Reaffirming my house first loan but not the second

[financeguy]

Hi All,
I'll make the scenario simple before to ask my questions.
Bought a house 10/2006 with 100% financing in California. Purchase price 650K. and did a 80/20 financing. First loan 520K. Second loan 130K.
Filed BK in august 2009. House value was reported to 450K. The value was not challnged. Case was closed on january 2010. The note holder of the first lient is now foreclosing. No sale date published yet but it will be soon published.
I tried to approach the bank of the second loan (loss & mitigation) and offer them 5K to charge off the second. Of course they refused (even though I pointed them out they would loose those money no matter what... being unsecured debt).
My question is. I want to keep the house only based on the first (520K) and get rid of the second. What is my best plan of attack?
1) Reaffirm the first and then deal with the second after? The problem I see here is that once I commit on the first the second could leverage on that to no negotiate.
2) Sort out the second first trying to get a charge off agreement and then reaffirm or reinstate the first? The problem I see here is that if the second doesn't agree to something the first will continue with foreclosure.

thanks.

[Amy26]

As far as I know you cannot reaffirm a debt after your bankruptcy is discharged. If you didn't reaffirm it during the bk, it is considered discharged. This is one of the reasons why they will be unlikely to work with you (2nd or the 1st). I'm confused about approaching them with 5k to charge off the second mortgage...cause its technically gone since you didn't reaffirm.

I have heard of people getting loan mods after the fact, but its a tricky slope since they are technically trying to modify a loan that no longer exists.

I am guessing your loans are not current either otherwise they wouldn't be in the foreclosure process... I think you will find it difficult and/or not possible to make any negotiations. I think you would have to pay up what you owe them to be able to do any kind of "ride through".

Maybe someone else has something more positive to add.

[financeguy]

Thanks for the response.
I checked with my BK lawyer and she said that typically the bank is the one that proposes to reaffirm a loan during BK. Bottom line, whether I was supposed to ask to reaffirm or the bank was supposed to that, it wasn't done during the BK period. Therefore now that BK is closed sounds like reaffirmation is not an option. Why wouldn't be? After all reaffirmation is to legalize a debt I am not liable for on an existing deed?
By the way I would want to reaffirm only the first and not the second. The 5K I would offer them to remove the deed on the second is a payoff of the second (130K). The alternative is that the bank loose everything if they foreclose because the second is unsecured. So 5K for them could be better then nothing.
There might be a way to reaffirm the first even after BK is closed. In this case it would be more a reinstating the loan which require payment of the all the missing payments. After all only the first is currently foreclosing.
My goal basically is to leverage on the BK in order keep only the first which is about the current value of the house. For the bank is a better deal then foreclosing (they would make more money then foreclosing) ... unless I am missing something on the equation.
Anyone successful in doing this ?

[WC Nurse]

We didn't reaffirm the 1st or 2nd (both with Chase) and our Ch 7 was discharged in July 2009. In August 2009, a month after our BK was discharged, we applied for a loan mod on the 1st and stopped paying on the 2nd. We got our first permanently modified on 3/11/10 and just settled our 2nd.

You CANNOT reaffirm after the bankruptcy has been discharged unless you REOPEN the case. There is no reason to reaffirm in my opinion. It's actually to your advantage not to. I used that in our negotiations with Chase, stating to them that the debt is discharged, we didn't reaffirm and can walk away at any moment and it's in their best interest to work with us. They must have agreed since we got what we wanted....a greatly reduced 1st payment and the 2nd settled for about 30% of what we owed.

[financeguy]

Now it start to make sense.
I tried to do exactly the same. The difference in my case is that two loans are owned by different entities: 1st by private investor and 2nd by SunTrust. Now SunTrust is also the servicer of the first.
Suntrust came back with a modification on the first and the second (of course they don't want to loose their 2nd) although both have been discharged.
I offer them to accept the modification on first but not the second. I offer them a settlement of 5K on the second (about 4% of the loan) but they refused it.
So I guess with chase you were luckier then me with Suntrust or maybe because in your case both loans were with the same bank.
Did you use any other tactic besides offer them a deal or walk away ?

thanks.

[WC Nurse]

So I guess with chase you were luckier then me with Suntrust or maybe because in your case both loans were with the same bank.
Did you use any other tactic besides offer them a deal or walk away ?

I'm not sure if it helped that both loans were with Chase, because Chase wasn't the investor on either loan; Chase actually had to get investor approval to modify the 1st and settle the 2nd. I know that the investor for the 1st was Wells Fargo but I'm not sure who the investor was on the 2nd.

That was the only tactic I used...except for the numerous phone calls I made, emails I wrote, etc. I even wrote the CEO of Chase and the executive team several times for assistance. I called the HOPE helpline several times. I inundated them on a regular basis. They probably got tired of hearing from me!

You might want to check out this other site I go on a lot. They have a thread for loan modifications and if you do a search for Suntrust, you can read a lot about people's struggles with them. http://www.loansafe.org/forum/loan-modification/. I mostly went on the Chase forum there and found a wealth of information. There's many people on that site that post the CEO's and other important people's contact information so you might want to check it out and see if anyone's been successful with settling with Suntrust and how they did it.

[financeguy]

The pressure you did sounds similar the one I am doing. I was wondering if you kept an attitude such as: "This is the deal I offer you. Take it or I walk away" or if you used a more soft approach asking for help.
They really do play a hard ball game and I think the only criteria the go by is how they are gonna make the most money out of it.

[Ugh07]

Suntrust will very often take 10 cents on the dollar to settle a second. I have seen it many many times.

[financeguy]

Thanks.
Can you give some more details (if you have them) when you say you have seen it many many times?
Do you know by chance who to approach? Regular negotiators on Loss&Mitigation department has less authority then a monkey.

[Ugh07]

During the boom in Florida my Company was the top selling broker of Suntrust HELOCS on the west coast of Florida for 2 years straight. Unfortunately, due to that I now have a lot of past customers in underwater loans. More than 90% of them have been successful in getting Suntrust to take a 90% haircut. Usually it is in the case of a short sale but I have seen cases like yours as well. I would try going through channels and seeing what you can do. If they do think there is a chance at getting to your equity then they wont do it at all.

[financeguy]

Thanks for the reply.
There is no equity in the house. Actually quite the opposite. I am under water of about 200K. If Suntrust sell to an action they will loose the 2nd and part of the 1st. Now the 1st is owned by other investors. The 2nd is owned by Suntrust.
I don't understand why they are not willing to take even 5K rather then loosing everything. It just doesn't make sense. Do they incentives that I am not aware about foreclosing ? In other words they must see money somewhere else if they are not willing to settle. Or maybe they are just bluffing ?

[Ugh07]

-They may be bluffing
-The person you are dealing with may not actually have the authority to settle
-They may try to extort some money out of the first lender to grease the wheels of the foreclosure
-They may just be idiots, it's pretty common