sell and then take the money as a part of that transaction. You might consider an attempt at pay-off or settlement. Otherwise, the second will continue to accrue interest.

PS - makes a difference if your State is a judicial foreclosure State or not - I'm assuming it is
 

JohnFL

LoanSafe Member
Aug 21, 2010
13
0
1
Can they legally charge interest if they made no attempt to collect on 2nd and the SOL has run its course? This could be a significant amount if interest has accrued for 10 years.
 

moretrouble

LoanSafe Member
Nov 14, 2009
1,581
289
83
Hi all. This site is a wealth of information, but I couldn't find anything relevant to my situation.

I had a first & second mortgage with HSBC/Beneficial. Stopped paying on second and they eventually charged it off around 2010/2011. Balance was about $7500. First mortgage was eventually transferred to Fay Servicing collecting for New Rez. That is current and will be paid off in less than 5 years.

A few years ago, started receiving collection notices from Ditech, then Greentree and most recently Shellpoint. The last collection notice from Shellpoint was about 2 years ago. Shellpoint, I understand, is now a part of New Rez. My question is can they foreclose on the second mortgage. I can't figure out if it is with a 'legit' mortgage company or debt collector. Second mortgage is not reporting to any CRAs. Is there a statute of limitations on this (either as a mortgage or debt collection)?

Thanks in advance.
I am in the exact situation. My HELOC from HSBC was charged-off in 2011 balance 50K, sold to Greentree for less than 2 pennies on the dollar (per its own financial documents filed with the SEC), to WAC, then to Ditech. New Rez bought Ditech’s assets. They can not collect because of the SOL but telling me they can enforce the lien when I sell, questionable though? That is how these debt buyers make money, buying charged-off debts for pennies on the dollar then try to collect on the whole amount. A few years ago, I asked Greentree to provide the proof of the transfer of the note, they couldn’t. I question whether they can foreclose without the note, judicially. They can still try to do it non-judicial . It would not hurt for them to try though because nobody holds these crooks responsible for forging documents or misrepresentation, even the courts buying their stories.
 

Jzone

LoanSafe Member
Jun 20, 2017
239
32
28
71
Hi all. This site is a wealth of information, but I couldn't find anything relevant to my situation.

I had a first & second mortgage with HSBC/Beneficial. Stopped paying on second and they eventually charged it off around 2010/2011. Balance was about $7500. First mortgage was eventually transferred to Fay Servicing collecting for New Rez. That is current and will be paid off in less than 5 years.

A few years ago, started receiving collection notices from Ditech, then Greentree and most recently Shellpoint. The last collection notice from Shellpoint was about 2 years ago. Shellpoint, I understand, is now a part of New Rez. My question is can they foreclose on the second mortgage. I can't figure out if it is with a 'legit' mortgage company or debt collector. Second mortgage is not reporting to any CRAs. Is there a statute of limitations on this (either as a mortgage or debt collection)?

Thanks in advance.
Some good replies so far, and I will give you my experience. Always check your state laws about foreclosure because they are not the same in every state. My experience is in Michigan. I filed Chapter 7 bankruptcy and continue to pay on the first but not the second mortgage. I haven't made payments in 10 years on the second with little to no communication with the current lien holder.

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.

Have you filed bankruptcy? In Michigan, this would release you from the debt, but not release the lien. In other words, you could walk away from the home and not owe any money. If you don't file bankruptcy, you can still walk away, but are still liable for the debt.

Even if you haven't filed bankruptcy, the original lien holder can assign, transfer or sell your debt and lien. It's perfectly legal and it will be in your loan documents that you signed.

Most states will allow a second lien holder to foreclose, but unlikely. A second lien holder must also pay off the first lien holder to complete the foreclosure. If you owe $25,000 on a second and $150,000 on a first mortgage, the second would need $175,000 to complete the foreclosure. Unlikely, but could happen if you have enough equity in the home.

In my situation, I filed bankruptcy 9 years ago and continue to pay on the 1st only. My second was sold/transferred. I get a notice probably once or twice a year with a balance owed to release the lien. The wording is very specific, since it would be illegal for them to attempt to collect on a debt that has been discharged in bankruptcy. They are trying to "enforce a lien', not collect a debt. I respond in writing reminding them of the bankruptcy and make an offer to release the lien. I never get a response back.

Now, if I ever want to sell or refinance the lien will need to be taken care of somehow. But, I'm in no hurry to sell so Im just waiting it out. So, check your state laws on this because it will vary greatly on what can happen after you stop paying. Good luck.
 

moretrouble

LoanSafe Member
Nov 14, 2009
1,581
289
83
Some good replies so far, and I will give you my experience. Always check your state laws about foreclosure because they are not the same in every state. My experience is in Michigan. I filed Chapter 7 bankruptcy and continue to pay on the first but not the second mortgage. I haven't made payments in 10 years on the second with little to no communication with the current lien holder.

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.

Have you filed bankruptcy? In Michigan, this would release you from the debt, but not release the lien. In other words, you could walk away from the home and not owe any money. If you don't file bankruptcy, you can still walk away, but are still liable for the debt.

Even if you haven't filed bankruptcy, the original lien holder can assign, transfer or sell your debt and lien. It's perfectly legal and it will be in your loan documents that you signed.

Most states will allow a second lien holder to foreclose, but unlikely. A second lien holder must also pay off the first lien holder to complete the foreclosure. If you owe $25,000 on a second and $150,000 on a first mortgage, the second would need $175,000 to complete the foreclosure. Unlikely, but could happen if you have enough equity in the home.

In my situation, I filed bankruptcy 9 years ago and continue to pay on the 1st only. My second was sold/transferred. I get a notice probably once or twice a year with a balance owed to release the lien. The wording is very specific, since it would be illegal for them to attempt to collect on a debt that has been discharged in bankruptcy. They are trying to "enforce a lien', not collect a debt. I respond in writing reminding them of the bankruptcy and make an offer to release the lien. I never get a response back.

Now, if I ever want to sell or refinance the lien will need to be taken care of somehow. But, I'm in no hurry to sell so Im just waiting it out. So, check your state laws on this because it will vary greatly on what can happen after you stop paying. Good luck.
Very well explained, thank you. If you wait long enough, the value of money will be pretty much worthless.