Foreclosure University

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Settlement

Can my 2nd mortgage (heloc) foreclose on me?

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Question:  I have done a loan modification with my first mortgage and have been making the monthly payments every month with no problems. We have a Home Equity with another back which we have not been making the payments for that for over a year now. That bank is now sending us Notices Of Intent To Accelerate. Can they foreclose on our home even though they are not the first mortgage and we are current with the first mortgage company. what can this bank do to us?

Answer:  – This question comes up all the time. For some reason, many homeowners don’t believe the 2nd mortgage can force the sale of their home. In most cases, your home is collateral for the loan. That’s why when you get a 2nd mortgage, they want to make sure there is equity in the home so they can get paid if they have to foreclose. Even if you are current on your first mortgage, doesn’t matter. The 2nd mortgage can still foreclose and force the sale of your home. Although they would prefer not to because very likely they won’t be able to sell it for what they are into it.

So they will incur both foreclosure costs and lose out if the home is upside down. This is why they are so willing to work with us and other investors in settling those 2nd mortgages because they would prefer to have something rather than nothing. In any case, you will eventually lose your house if you continue on this path so it makes no sense if you are not paying your second, might as well not pay your first either. A better solution if you want to keep paying your first, is to work out something with the 2nd… basically a settlement. You’ll agree to pay them x amount to satisfy the loan.

If the 2nd forecloses, more than likely they will issue you a 1099 or they will file a judgment against you for the difference. When this happens, you can either choose to pay the judgment or the loss that was incurred from the sale or you can file bk. Hope this helps.

Short Sale? Can we Settle instead of payment plan?

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Question:  We are in the process of doing a short sale to sell our condo in Illinois. We have a mortgage and a line of credit through Wells Fargo. The mortgage is approved for short sale, asking us to bring $20k to closing. The line of credit is almost approved but they are saying that we will have to settle that loan AFTER we close by setting up a payment plan. We cannot afford to pay on this line of credit and we are now considering foreclosure. If we foreclose, can the bank come after our assets? Can the bank come after us for the line of credit? We are moving out of state. Will we have to go to court? Will foreclosure permanently be on our record, or just for 7 years? Will we be able to get loans in the future? Thank you for your help!

Answer:

These are great questions. You have about 3 or 4 questions here so I will try to answer them accordingly. First, the bank can’t come after your assets directly but they “could” file a judgment against you where you will have to pay them the amount that was deficient. The line of credit is what gets most people into trouble. They are the ones who take the biggest losses. So they are the ones that usually come after you. You can actually settle the 2nd mortgage completely for approx. 10% to 15% of the original note if you know what you are doing. That way there is no repayment plan. It’s basically wiped out for good. See most banks are worried that you will file bankruptcy, so they are willing to work with you if you provide them a quick settlement upfront. Third, you shouldn’t have to go to court, unless you decide to fight the judgment if it even goes that far. Fourth, foreclosure will be on your record for about 7 years. Bankruptcy is about 7-10 years. A short sale is about 2-3. A settlement has NO effect on your credit because it was paid off in full. No matter which route you choose, you will eventually be able to get loans again. It’s just a matter of time.

Can I Short Sale My HELOC?

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Question:  I may need to short sale my home in Washington DC. My second is a line of credit of $80K. Is it possible that that lender approve a short sale, or will they automatically not, just because it is a line of credit and not a regular mortgage loan?

 

Answer:  

Yes, you can “work out” something with your lender. A short sale is usually done when you have a buyer come in and offer the bank less than what that home is worth and then you have to move out. If you want to sell the home, than that would be an option. However, a better alternative might be to Settle Your 2nd Mortgage. This is where you would negotiate a full payoff or settlement of your 2nd mortgage. It’s a lot different from a short sale because you get to stay in your home and it doesn’t affect your credit like a short sale would. Hope this helps.

Counter offer to HELOC settlement

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Question:  Hi, many of these subjects are interesting but my questions and situation is a bit different.
After going through a long process with my 1st mortgage, finally a loan modification with a 3 month trial is being worked on. Still owe about 145,000 on 1st mortgage. House value is now around 50,000. Took a HELOC of 30,000 of which I still owe 24,000. After unemployed and some rough times, just getting back on my feet. Heloc lender wants a lump sum at this point of 19,500. If I can’t come up with it then a down of $4,500 and a monthly of $200. If I could I would but can’t. I counter offer $50-$75 month. My weekly budget has no rooms for extras. I have not heard on my counter offer. Can you explain what will happen if they don’t accept to me, my house which I am trying to keep and working with my 1st lender. Thank you for any help or suggestions you can provide. will look out for a response.

Will 401k savings be affected in I foreclose on Michigan home?

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Question:  My husband and I own a home in Michigan, but my husband has had to accept work in Iowa. I am currently still living in our Michigan home since I don’t see a good way to get out of our home. We have had an interest only loan on it for the 6 years we have owned it and an equity line as well so there has been 0 principal paid off on it. I owe $175,000 on a home that is currently worth about half of that, so I will be unable to sell it for what I owe. I’m not sure what to do. Unfortunately, we don’t make enough money between the both of us to pay for our Michigan home and for my husband to rent a home in Iowa so I’m afraid that my only option may be foreclosure. What I need to know is if I will still be responsible to pay the equity line if the home is foreclosed on and if either bank will be able to take my 401K savings? Also, my husband and I are both listed on the house deed, but the financing on both loans is in my name only. Will my husband be protected or will they be able to come after him for payment as well? Thank you for any advice you can give me.

Can I Settle my Equity Line of Credit with the Bank?

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Question:  I own a property outright which has no mortgage. There is an equity line of credit which has come due, which I can not afford to pay in total. I consistently made payments on the equity line until November of 2011. The bank asked me to offer them a settlement which I have done and suggested that I not make anymore payments on the equity line. This has been dragging on for months. The bank asked me to let them appraise the property and then they would decide on the settlement. Is this normal procedure? Can you shed any light?