2nd was written off but re-appeared years later for twice as much

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LoanSafe Member
Sep 24, 2019
We refinanced through HARP (or HAMP - not entirely sure which) in 2012. Our 1st was through B of A (originally Countrywide). At the time both my husband and I had lost our jobs and we were able to get a 100K principal reduction, also. At the time we purchased our home in 2006, we took out a second mortgage (or HELOC) to build a pool and pay off debt. The total loan amount was 70K. By 2012 when we stopped paying on it the balance was 45K. We contacted our second mortgage holder, River City Bank, and told them we were modifying our first loan and were unable to pay the second and asked to modify or reduce that also. They said they would get back to me and then I got a notice that it was written off. In 2017 it reappeared as two different accounts on our credit report. One as a charge off (owing 0) and one as owing over 90K. We disputed it and it has been removed but there is still a lien on the property for over 90K. Our home is now worth about 375K and we owe 140K. What are the odds that River City would settle the amount owed on the second for less than 90K? How do I broach the subject with them without reactivating the negative account on my credit report (as my credit is now 800+). Any input is greatly appreciated!

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
Hi Mkt3474,
Back in the time period when you received the modification you were part of a very large group of people that stopped paying on their 2nd liens which in turn were charged off. The lien holder deemed the debt as noncollectable however the lien remains on the home.

The question you're looking to get answered is what are your options.

1. Try and settle with them for a lower amount, if you have equity in your home it's very unlikely they will agree to anything less than what they are saying is owed. What is owed is usually the amount you stopped paying on with accrued interest and maybe a few late penalties. I don't believe they can charge late penalties but every month that goes by more interest accrues to the balance. The legality of this still puzzles me to this day but unfortunately it's what they're doing.

2. Refinance and pay them off. There is a 4 year requirement post charge off that is needed to qualify for a traditional product. Even though the loan technically has "been delinquent" you're still eligible. There are certain items that underwriters typically require that I am used to getting up front with three way calls with these investors (usually SLS and RTR).

3. Leave it alone and see what happens. There's one or two (maybe more) members of this forum that continue to tell these 2nd lien holders to shove it. I absolutely do not recommend doing this as I have seen foreclosures attempt to take place and actually an auction on a home AFTER we satisfied the debt via a refinance for a previous client (and loansafe member). She received the notice of election to sell and immediately called the courthouse, provided the satisfaction and her home was removed from the docket of sale that afternoon.

I don't recommend waiting too long as these investors have surfaced from the dead and they are and have been coming after people to either modify the lien or foreclose and get their money back. What I've been seeing with the modification agreements is they ask for a significant amount of funds up front (usually) and then modify the loan at the balance you owe and you now have a new monthly payment.

If you have any questions about refinancing this lien and need help, I can do loans in just about every single state nationwide and have helped many of our loansafe members do this. Please feel free to either give me a call at 619-379-8999 or e-mail at [email protected]