Morgan Heloc

StillHangingOn

LoanSafe Member
Mar 20, 2015
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First, I have been reading the forums for a few years and have learned an immense amount of knowledge from all of the generous contributors. Thank you! My story is similar to many - in 2008 personal finances/job loss propelled me into eventual Chapter 11 after struggling for a few years. 1st and 2nd mortgage responsibility was eliminated and eventually received modification on 1st. Quit paying second in 2011 since house was totally underwater. 2nd has switched twice to different servicers. I sent a request for a settlement for 5% of balance last year and financials were demanded. Ignored them. Another new servicer through an LLC has now sent a notice of default with a cure amount listed, which happens to be approximately half of balance when interest, late charges are added in. Even if I could afford it, not happening since balance of 2nd, even without those extra fees, along with 1st balance still puts me roughly at least $25,000 to $30,000 underwater.
My question - is this typically how negotiations begin or are they simply threatening me?
 

OneHugeMess

LoanSafe Member
May 30, 2016
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Is your First Lien totally underwater, or treading water? Is there any partial equity in the 2nd? I'm not worried about full equity, but partial equity in the 2nd lien.
 

StillHangingOn

LoanSafe Member
Mar 20, 2015
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71
Is your First Lien totally underwater, or treading water? Is there any partial equity in the 2nd? I'm not worried about full equity, but partial equity in the 2nd lien

Homes in my neighborhood do not turn over very quickly. Based on final sales I have seen, similar homes to mine range from $240,000 to $270,000. My 1st has balance of $248,000 and current. 2nd balance including late fees etc is $111,540. When I stopped paying it was approximately $61,000. The offer I was sent to “cure” was $55,000.
 

OneHugeMess

LoanSafe Member
May 30, 2016
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My question - is this typically how negotiations begin or are they simply threatening me?
I'm sorry for just now getting back to this.

Legally, whenever these loans transfer to a new servicer... you're likely to receive a Notice of Default, Notice of Accerlation, Monthly Statement or Demand. It all depends on the laws in your state, but... they'll send out new notices (even though your loan may already be accelerated) just to protect their interest in the loan.

What I truly worry about is... even though your underwater, there is partial equity to foreclose on the 2nd Lien, and make a recovery for the investor in your mortgage. So... they could actually be planning on coming after you. However... as many of our friends are learning on this board, they really don't owe anything to anyone for these second mortgages.

Every State has Different Laws, but... in the State of NY, after Five Years of Missed Payments (and no attempted foreclosure actions by the Servicer or Lender)... the Statue of Limitations actually time bars the foreclosure action from occurring. So... in exchange for the clouded title, as in... the homeowner still has a lien, and can't sell, the homeowner can stay in the home without paying a dime on their 2nd Lien.

Not only that... but in certain, circumstances, a Quiet Title Action can actually be brought to remove the 2nd Lien. Or a Homeowner can wait for the loan to simply expire.

You need to do a cursory Google Search and learn your state laws regarding this. I don't personally know the IL laws by heart, to tell you, but I feel like they have a similar statue.

By chance, was your loan charged off?
 

OneHugeMess

LoanSafe Member
May 30, 2016
475
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Homes in my neighborhood do not turn over very quickly. Based on final sales I have seen, similar homes to mine range from $240,000 to $270,000. My 1st has balance of $248,000 and current. 2nd balance including late fees etc is $111,540. When I stopped paying it was approximately $61,000.
Let's just say, for Fun... that your homes market value is $255k. Assuming your original 1st lien loan balance is at least $255 - $260k, many loan servicers are going to disregard your home for any foreclosure action. For all they know (unless it's the same servicer as first) your loan could be Interest-Only or Negative-Amortization, the original loan balance could be $255 or $260k, or even higher.

There is simply no equity in the home, once again, assuming the Estimated Value is accurate to even potentially recover the amount needed. When you factor in the costs to pay off the first lien mortgage, plus the foreclosure costs of $3/5k, as well as a write-down in the collateral value of 12%, and than the additional marketing/realtor fees of 6%. They need to be able to recover at least $20k for the investor of your Home Equity Loan / 2nd.

Rest Easy. Assuming the estimate you gave is accurate, they are not going to foreclose on you. They are sending you notices because they are legally required to, but they don't want the home. Ignore them and Brush up on your state laws.
 

StillHangingOn

LoanSafe Member
Mar 20, 2015
4
0
1
71
Let's just say, for Fun... that your homes market value is $255k. Assuming your original 1st lien loan balance is at least $255 - $260k, many loan servicers are going to disregard your home for any foreclosure action. For all they know (unless it's the same servicer as first) your loan could be Interest-Only or Negative-Amortization, the original loan balance could be $255 or $260k, or even higher.

There is simply no equity in the home, once again, assuming the Estimated Value is accurate to even potentially recover the amount needed. When you factor in the costs to pay off the first lien mortgage, plus the foreclosure costs of $3/5k, as well as a write-down in the collateral value of 12%, and than the additional marketing/realtor fees of 6%. They need to be able to recover at least $20k for the investor of your Home Equity Loan / 2nd.

Rest Easy. Assuming the estimate you gave is accurate, they are not going to foreclose on you. They are sending you notices because they are legally required to, but they don't want the home. Ignore them and Brush up on your state laws.
Thank you so much for your responses. As far as we know, the loan is not charged off. Looks like my next step is to check my state laws and then possibly see if the lien holder will consider a settlement that we can manage. We did contact them with a low settlement offer a few months ago but the servicer would not present it to the lien holder without financials which we refused to give.