Sold Out Junior Loans

NVfun

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Sep 3, 2011
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I've been inactive on here for awhile as we were waiting for the 3 years to be up to buy again with FHA. Question for anyone who has experience with this...

Has the SOJL caused anyone issues with getting an FHA loan (3 year wait done)? Financially we are fine and expect to find a home for well under what we are qualified for.
 
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spike9999

LoanSafe Member
May 28, 2014
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I've been inactive on here for awhile as we were waiting for the 3 years to be up to buy again with FHA. Question for anyone who has experience with this...

Has the SOJL caused anyone issues with getting an FHA loan (3 year wait done)? Financially we are fine and expect to find a home for well under what we are qualified for.
so the SOJL is still outstanding debt?
 

PatZZ

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Jan 30, 2011
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Well I just got notice they have forgiven the debt because of a settlement with the Department of Justice. And they will report it as paid. Which I guess is good news, though I may have to pay tax on the forgiven amount. But they may cover part or all of the taxes. So I guess this is good, but I still did not want to pay anything out of my pocket. But probably nothing I can do to avoid paying something to the IRS.

Keep in mind the following:

  1. If a homeowner can show he/she was insolvent (by IRS rules) before the discharge of the mortgage and turnover of the property, as well as afterwards, then there is no tax obligation.
  2. Don't forget about the IRS "Home Sale Exclusion." It is a tax break that allows a single homeowner who sells his/her property under the usual circumstances to exclude up to $250,000 profit from taxes; the exclusion is $500,000 for married couples filing jointly. BUT, this exclusion also applies in foreclosures. As long as the seller (or the foreclosed-upon owner), lived in the home as his principal residence for two of the past five years, he can avoid taxes on any capital-gains profit, phantom or real.
Check with an accountant or check it out yourself. I am sharing what I know from long ago. Something may have changed.
.
 
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PatZZ

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Jan 30, 2011
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I've been inactive on here for awhile as we were waiting for the 3 years to be up to buy again with FHA. Question for anyone who has experience with this...

Has the SOJL caused anyone issues with getting an FHA loan (3 year wait done)? Financially we are fine and expect to find a home for well under what we are qualified for.
Many times, approval will depend on the lender you use and what's on your credit report. Even under FHA, lenders can establish their own guidelines for approval that are more strict than FHA. Before applying, if I were you, I would try to get an answer about this before you apply and run up a bunch of inquiries. Get your credit report from all 3 bureaus so you know exactly how they are reporting.

All the best.
.
.
 

gacluster

LoanSafe Member
Oct 11, 2012
3
0
1
I've been inactive on here for awhile as we were waiting for the 3 years to be up to buy again with FHA. Question for anyone who has experience with this...

Has the SOJL caused anyone issues with getting an FHA loan (3 year wait done)? Financially we are fine and expect to find a home for well under what we are qualified for.
Did you ever get an answer on this? Would be curious to know what you found out. We are in the same exact situation. Credit rebuilt, three years are up, scores in the low 700's but have a SOJL reporting charged off for around $60k. I'm thinking we will have to deal with this before any new mortgage.

Anyone?
 

kidsandliz

LoanSafe Member
Mar 28, 2011
56
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I am almost at the end of statue of limitations for my second (80/15 original mortgage). Chase wrote off the first (got a 1099). The second hasn't and lists that I have a balloon payment in 2022. They sold it, didn't notify me, looks like it was sold to Freddie Mac or whatever that federal mortgage company is - I saw that on a credit report. I stopped making the monthly payments on both in 4/2010 with short sale end of 1/2011, this is a recourse state.

Since there is a ballon payment listed, even though I would be beyond the statue of limitations when that comes due, will my credit will take another hit when I don't pay that either?

Also my credit report lists it as a foreclosure even though it was a short sale. Is that even worth fixing since theoretically it will fall off my credit report in around 2.5 more years (or at least I think that is right - 7.5 years from the action?)? At the moment my financial problems are far worse than my credit being dinged (cancer, job loss twice, currently only part time employed looking for full time, homeless).

