Settling a 2nd mortgage after chapter 7 bankruptcy discharge

Western Belle

LoanSafe Member
Feb 4, 2015
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Hello… has anyone had experience in settling with HSBC/PHH (fannie mae)? If yes, can you please share your story?

I filed BK7 in 2011 and discharged from both 1 & 2 mortgage. I am current on first and haven’t paid on the second in nearly 3 years. A fews wks ago I received a letter in the mail asking that I contact them. When I called they simply wanted to know when I will be making a payment on the second. I told them I would like to discuss settling the loan and they transferred me to someone in the loss mitigation dept. Hence, I then received a remodification package in the mail. I called them once again stating my intentions and they said they needed to know my finances to work w/ me. Told them they didn’t need to have it in order to negotiate. Approx 2 wks later I received a notice advising I have 90 days (May 2015) to become current or they would possibly foreclose. I immediately faxed them a letter authorizing them to contact me to discuss a settlement. So far nothing. I plan to get an appraisal within the next 2 wks and send that to them along with a settlement offer of 3%.

New York
1st mortage bal = $197K (current, remodified)
2nd mortage bal = $152K (not paid 3 years, remodified)
Total = $349K
Guessestimate value = high $330, low $300 (work is needed)
(not so much underwater… approx. $20K plus foreclosing fees so maybe $50-$75K in red)

Do you believe they would proceed to foreclose? I've read PHH is tough. If yes, does anyone know the NY timeline? Would I be an idiot to try to sell even a shortsale? Its my conscience of trying to do the right thing and the thought of walking away and having my two kids go through it all. It’s just the three of us .

One other question… MERS is showing both mortgages as an ‘inactive status’. Would this mean because of the BK7 status?

Thank you in advance. Wishing luck to us all.
 

knoxroks

LoanSafe Member
Oct 5, 2012
1
0
1
Hello,

I’ve been following this site for years, thank you for all you do. Now I’m posting my Tennessee story to receive help from your wisdom.

I modified my first mortgage 3 years ago but the second would not modify. The second started foreclosure which forced me to file Chapter 7 bankruptcy. The bankruptcy was discharged November 2014 with neither mortgage reaffirmed. After making No payments on the 2nd for 72 months and several conversations about settling, I came to the realization they would never settle. At that time I started planning a move to another state so I stopped paying the first. The first sent a notice of default by regular mail, which date past two weeks ago. Now, just yesterday, the 2nd informed me in December of 2014 they had the house appraised. The 2nd is now willing to entertain an offer.

1st lien $120,000 servicer Seterus /modified.
2nd lien $205,000 servicer Nationstar / Investor Bank of NY Mellon.
Total $325,000
Appraised value $239,000.

I believe the appraisal is high. The house 4 doors down sold in December 2014 for $195,000. It is 150 sq. ft. larger than mine of 1,770 sq. ft. and they have a one car detached garage versus my carport. Everything else is comparable.
If I can settle, I want too.
  1. What do I offer the 2nd?
  2. Then, what will the 2nd ultimately accept? When?
  3. How to work with 1st will trying to settle the 2nd.
  4. Does the 1st not being current help or hurt negotiations with the 2nd?
Thank you for your help,
Mark
 

hipster

LoanSafe Member
Dec 4, 2013
34
6
8
Hello… has anyone had experience in settling with HSBC/PHH (fannie mae)? If yes, can you please share your story?

I filed BK7 in 2011 and discharged from both 1 & 2 mortgage. I am current on first and haven’t paid on the second in nearly 3 years. A fews wks ago I received a letter in the mail asking that I contact them. When I called they simply wanted to know when I will be making a payment on the second. I told them I would like to discuss settling the loan and they transferred me to someone in the loss mitigation dept. Hence, I then received a remodification package in the mail. I called them once again stating my intentions and they said they needed to know my finances to work w/ me. Told them they didn’t need to have it in order to negotiate. Approx 2 wks later I received a notice advising I have 90 days (May 2015) to become current or they would possibly foreclose. I immediately faxed them a letter authorizing them to contact me to discuss a settlement. So far nothing. I plan to get an appraisal within the next 2 wks and send that to them along with a settlement offer of 3%.

New York
1st mortage bal = $197K (current, remodified)
2nd mortage bal = $152K (not paid 3 years, remodified)
Total = $349K
Guessestimate value = high $330, low $300 (work is needed)
(not so much underwater… approx. $20K plus foreclosing fees so maybe $50-$75K in red)

Do you believe they would proceed to foreclose? I've read PHH is tough. If yes, does anyone know the NY timeline? Would I be an idiot to try to sell even a shortsale? Its my conscience of trying to do the right thing and the thought of walking away and having my two kids go through it all. It’s just the three of us .

One other question… MERS is showing both mortgages as an ‘inactive status’. Would this mean because of the BK7 status?

