Discharged and 2nd mortgage?

[vengence]

Hello,
I filed a chapter 13 in 2005 which was converted to a 7 and discharged in 2009. 2005 was the last time I made a payment on my 2nd mortgage. I was able to get a home loan modification on my 1st and have been current with the 1st ever since then. I had attempted to do the same with the 2nd back then as well however they would just hang up when called them and never replied to any emails. The 2nd does not show on any of the credit reports either. Just last month my 1st mortgage sold my loan to... The 2nd mortgage company. My concern is now that they have both notes they might think it's a good idea to foreclose. The house is still under water. I'm not sure what I should do. I had been thinking of sending them an offer to get rid of the 2nd before they got the 1st.

Any thoughts on a plan of action would be great.

Thanks

 

[LdiJ]

Hello,
I filed a chapter 13 in 2005 which was converted to a 7 and discharged in 2009. 2005 was the last time I made a payment on my 2nd mortgage. I was able to get a home loan modification on my 1st and have been current with the 1st ever since then. I had attempted to do the same with the 2nd back then as well however they would just hang up when called them and never replied to any emails. The 2nd does not show on any of the credit reports either. Just last month my 1st mortgage sold my loan to... The 2nd mortgage company. My concern is now that they have both notes they might think it's a good idea to foreclose. The house is still under water. I'm not sure what I should do. I had been thinking of sending them an offer to get rid of the 2nd before they got the 1st.

Any thoughts on a plan of action would be great.

Thanks

I would wait and see what transpires. If the home is still under water there is no ability to collect on the second in a foreclosure. Therefore if you are paying the first mortgage the bank would have no incentive to foreclose.

 

[Taxing Matters]

I would wait and see what transpires. If the home is still under water there is no ability to collect on the second in a foreclosure. Therefore if you are paying the first mortgage the bank would have no incentive to foreclose.

I have a different view of it. The bottom line is that details of this matter and I think the OP ought to see a bankruptcy attorney.

The longer explanation is this. The problem is that while the second mortgage may have been discharged in the bankruptcy, the lien may still have remained on the home unless they stripped it off in the 13 before the conversion to the 7. Then after the discharge, the OP refinanced the first mortgage. Depending on how the refinance was done, it may have had the effect of subordinating the new refinancing lien to the old second mortgage lien. If that is indeed what happened, the lender might well at some point have an incentive to foreclose. The only way the lender gets paid on that second mortgage lien (if it still attaches) is from the property; it cannot get a judgment for that debt and collect it from other assets of the OP. So if the lien is coming up to expire, the lender may well want to try foreclosing to get paid for that mortgage and then get a judgment for the refinanced loan and go after whatever is left on that after foreclosure by attaching other assets of the OP. The details of the two loans, the bankruptcy, the discharge, and the refinancing all matter in sorting out where the OP stands and we just don't have that. It's better that the OP find out now where he/she stands so the OP can come up with a plan to deal with rather than waiting to the point the lender might decide to pull the trigger and foreclose the lien.

 

[LdiJ]

I have a different view of it. The bottom line is that details of this matter and I think the OP ought to see a bankruptcy attorney.

The longer explanation is this. The problem is that while the second mortgage may have been discharged in the bankruptcy, the lien may still have remained on the home unless they stripped it off in the 13 before the conversion to the 7. Then after the discharge, the OP refinanced the first mortgage. Depending on how the refinance was done, it may have had the effect of subordinating the new refinancing lien to the old second mortgage lien. If that is indeed what happened, the lender might well at some point have an incentive to foreclose. The only way the lender gets paid on that second mortgage lien (if it still attaches) is from the property; it cannot get a judgment for that debt and collect it from other assets of the OP. So if the lien is coming up to expire, the lender may well want to try foreclosing to get paid for that mortgage and then get a judgment for the refinanced loan and go after whatever is left on that after foreclosure by attaching other assets of the OP. The details of the two loans, the bankruptcy, the discharge, and the refinancing all matter in sorting out where the OP stands and we just don't have that. It's better that the OP find out now where he/she stands so the OP can come up with a plan to deal with rather than waiting to the point the lender might decide to pull the trigger and foreclose the lien.

I understand everything that you are saying here, but the house is underwater. Its likely going to be a long time before there is any equity in the home that would allow for something to be available for the 2nd mortgage, assuming it was never stripped off.

 

[FlyingRon]

I understand everything that you are saying here, but the house is underwater. Its likely going to be a long time before there is any equity in the home that would allow for something to be available for the 2nd mortgage, assuming it was never stripped off.

But if TM's supposition is right, the "2nd" is now the first and there's plenty of value in the home to pay them off and probably make a good dent in the principal owed on the original first.