And, because I lost my job over having 2 cancers in one year (one of which has no cure but a longer life span), I was thinking of declaring bankruptcy to deal with my student loans. I fit the hardship clause and then some - am currently homeless (had to choose between health insurance and rent as I don't make enough for both since this state did not expand medicaid) and a gofundme www.gofundme.com/78d3nc is the only thing that has kept me even marginally solvent, but there is donor fatigue with my friends. If I do that should I keep the second mortgage out of that action once the statue of limitations will have passed by then or because of the balloon payment due should I include it? I don't want to risk reactivating that loan by taking any action that includes that too if that does that - not sure how that works once the statue of limitations is passed for collecting on a loan I am not making payments on. Too bad there is no statue of limitations on student loans (I am not behind with those - I have paid close to $40,000 on them, they are currently in hardship deferment but you only get 3 years of that - the problem with the income based ones is the 1099 you get is then taxable at the end of the term which creates the same kind of problems the 1099's for mortgages gives us and I will be retired by then, who knows what the tax laws will be in 25 years). Those they will garnish your social security (they take something like 25 or 30% of that) when you retire if you don't pay up earlier and I while I am not retired yet, I can't afford that to happen if I live long enough to see retirement.

Any advice or urls that might help me figure out what the deal is with my second and bankruptcy, a ballon payment that is in the future, etc. sure would be appreciated.

Also on a side note if anyone has media contacts (or suggestions) that can help me get publicity for my gofundme so I can pay off my medical bills (if I include them in a bankruptcy hearing I can't be treated at MD Anderson Cancer Center anymore and I don't want that to happen) and keep being able to pay my storage unit fees and health insurance, that would be appreciated too. I actually don't have many bills to include in a bankruptcy hearing as my only debt is the short sale stuff, school loans, medical debt and a car note on an almost 11 year old car I bought used when my 25 year old one blew an engine bearing. I am doing without because I don't have any money and to keep out of that kind of trouble (and more dings on my credit) I moved out of my rental and while I was still paid in full so once I manage to get full time employment again I don't have an eviction and past due rent against me, putting what was left of my stuff in storage.
 

mikesdsu

LoanSafe Member
Sep 10, 2012
4
0
1
Did you ever get an answer on this? Would be curious to know what you found out. We are in the same exact situation. Credit rebuilt, three years are up, scores in the low 700's but have a SOJL reporting charged off for around $60k. I'm thinking we will have to deal with this before any new mortgage.

Anyone?
I was able to buy a house this year with the VA no problem (Score in the mid 600, 3 years since SOJL).

I'm sure the FHA would be the same.
 

returntosender

LoanSafe Member
Mar 6, 2013
12
0
1
nj
Keep in mind the following:

  1. If a homeowner can show he/she was insolvent (by IRS rules) before the discharge of the mortgage and turnover of the property, as well as afterwards, then there is no tax obligation.
  2. Don't forget about the IRS "Home Sale Exclusion." It is a tax break that allows a single homeowner who sells his/her property under the usual circumstances to exclude up to $250,000 profit from taxes; the exclusion is $500,000 for married couples filing jointly. BUT, this exclusion also applies in foreclosures. As long as the seller (or the foreclosed-upon owner), lived in the home as his principal residence for two of the past five years, he can avoid taxes on any capital-gains profit, phantom or real.
Check with an accountant or check it out yourself. I am sharing what I know from long ago. Something may have changed.
.
I'm not sure when the "discharge" would be? The original short sale was almost 6 years ago. Would be hard to go back that far and prove that I was insolvent. Last month they officially noted that the loan is paid off and forgiven. The bank will pay the taxes on my behalf if I want them too, but not sure if that would count as income. But what will likely happen is that the government will extend the Mortgage Debt Relief Act again, so I would owe nothing in taxes.
 

paigelee

LoanSafe Member
Sep 28, 2010
5
0
1
When our house foreclosed in September 2010, we had a 2nd that was used to purchase our home in the amount of $50,000. Right after the foreclosure, the bank offered to settle with us for $14,000. My husband had lost his job, so it was impossible for us to pay. We offered to make payments until the $14,000 was paid off and the bank refused. They wanted all the money upfront. After doing some research and finding that the banks are not really going after people for the 2nd's, we decide to just wait it out until the SOL is over. Six years for our state.

More research provided that any collection agency, bank or note holder, will only go to court if they think that the financial benefits are worth the cost of the court proceedings. So the first thing we did was hire an attorney. All we did was have him send a letter to the bank that he was now representing us and any further communication should only be sent to him and no other contact should be made to us about the 2nd mortgage. The attorney only charged $200 for this and the consultation was free. The attorney was a bankruptcy attorney, we did not know if we were going to have to declare bankruptcy or not. We did not have to, thank goodness, but the letter coming from this type of attorney, plus the fact that the bank was now dealing with a professional not homeowners, made us very unappealing for further legal action.