Thank you in advance. Wishing luck to us all.
Have you had any news on this front? Thanks!
 

Western Belle

LoanSafe Member
Feb 4, 2015
39
6
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55
hello hipster .,... thanks for inquiring. the 90 day is up next week. i have heard nothing from PHH. i just received a CMA from a well known realtor group. prices have certainly increased in my area (NY) over the last 60 days. seems the house is worth exactly what I owe (give/take a bit) ... and there is work to be done - amazing! the realtor anticipates prices to go higher (oh no!) however, if PHH decides to FC it will be definitely in the red by $40-60K due to all the fees. I'm thinking of calling them next week just to followup on my offer that i mailed to them back in March. honestly its driving me crazy - just need / want to know which direction im going in. if they proceed / accelerate with FC im going to stop paying my first mortgage (which is current, and also serviced by PHH). im sure loan 1 will immediately begin to send me notices and i will honestly tell that that loan 2 is not working with me and again, that i can simply walk away due to BK7 discharge. at this point i have nothing to lose. do you believe i should refrain from calling them and continue to follow the game? again, i submitted a full appraisal back in march ($45K lower than CMA anticipated sold price) and will reiterate that to loan #2 if i do speak w/ them, but I won't dare mention the CMA $. what's the status update with you? does phh service your loan? be well.
 

hipster

LoanSafe Member
Dec 4, 2013
34
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8
I am still waiting to hear anything on my 2nd... So, I could not give you advise that I think would be worthy on your situation. Sorry about that, but maybe someone else reading might be able to. Popular Community Bank is my loan servicer the US division of Banco Popular.
 

liz1221

LoanSafe Member
Jun 29, 2011
10
0
1
Cape Cod, MA
We are in a similar situation here. 2010 we filed chap 7 and did not reaffirm either our 1st or 2nd mortgage. We modified the first mortgage in 2012 and are current on that. We have not made a payment on our second mortgage in OVER 5 YEARS since we filed bankruptcy, and they have not contacted me at all.

I have been nervous about contacting 2nd because I don't have the cash to offer any type of settlement, but finally about 3 months ago I decided I needed to get the ball rolling. I have not heard a peep from them. It's crazy how I could go 5 years not worrying too much about FC but since the day I sent the letter that they could contact me it's right back front & center again. Our 1st is with Ocwen and our 2nd is with Citizens Bank. We also have our checking account with Citizens, does that mean they have access to our financials or do they still need permission to look at it? I am worried we waited too long on this settlement process as home prices have really been on the rise here lately. Since we filed chapter 7 in 2010 our zillow estimate has gone up $35k - in just the past year alone it has increased $16k. We are still (barely) underwater if they had to sell at market prices, but obviously at an auction they wouldn't get market prices plus the foreclosure fees. So I keep telling myself FC is fairly unlikely and I need to sit tight.

1st mortgage $180k (Ocwen)
2nd mortgage $70k (Citizens)
zillow estimate $237k (and I think that is probably pretty accurate)

so we are still underwater by 13K. I am hoping to eventually settle the 2nd for around $4,000. I'd love to hear from anyone that has actually gotten a settlement letter after bankruptcy. I'm curious how long it normally takes to hear from them. I sent it April 1 and it's now the middle of June. I know the HARP process took FOREVER, I'm guessing I'm in for a similar long haul? Because my house is not underwater by that much anymore does this mean the chances of settling for 5% are unlikely? I told them they are allowed to contact me by email or mail, I wanted to be sure I had written documentation of all conversations.
 

liz1221

LoanSafe Member
Jun 29, 2011
10
0
1
Cape Cod, MA
oh and the house right behind me (same size/layout of house, same size lot) just two months ago went for $155K at auction. Basically the same house as mine except mine has been better cared for (that house had been used as a rental for years). So I'm hoping that would discourage any FC thoughts by Citizens as that price wouldn't even cover the 1st mortgage
 

Survivor_IN

LoanSafe Member
Jun 2, 2008
278
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Fair warning, when settling the second make sure you provide them with a lien release incorporated into the offer... and that this offer is signed before you send funds... otherwise, it will be reported as a 'payment' in an effort to reset the collection clock and SOL.
Also, there is a thread on this under the 'Ask the Attorney' forum here.
 
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hipster

LoanSafe Member
Dec 4, 2013
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Update, It is going to be 3 years in Jan 2017. No word, no communication , no nothing from the 2nd mort.
 

ques

LoanSafe Member
Apr 22, 2016
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I thought I'd chime in on this thread since I am in a similar situation to some of you. We were discharged from Chapter 7 in August of 2011. We have kept our first mortgage current, but have not paid our 2nd mortgage for over 6 years now. The debt for our 2nd mortgage has been sold 4 times...most recently in December of last year. Each time I would write my initial letter of an offer to settle, the debt would change hands.