 

[LdiJ]

But if TM's supposition is right, the "2nd" is now the first and there's plenty of value in the home to pay them off and probably make a good dent in the principal owed on the original first.

The first was modified, not refinanced. I do not see any way that it could turn into the second, nor do I believe that the bank who had the first would agree to a modification if it would turn them into the 2nd.

 

[Taxing Matters]

The first was modified, not refinanced.

But the details of that matter. What the OP is calling a modification may have in fact been what amounted to a refinancing.

I do not see any way that it could turn into the second, nor do I believe that the bank who had the first would agree to a modification if it would turn them into the 2nd.

The lender probably would not have done it if it knew that the effect would be to subordinate it to the old second mortgage. But lenders are not perfect; they do screw these things up, sometimes when there are trying to be a bit too clever. And they screw up more than most people realize. When I was an officer for the IRS I reviewed lots of mortgage liens and mortgages and found quite a few errors. Some were not very significant, but some were resulted in huge problems for the lender that I was able to exploit for the government's benefit. One should never assume things when liens are involved; they should always get the relevant documents and read them closely — or have an attorney review them if they are not experienced with that sort of thing. You'd be surprised what you might find. I was able to collect a lot of money for the government by being detail oriented. And it may be that the old second mortgage lender might find a screw up to exploit here, too.

The first thing the OP wants to know is if that old second mortgage lien got stripped off in the bankruptcy. If it did then that's a dead issue. If it wasn't, then a review of the mortgage documents and liens may be a good idea so the OP knows exactly where he/she stands rather than just assuming it. I've learned in my years of practice as a lawyer that you never want to rely on what you assume. Always verify the facts.

 

[vengence]

Hello all,

Thanks for the replies. To clear up the issue a little... The 1st is still the 1st mortgage, it was just modified to make the payment do able. Both the first and second were done prior to the BK. I will check with the county on Monday to see if the second is still listed as a lien holder, all I know is that they stopped reporting to credit bureaus(all3) many years ago. I have talked with my BK attorney. He thought it would be a good idea to make an offer on the 2nd. I'm just not sure at this point. Part of my uncertainty is due to the the 2nd mortgage holder and now they are the 1st as well. Specialized Loan Servicing do not have a good reputation.

 

[vengence]

1 clue to the status of the 2nd is that when SLS got the 1st from Wells Fargo they claimed I didn't have insurance and they were adding it to the loan. I did and do have the house insured. I had my agent contact them with the info and told him to add SLS to the policy after removing Wells Fargo. What I got from the insurance company was to documents 1 showing they had added SLS to the policy and 2nd document was showing SLS had given the insurance company the loan number for the second and had the 2nd added to the policy. I didn't authorize that they just did it.

 

[LdiJ]

1 clue to the status of the 2nd is that when SLS got the 1st from Wells Fargo they claimed I didn't have insurance and they were adding it to the loan. I did and do have the house insured. I had my agent contact them with the info and told him to add SLS to the policy after removing Wells Fargo. What I got from the insurance company was to documents 1 showing they had added SLS to the policy and 2nd document was showing SLS had given the insurance company the loan number for the second and had the 2nd added to the policy. I didn't authorize that they just did it.

Yeah, that is a rather big clue.

 

[despritfreya]

I wasn’t going to chime in due to the intelligent discussion that was/is taking place. I love reading highly thought provoking opinions. Thank you.

Here is the reality. . .

1. The second was not stripped. Such simply does not happen in the context of a Chapter 7 discharge even if the bk was originally filed as a 13 and then converted.

2. The second is not beyond collectability (statute of limitations) unless it became fully due and payable at some point in the past. A loan, to be subject to a SOL, has to be fully matured. A long term mortgage (if OP’s HELOC was one) is not fully matured unless it reaches its last due date or is officially accelerated by the lender. A "charge off" is not an acceleration. What may be beyond a SOL is the actual monthly payments that fell due more than ___ years ago.

3. OP is concerned about the lender seeking to foreclose, not because there is any equity (which there apparently isn’t) but because OP believes that the holder of his 1st loan and the holder of his 2nd loan are now the same. OP’s concern is well taken however I tend to doubt such is a problem. My guess (since OP did a loan mod probably under HAMP) is that both his 1st and 2nd are securitized. While the “servicer” is the same for both it is unlikely that the “investor” is the same. If I am correct, it is unlikely that the servicer will foreclose on the 2nd if the 1st is current. However, OP needs to understand (and I believe OP does), that the 2nd has the right to foreclose even if such makes no economic sense. The question is, will it?

4. Attempting to buy a lien release for a token amount is not a bad idea however, once OP contacts the 2nd OP will be waking the sleeping giant. To me, it is a toss of the coin but if OP has some cash reserves it may not be a bad idea.

Ok, I will go back to enjoying reading what others have to say.

Des.