The bank sent an acknowledgement of our retaining an attorney and within six months they followed this up with a letter stating that the $50,000 was now considered no longer owed and that we were free and clear of this debt to them. We tucked this letter away in a safe place so that we can not be sued for this money ever. This strategy worked because the loan was still with the original lender. If the loan had been sent to a collection agency, they probably do not want to go to court either so sending them a letter from a bankruptcy attorney hopefully should stop them also from suing. Again all the letter stated is that the attorney was now representing us and to cease and desist from all contact with us. The attorney never had to do anything else.

Two years ago, we obtained a new mortgage through FHA and bought a condo now that our finances are back in order. Yes the foreclosures are still on our credit report and will be for two more years, but this did not stop us from getting another mortgage. Our credit score is back in the 700's and this time we bought a home well within our means and very affordable. We thought that there would be six years of worry and stress waiting for the SOL to be up before we could relax, yet it took a simple letter to move everything forward and get some peace back in our lives.

For information purposes, we live in Washington State and the mortgage was with Wells Fargo.
 

PatZZ

LoanSafe Member
Jan 30, 2011
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I was able to buy a house this year with the VA no problem (Score in the mid 600, 3 years since SOJL).

I'm sure the FHA would be the same.
Congrats pn your approval. However, as an ex-mortgage employee, I can assure you no 2 loans or applications are the same - even when it's VA or FHA. We can never be "sure" of anything when it comes to mortgage approval. As I mentioned earlier, lenders have TONS of latitude to add their own particular requirements to the qualification parameters. Not only that, lenders constantly make modifications to their criteria. The borrower who got approved today might not have been approved 4 weeks prior. I can't over-emphasize how important the lender is in the process. Many a borrower has been turned down by one lender, but got approved by another the next week - regardless whether it was FHA, VA, or conventional.

My suggestion for everyone would be to first see what can be found by researching lenders online. If that doesn't work well, then I would pick up the phone and start making calls to lenders to inquire about their requirements until you get the answers you need. Unless someone on this forum is a lender, any response will be just someone' s guess.
.
 

RichardRoe

LoanSafe Member
May 11, 2013
9
1
3
Yes, I'm replying to a post from May 2013! :)

Although that SOJL is recourse, heretofore lawsuits by recourse SOJLs have been rare in any state.
I haven't been sued yet, but I think I'm getting teed up for a suit.

The quick version is that over the past couple of years, the debt went to collections. I got some letters from a collection agency, which I didn't respond to. It went quiet after that.

Last week, I got a demand letter from a law firm. I Googled them and they seem to specialize in collections and suing people for debts. So far I haven't been sued, but I suspect that will be their next move if I don't respond.

Is the right action to keep ignoring it?

Some background information: The house that was originally involved in this (the one with the HELOC) went through foreclosure - the initial filing was in spring 2012, and the foreclosure seems to have finally gone through in spring 2014, when the house was sold by the sheriff.

Thanks for your help!
 

Ready2Run

LoanSafe Member
Aug 11, 2010
611
18
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San Francisco Bay Area, CA
Yes, I'm replying to a post from May 2013! :)



I haven't been sued yet, but I think I'm getting teed up for a suit.

The quick version is that over the past couple of years, the debt went to collections. I got some letters from a collection agency, which I didn't respond to. It went quiet after that.

Last week, I got a demand letter from a law firm. I Googled them and they seem to specialize in collections and suing people for debts. So far I haven't been sued, but I suspect that will be their next move if I don't respond.

Is the right action to keep ignoring it?

Some background information: The house that was originally involved in this (the one with the HELOC) went through foreclosure - the initial filing was in spring 2012, and the foreclosure seems to have finally gone through in spring 2014, when the house was sold by the sheriff.

Thanks for your help!
Personally I would not contact them until you are served, however I would start to prepare to get served.

