what to do about my 2nd mortgage?

[Medport]

Ok, that clears it up a bit. I'm not underwater on my first. But it is a fairly low-value house and with the repairs it needs, would be pretty close to even right now. I just don't want them to come along in a few years when the equity starts to build up and I'm close to paying it off and then try to foreclose. It sounds like they could be willing to negotiate at that point too by offering a settlement or refinance. I'm still thinking of refinancing in the near future too if possible. If I decide to try that route, than I'm assuming I would have to include the 2nd in that too? If that were the case I would probably want to continue to pay on it.

[IBroke]

I'm still thinking of refinancing in the near future too if possible. If I decide to try that route, than I'm assuming I would have to include the 2nd in that too? If that were the case I would probably want to continue to pay on it.

No, not even in that scenario.

If you want to refinance in the future, you would have the option to either consolidate both mortgages into a new one (if there is sufficient equity) or you could simply refinance the first mortgage after the second is paid and gone through a settlement. THIS is what you want - not the first option with an (obviously) higher payment.

Now, especially when aiming at a long term solution like refinancing, you should focus on getting rid of the second rather than keeping it on your back through re-financing. If you want to go for a settlement, you should do it ASAP as long as the property-values are relatively low. The higher the property-values get, the lower your chances will be to settle with them. So stop making payments now and try to settle while the value is lower and refi your first mortgage once the property-value is higher.

Sorry if I sound like a broken record but the best scenario is a settlement on the second mortgage and if you decide to keep on making payments, that ain't gonna happen.

[Medport]

I see what your saying. If I were to add the 2nd and do a refinance it would almost be like starting over. Although I was quoted maybe a $100 a less payment with the current rates (but that is assuming I qualify and when I'm about 4 years post bk). So all companies will settle and just to confirm, it won't affect my credit to stop making payments, correct? Also what would be the typical time period of not making payments before considering a settlement and will they contact me?

[LadyInTheRed]

So all companies will settle and just to confirm, it won't affect my credit to stop making payments, correct?

There is no guaranty that the company will settle. That's why if you stop making payments, you should set the cash aside so you are ready to bring the loan current if they are unwilling to settle and instead foreclose. You will also have to pay late penalties to bring the loan current.

They should not report late payments on your credit report. If they do, you should file an objection with the credit reporting agency saying that the debt was discharged in BK.

Also what would be the typical time period of not making payments before considering a settlement and will they contact me?

When you save enough to offer to settle for 10% of the outstanding balance, you should call and make an offer. But, start by offering 5%. They may or may not make a settlement offer before you contact them. They will definitely contact you before they start foreclosure in which case you should make an offer.

[RedLight]

Having cash set aside to bring the loan current is pointless unless you are able to completely pay off the loan in full. After 120 days of non-payment they will charge off the account and will not be able to accept any money from you unless you settle or short sale.