We are not underwater, however...the 2nd would be in the Red if they foreclosed due to the fees they would incur:

We owe 82,000 on our first (which is current)
We owe 35,000 on our defaulted, sold four times 2nd
Total: 118,000

Market Value of Home: 138,000
Minus 20% value for foreclosure sale: 27,600

$110,400...so, they might stand to get about $110,000 on a really good day as a foreclosure sale. We have quite a bit of maintenance needed on the home since we have not invested in it at all these past 6 years...we live like we are "renting"...and may walk away any day. There are at least $10,000-$15,000 of repairs that would need to be done for anyone to make it market worthy, or rent worthy.

If they got the $110,000 and pay of the first, there is 28,000 sitting there...but, assuming their fees to foreclose would be quite a bit more than that, I don't anticipate them being highly motivated to actually foreclose on us.

They know we will not disclose financial information of any kind to them. They know we are willing to walk. I sent an offer to settle letter that was very low...approx 8%. They called the next day to counter offer with a stupidly high number and offer for us to fill out papers for a loan modification. I explained that we were not willing to do a modification, and that we were not willing to put very much money up towards settling because the home was in need of such major repair that it would not be financially wise to pay a high settlement, and repair the home. We'd be spending more than it was worth. I said we'd be willing to settle for the right price...which I stressed had to be low enough that we could still afford to fix it and not be underwater again... And, that if we couldn't do that, then the most financially wise decision would be for us to stop paying our first and ride out the foreclosure process. I made him aware that I knew Chapter 7 protected us for this very reason, and that they would not be able to come after us for any deficiency judgement.

So, I guess it's their move now. If I don't hear from them again in about 6 months, I will probably bump my offer up a tiny bit, and send another letter. It feels a lot more vulnerable trying to settle something that is no longer technically underwater... I'd love to know how much they actually paid to buy our debt...this many times sold after discharge of a Chapter 7. I'm sure it's pennies on the dollar. The saga continues...
 

hipster

LoanSafe Member
Dec 4, 2013
34
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Well it's been years since I have posted this. I finally received a statement from our second. It is a statement that we owe $18,750 in back payments by Nov 1st or we could risk foreclosure... I wonder if I should try to settle..
 

hipster

LoanSafe Member
Dec 4, 2013
34
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Just an update, 1st $82,000 paying monthly 2nd $41,000 haven't paid in over 4.5 yrs. Market is probably $142k to 155k. So I have equity , just wondering what settlement percentages people are getting? If it's wise to try to settle now?
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
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Jan 14, 2011
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To be completely honest it seems that settlements are few and far between nowadays, especially when there is equity in the home. I've had numerous borrowers trying to seek a settlement on a charged off account so we can refinance them and only one has been successful recently at a lower settled amount and I believe it was 75% of the balance.
 

hipster

LoanSafe Member
Dec 4, 2013
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8
Thanks for the reply. I kinda figured that it might be difficult to settle. I don't think they would get much if they foreclosed though.
 
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Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
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Loan Safe Mortgage
Jan 14, 2011
2,049
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San Diego, California
www.loansreduced.com
That's also true in many, many cases with all the costs that are involved but I think they would rather get the net after foreclosure rather than settle unless that offer is a good one. The 10% settlement days seem to be long gone.
 

hipster

LoanSafe Member
Dec 4, 2013
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Do you have to settle the charged off account before you can try to refinance?



To be completely honest it seems that settlements are few and far between nowadays, especially when there is equity in the home. I've had numerous borrowers trying to seek a settlement on a charged off account so we can refinance them and only one has been successful recently at a lower settled amount and I believe it was 75% of the balance.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,049
161
63
San Diego, California
www.loansreduced.com
Yes or refinance and pay the balance in full (I know, painful). When thinking of a refi, take into consideration that rates are usually above 5% now - what you have might be better. If so, I would probably hold onto it unless they start threatening you. I've seen you around the community for awhile so I'm sure you know that the 2nd lien would have to satisfy the 1st mortgage in full in order to proceed with foreclosure or get the 1st lien to agree which is rare.
 

hipster

LoanSafe Member
Dec 4, 2013
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It doesn't matter what state you live in on how they have to deal with the 1st? Our 2nd is 8% which sucks, another reason we stopped paying..



Yes or refinance and pay the balance in full (I know, painful). When thinking of a refi, take into consideration that rates are usually above 5% now - what you have might be better. If so, I would probably hold onto it unless they start threatening you. I've seen you around the community for awhile so I'm sure you know that the 2nd lien would have to satisfy the 1st mortgage in full in order to proceed with foreclosure or get the 1st lien to agree which is rare.
 

hipster

LoanSafe Member
Dec 4, 2013
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I understand. Thank you for your honesty. They haven't sent any threatening letters, just a statement which said we are 1700 odd days late and need to pay $18,700 to bring it current... so, I don't know if this is the start of something...