I started the rest of my response with a lot of questions (ie. which state, purchase money or not, etc) but then check on some of your older posts. I just did some research on the topic and I'm not sure it they can sue you at this point but I'm not an expert so there is a very good chance that they can. Basically I looked at what Cat wrote you here. Then I Googled Oklahoma Sold out junior and got this page at Nolo. That lead me to read Titles 12 & 46 of the Oklahoma Statues which can be found here: http://www.oklegislature.gov/osStatuesTitle.aspx

In Title 46-43 and several other locations it states "Any action for a deficiency pursuant to the provisions of this subparagraph shall be commenced within ninety (90) days after the date of the sale." So it seems they missed the 90 days however it's unclear if they can now come after you personally or not. The sections where the "90 days" are mentioned also refer to many other sections so some careful reading of the Oklahoma Statues is required.

If you do get served or just want to prepare, I highly suggest speaking with a competent attorney who is well versed in sold out juniors in Oklahoma. Until then it's probably a good time to start reading the Oklahoma Statues.
 

RichardRoe

LoanSafe Member
May 11, 2013
9
1
3
If you do get served or just want to prepare, I highly suggest speaking with a competent attorney who is well versed in sold out juniors in Oklahoma.
I have retained an attorney to represent me in this. I talked to him today and we discussed a couple of different options.

At this point it's probably not a great idea for me to post a lot of details on the Internets about the proceedings, but I promise to come back and post the results when I can make them public.

Thanks for your help!
 
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Royal Delta1

LoanSafe Member
Oct 10, 2014
154
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Does anyone have had anything new to report on this? Also, for those who unfortunately were sued, have they considered lein-stripping a second mortgage in Chapter 13?
 

jmnewcomb

LoanSafe Member
Oct 26, 2013
19
0
1
Does anyone have had anything new to report on this? Also, for those who unfortunately were sued, have they considered lein-stripping a second mortgage in Chapter 13?
Wells Fargo sold our home at auction October 2013. We did not settle our SOJL (for $40K) We talked to numerous bankruptcy lawyers and then decided to hunker down and wait. We received a tax form from them this year, I think it was March 2016, and realized they'd forgiven the loan in August 2015
 

KtmKtm

LoanSafe Member
Feb 19, 2012
15
0
1
I've been inactive on here for awhile as we were waiting for the 3 years to be up to buy again with FHA. Question for anyone who has experience with this...

Has the SOJL caused anyone issues with getting an FHA loan (3 year wait done)? Financially we are fine and expect to find a home for well under what we are qualified for.
3 years to the month and just refinanced with a FHA (SOJL and SS), they have circumstances for a shorter wait, but it is on the hardship side. It went through very easily, my credit has also recovered nicely and I was well qualified financially and with equity.
 

kidsandliz

LoanSafe Member
Mar 28, 2011
56
0
6
I am now safe!!! My home was bought on a 80/15. Stop paying April 2010, sold short Jan 2011. Chase forgave the 80 and sent a 1099 (filled out insolvency papers), the 15 got sold to Freddie or Sallie whatever (saw that on a credit report) and vanished into the darkness - was never even notified it was sold and never heard from them. It had a balloon payment due in 2022... but the statue of limitations was 3 years in the state I am living in and was 5 years in the state I bought the house. No matter how you count it - from the sale or from when I no longer paid, the statue of limitations done. The Chase mess is on my credit as a foreclosure even though it is a short sale but then has the comment settled for less than I owed, the other one is on there with no comment at all. My credit originally was 750 or so, fell into the 500's after this and is now back up in the low 700's.

I still may have problems in 2022 when that balloon payment comes due but they won't be able to do much since the more stringent of the statue of limitations has past. That being said, they could create me a nice credit mess to straighten up but I will worry about that then.

In both cases I did not initiate contact, did not answer letters, basically ignored them. I did respond right after the short sale, told them my circumstances and told them I'd be unable to pay. Beyond that I did nothing. Considering how horrific Chase (the 80) can behave (and did during the 7 months trying to get them to accept the short sale) I felt lucky they gave up and 1099'ed me. I had been expecting worse from them as they put me through hell a number of years back with a credit card issue. The other lender (the 15) vanished into thin air. Thus I am another vote for do nothing, wait and hopefully you will pass the deadline to be sued.
 

rkd1908

LoanSafe Member
Oct 26, 2016
4
0
1
79
I need help!

In 2007 I opened a 75/25 home loan with Flagstar. $122k & 40k

Scenario:
The 75% loan was sold in 2009 to another bank and is in good standing and current
The 25% loan was kept by Flagstar and they rate ballooned in 2012--so, I stopped paying. It currently is charged off and was sold to ClearSpring

Over the last 4 years, clearspring has been calling my cel phone asking for me to confirm my social security number. I would tell them NO and hang up. Clearspring does not report on my credit, however, I am looking to settle such that I can get the lien released.

