what to do about my 2nd mortgage?

[demetrise]

I filed bankruptcy it was discharged a little over a year ago. I did not reaffirm my 2nd mortgage. I did reaffirm my 1st mortgage. I have been making payments on both, but neither have shown up on my credit report? What would be the possible issues I would face in the future if I stop making payments on my 2nd mortgage? Since I reaffirmed my 1st mortgage should the payments show up on my credit report?

I live in Austin, TX.

[Medport]

anybody, I'm in the same boat?

[justbroke]

If you reaffirmed a first and the payments do not show up, perhaps the bank doesn't believe it was properly reaffirmed. You would need to speak with the bank about that (reporting). If it was discharged, never worry about a debt for which you're still paying, not being reported on your credit report. That's the last thing you should be worried about or care about. (I should also mention that there are very few good reasons to reaffirm any mortgage anyhow. Especially when you are underwater on any one of them.)

If you stop paying the 2nd, then you will be at the mercy of what the 2nd decides to do when you are in default. There is absolutely no way to tell what the 2nd will do. They can do everything from a.) absolutely nothing, b.) foreclose, c.) sue you on the Promissory Note (without foreclosing), or even d.) give up and send you a satisfaction of mortgage. (I actually received a satisfaction of mortgage recently, out of the blue , on a discharged 2nd mortgage!)

The problem is, there is no way to tell what is going to happen.

[Medport]

In my case, the 1st was reaffirmed, but I can't remember what the attorney said about the 2nd since it was about years ago. I believe he said to just keep paying on it and possibly refinance it when it came do? I stopped getting statements after I filed and they said to keep sending payments in. I've usually only paid $50-100 a month and I know the interest only is about $38 so I'm sure the balance is around 12k or so. My draw period ended in Dec. 2013 I believe if you go by 10 years since I took out the loan so I think the balance should be due unless the bk changed that? This was the first month I didn't send a payment in as finances are tough at the moment. Any idea what I should do? I'm debating between calling them, just sending a payment or do nothing and see what happens. I would hate to have them try to foreclose as I've remained current on my first (although its a struggle sometimes) and I only have about 15 years on my 30 year mortgage left. I inquired on my current 1st about refinancing and they said I would most likely have to wait 4 years post bk to be approved by them, but haven't tried other lenders yet. I know my debt-to-income will be pushing it to due to my student loans and car payment. Any advice?

[justbroke]

There is no telling what a HELOC 2nd will do. Again, they can just sue on the promissory note which is probably a better strategy for the lender given that this is only a $12K HELOC.

If you don't have any equity in the property beyond the first mortgage or record, and the 2nd (HELOC) was discharged in the bankruptcy, you could approach the HELOC lender for a settlement of say 5% - 10% of the balance. There are some discharged debtors that have been successful in that approach. Of course, you may need to stop actually paying it, otherwise they will figure that you have the money to keep paying, so why settle.

[Medport]

I'm still debating what to do. I have a little money now and could send in the min., but was thinking of holding off and seeing about a payoff or what they may do. On the other hand, I'm assuming my credit will take a hit if I stop making payments correct? I'm thinking of trading my car in in the spring and don't want my credit scores to take a plunge now.

[LadyInTheRed]

I'm still debating what to do. I have a little money now and could send in the min., but was thinking of holding off and seeing about a payoff or what they may do. On the other hand, I'm assuming my credit will take a hit if I stop making payments correct? I'm thinking of trading my car in in the spring and don't want my credit scores to take a plunge now.

If you stop paying on the reaffirmed 1st, the late payments can be reported on your credit report. If you stop paying on a debt that was not reaffirmed and discharged, then the creditor cannot report the late payments on your credit report.

[Medport]

This is confusing. The 1st was reaffirmed and I'm continuing to pay it. The 2nd I believe was not reaffirmed, but not discharged either (because its a lien on the 1st?). I believe they said it should have been reaffirmed after the fact when I called them after the bk because I didn't get any more statements. I guess I should call them again to figure out whats going on, although I'm sure they will say to send payments in. I just don't know why I haven't been contacted saying my draw period was over or something.

[LadyInTheRed]

This is confusing. The 1st was reaffirmed and I'm continuing to pay it. The 2nd I believe was not reaffirmed, but not discharged either (because its a lien on the 1st?). I believe they said it should have been reaffirmed after the fact when I called them after the bk because I didn't get any more statements. I guess I should call them again to figure out whats going on, although I'm sure they will say to send payments in. I just don't know why I haven't been contacted saying my draw period was over or something.

It makes complete sense that the 2nd mortgage was discharged if it wasn't reaffirmed. That is how it normally works. But, there are other reasons besides a reaffirmation that might cause a debt to not be discharged. I don't make any assumptions because I don't know the details of your case. If you did not reaffirm the second and the second did not file an objection to dischargeability and win, the loan would have been discharged.

I see now that my phrasing was confusing. I should have said "if you stop paying on a debt that was not reaffirmed and that was discharged..."

[Medport]

I don't know, I'm pretty sure the 2nd wasn't discharged or my attorney would have told me to stop paying on it. I wonder if I should try to contact the attorney I used at the time to see if they still have any records or advice?

[LadyInTheRed]

I don't know, I'm pretty sure the 2nd wasn't discharged or my attorney would have told me to stop paying on it.

Not if you wanted to stay in the house which I assume you do since you reaffirmed the first. People continue to make payments on discharged mortages all of the time.

I wonder if I should try to contact the attorney I used at the time to see if they still have any records or advice?

You could. But you could also check your discharge order to see if the 2nd is listed as excepted from discharge.

