Help with Settlement Offer on 2nd Discharged in a Chapter 7

cmefly

LoanSafe Member
Jan 9, 2010
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A relative of mine has a 1st for $100K with ABC bank and a 2nd for $33K with Chase. House value is $135K. Had a Chapter 7 Discharge in August 2018 and did not reaffirm the 2nd. She has always paid the 2nd and even continued to pay it after the Discharge. Just stopped paying it in April 2019. Received a Certified Letter as required by law that she was past due and she risks foreclosure, etc. She is on permanent disability and would like to settle. She can pay $3,500, so is that a reasonable settlement offer? Should she write a offer letter directly to Chase or have her attorney do so and ask for satisfaction and release of the lien. Thanks!
 

Jzone

LoanSafe Member
Jun 20, 2017
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A relative of mine has a 1st for $100K with ABC bank and a 2nd for $33K with Chase. House value is $135K. Had a Chapter 7 Discharge in August 2018 and did not reaffirm the 2nd. She has always paid the 2nd and even continued to pay it after the Discharge. Just stopped paying it in April 2019. Received a Certified Letter as required by law that she was past due and she risks foreclosure, etc. She is on permanent disability and would like to settle. She can pay $3,500, so is that a reasonable settlement offer? Should she write a offer letter directly to Chase or have her attorney do so and ask for satisfaction and release of the lien. Thanks!
Hopefully, the 1st and the 2nd were not reaffirmed. That defeats the purpose of bankruptcy.

Im in similiar situation. Just keep current on the first. You dont need an attorney to send a settlement offer, just do it in writing, not on the phone or email.
Wait for their reply. 2nd mortgages rarely foreclose. They have to satisfy the first mortgage in order to bring a foreclosure to court. Unlikely. Settlement offers usually are started in the 10% of balance range, so $3500 is a good starting point.
If you keep current on the first, you will probably never hear from the 2nd. Contact them once a year with the same offer and wait for them to respond.
 

cmefly

LoanSafe Member
Jan 9, 2010
78
1
8
The 1st was reaffirmed and never late. The second was not reaffirmed. Sending off settlement offer for $3,500. Thanks!
 

cmefly

LoanSafe Member
Jan 9, 2010
78
1
8
Unbelivable Snag! So Chase contacted my relative and said due to the Dodd Frank in 2010, they don't offer settlements. My relative questioned that and then found out that Chase said that they were in 1st lien position. She said that is not possible. She has a 1st with Suntrust and Chase is 2nd. She re-affirmed on the 1st with Suntrust during the Chapter 7. Chase said they hadn't pulled title yet because she was only 61 days past due and that typically is done at 90 days. My relative pulled her refinance papers she did in 2016 with Suntrust and low and behold NO Subordination Agreement was done to keep Chase in 2nd place. Chase said this is common and happens frequently. However, even though Chase was not reaffirmed if she doesn't pay on it, Chase could foreclose without having to even pay anything to Suntrust. Chase suggested she bring the account current and send a letter to Suntrust explaining that they are in 2nd place and they need to reach out to Chase to see if they will go into 2nd lien position. The Chase rep said more than likely Chase will agree because there is no equity and such a small loan amount. Chase then said that after that is done, then she should send another letter to Chase to see if they will settle. This is a messed up situation. How could the bankruptcy attorney and court miss this? I looked at her bankruptcy papers and it clearly shows that the Chase was in 1st place since 2015. What happended was she paid cash for the home in 2014 and then did a home equity with Chase. In 2016 she refinanced with Suntrust to pay off debt and Chase and put Chase in 2nd position. That was not done and all that was done was that it was paid off. She became disabled and used the Chase line for medical bills and then eventually filed Chapter 7 when the medical bills got to be too much. Still VERY CoNFUSED how the courts missed this. I paid the 3 payments for her today to bring her current. So should she write a letter to Suntrust and explain or just continue to pay Chase until paid off which could be a long time.
 

OneHugeMess

LoanSafe Member
May 30, 2016
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Let me just make this easy for you. There will be no settlement on that account. Chase is in first place, and presumably, has 100% Equity to recover there loan in entirety, plus attorneys costs and so forth. I can also tell you now, they most certainly will not subordinate the loan, with the notes that are now on the account + the fact that it's delinquent.

If I were your sister, I would attempt to get a Loan Modification or start paying on that loan again. Without a doubt, Chase WILL take the home, no questions about it. Whatever proceeds are obtained at the auction after paying off Interest Arrears, Principle on the Loan & Foreclosure Attorney costs for the Chase loan -- will be given off to Suntrust by the foreclosing attorney. And in this particular case, I think she should be concerned about a likely deficiency judgement, considering the circumstances.

Whatever you do STOP talking to the representatives at Chase, although I think the damage is already done. She needs to seek out a loan modification, which they might oblige with. They have her cornered though. Don't try to talk with them about settling.
 

OneHugeMess

LoanSafe Member
May 30, 2016
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I just re-read the original post. I hate to say this - but they most certainly will send this case to a Foreclosure Attorney around the 120-Day Mark. Everything is lined up for them to fully recover the balance of the loan. That is the problem.

When was this 2nd Mortgage Opened? You said 2014? If the loan is particularly old (2002-2008) Chase will often offer a decent (1-3% Interest Rate) and amortize it over 15 or 30 years. This loan isn't one of the "Vintage" ones, but they might be willing to give her a decent offer. I would ask for a Request for Mortgage Assistance Packet, and make it clear, the payments are not affordable. Maybe they can get her into a decent mod.