My concern is how to approach a settlement. I have been reading on the forums that most people were offered settlements. I only receive the monthly statement each month for the full 40k.

I have a credit repair specialist working on my behalf to send letters to Clearspring. Additionally, they have called, and Clearspring will not converse w/o confirmation of social security information. Which I suspect is a means to start pursuing me. The letter sent has not been responded to--in which we only offered 10% lump sum.

I want to accelerate this process and just get it done and over with, so my questions:

1. What is the likelihood of being able to settle with ClearSpring if the 1st mortgage is current?
2. Should I confirm my identity to start further conversations?
3. Should I retain legal services such as a real estate attorney or debt settlement attorney to help accelerate the process?
4. Should I be concerned that ClearSpring will come after me?
5. Should I expect Clearspring to start reporting on my credit once I confirm?
6. Does the SOL work in my favor, since the home is in Michigan, where the SOL is 6 years.... and, I have not paid in 4.5years

I am looking to get rid of the house eventually. So, I do not want to continue holding.

I need HELP!!
 

rkd1908

LoanSafe Member
Oct 26, 2016
4
0
1
79
Hello. I've been reading everything and I feel like I'm over my head in all of this. I'm having trouble understanding it. This is my situation:
We had 2 mortgages with BofA on our townhouse - $185,000 total.
Stopped paying both Jan 2013.
First mortgage foreclosed in May 2014.
Second mortgage has since been transferred to ClearSpring Loan Services and is now at $39,861.
I get multiple calls a day from then and multiple letters a month. They were offering a few settlement options - one being reduced payment of $10,000. I followed some advice (and I'm not sure if it was good or not) to offer $5000, no questions - paid in full. Clear Spring accepted immediately. After reading through the posts, I'm now thinking I offered too much?
Is anyone in the same situation? Anyone have advice? Should I pay the $5000? Or is that a completely stupid thing to do...?
Hi, I am looking to start negotiations with clearspring. How was the process with them after providing them the money? Were they honest? Did they do as requested and provide a letter/notice that the debt was fulfilled. I am looking to get a lien release letter for my payment. Just curious.

Also, did you by chance have to confirm any information with Clearspring before they sent the settlement offer? I currently receive calls from them, but have not confirmed my identity since they are not reporting on my credit or pursing me.

Any help or input offered would be great!
 

rkd1908

LoanSafe Member
Oct 26, 2016
4
0
1
79
I need help!

In 2007 I opened a 75/25 home loan with Flagstar. $122k & 40k

Scenario:
The 75% loan was sold in 2009 to another bank and is in good standing and current
The 25% loan was kept by Flagstar and they rate ballooned in 2012--so, I stopped paying. It currently is charged off and was sold to ClearSpring

Over the last 4 years, clearspring has been calling my cel phone asking for me to confirm my social security number. I would tell them NO and hang up. Clearspring does not report on my credit, however, I am looking to settle such that I can get the lien released.

My concern is how to approach a settlement. I have been reading on the forums that most people were offered settlements. I only receive the monthly statement each month for the full 40k.

I have a credit repair specialist working on my behalf to send letters to Clearspring. Additionally, they have called, and Clearspring will not converse w/o confirmation of social security information. Which I suspect is a means to start pursuing me. The letter sent has not been responded to--in which we only offered 10% lump sum.

I want to accelerate this process and just get it done and over with, so my questions:

1. What is the likelihood of being able to settle with ClearSpring if the 1st mortgage is current?
2. Should I confirm my identity to start further conversations?
3. Should I retain legal services such as a real estate attorney or debt settlement attorney to help accelerate the process?
4. Should I be concerned that ClearSpring will come after me?
5. Should I expect Clearspring to start reporting on my credit once I confirm?
6. Does the SOL work in my favor, since the home is in Michigan, where the SOL is 6 years.... and, I have not paid in 4.5years

I am looking to get rid of the house eventually. So, I do not want to continue holding.

I need HELP!!
I have just finished reading the differences in 2nd, 3rd, and SOJL.. and I do not think my loan is a SOJL..but rather a loan that was moved to collections since it is still secured and the property is not foreclosed on.

This changes the entire requirement for the approach.....

Any, input is welcomed.