Did you sign a reaffirmation agreement? Did the creditor file an objection to your discharge? You would know if they did. If the answer to both of these questions is "no" and you listed the mortgage on your list of creditors, then the mortgage was discharged.

[Medport]

I just called the 2nd mortgage company and asks the status of my loan and they said my obligation is discharged! I asked her to clarify that and they said they still have a lien on my property. So I asked if I didn't send in payments would they try to foreclose and she said she couldn't answer that and I could continue to make payments if I wanted to. So I'm thinking this means I don't have to and have been making payments for the past 2+ years for nothing, correct?

[IBroke]

I just called the 2nd mortgage company and asks the status of my loan and they said my obligation is discharged! I asked her to clarify that and they said they still have a lien on my property. So I asked if I didn't send in payments would they try to foreclose and she said she couldn't answer that and I could continue to make payments if I wanted to. So I'm thinking this means I don't have to and have been making payments for the past 2+ years for nothing, correct?

Not "for nothing". Again, you have to keep in mind that a mortgage exists of a lien and the debt itself. The lien is the lender's "security" and no matter if your mortgage was discharged or not, usually requires payment(s) to get rid off. This is what you did by paying your second mortgage after your bankruptcy. Each payment brings you closer to that goal.

Now, if a mortgage was discharged, it means that your personal obligation to pay this debt was erased. This means that they can't come after you personally if you fail to pay. However, their lien on your property assures them that they can still foreclose if they want to if you fail to make the payments.

It might also help you to understand this scenario by pointing out that filing for bankruptcy and getting a discharge on the debts involved doesn't mean that the debt is gone. It only means that lenders can't come after you for those debts anymore. This makes it a bit easier to understand why there is still a debt on a non-reaffirmed account (in this case, your second mortgage) in the first place.

On unsecured debts like credit cards, it certainly doesn't make any sense to pay after your discharge. On the other hand, if we are talking about secured debts like real estate or vehicles the debtor (in this case, you) wants to keep, continuing payments makes totally sense. The ultimate goal of a debtor on secured loans is to own free and clear - no matter if it's a house or a car. And this is usually achieved by paying off the debt associated with it (either a mortgage or an auto-loan). So if you want to keep a home or car after a bankruptcy, you keep on paying.

Now, if your second mortgage is completely underwater, I would suggest you stop making payments on the second mortgage and put the money aside. By doing so, you will ultimately be able to offer the second mortgage the usual 5-10% of your balance in order to settle and get rid of it. And if they don't agree and actually try to foreclose, you still have the money to get current again.

As others pointed out, you don't have to worry about credit-reporting on discharged and non-reaffirmed debts. They are not allowed to report anything derogatory on your second mortgage post filing.

[Medport]

So I still don't know if I should continue paying or not? btw, I don't know what you mean by asking if the 2nd is underwater? Its actually a home equity loan that was for around 13k when first taken out, I'm not sure what the balance is, but probably a little over 11k now. Last month was the first time I didn't make a payment. The interest only payment is around $38 and I usually paid anywhere from $50-100 so if I continue those payment it will probably take over 20 years to pay it off! (and I only have about 14 years left on the 1st) and I can't afford to pay any more right now. So if I understand, if I miss a payment here or there it won't affect my credit score or interest rate, most likely just add to the principle? I'm thinking that's the case because she didn't mention that my payment was past due or anything.

Maybe I should call back and try to get more answers? What questions should I ask? I don't think stopping paying to set money aside will work either as the past couple months I haven't even broke even. I did just get a 2nd job so I should start to do better, but still will have to watch what I spend as things always come up like home repairs and tires which I desperately need for my car right now.

[IBroke]

So I still don't know if I should continue paying or not? (...) I don't think stopping paying to set money aside will work either as the past couple months I haven't even broke even

Well, If you are saying that you are not sure if you should continue to pay, I don't understand why putting the money aside instead is not an option. The money for making payments has to come from somewhere, too, right?

So instead of paying the mortgage which won't get you anywhere in the near future, you should try something different by aiming at a settlement.

I don't know what you mean by asking if the 2nd is underwater? Its actually a home equity loan that was for around 13k when first taken out, I'm not sure what the balance is, but probably a little over 11k now. Last month was the first time I didn't make a payment. The interest only payment is around $38 and I usually paid anywhere from $50-100 so if I continue those payment it will probably take over 20 years to pay it off! (and I only have about 14 years left on the 1st) and I can't afford to pay any more right now. So if I understand, if I miss a payment here or there it won't affect my credit score or interest rate, most likely just add to the principle? I'm thinking that's the case because she didn't mention that my payment was past due or anything.

"Underwater on your second mortgage" means that the current balance of your first mortgage is higher than the current value of your home. If that's the case, the second mortgage wouldn't get any money from a foreclosure-sale and therefore, making it unlikely that they initiate a foreclosure.

As I suggested, stop making the payments on your second mortgage and put that money on a savings-account instead. Making payments on this second mortgage probably won't change the current status and you will be paying this mortgage for many, many years to come.

And since it doesn't affect your credit, there is no reason NOT to stop payments if you are indeed underwater with this mortgage. I think your chances of getting a settlement by doing what I suggested are quite good. It's a discharged mortgage with a low balance. They probably wouldn't even foreclose if there would be equity because it's not worth it due to the low mortgage-amount.

Maybe I should call back and try to get more answers? What questions should I ask?

I don't know. The most important thing is that it is discharged and non-reaffirmed. As long as you are making timely payments, they certainly won't give you any advice on who to get rid of this loan. Sad - but that's how it works.