2nd Mortgage Question

[2Bshinyandnew]

My dad recently filed a CH 7 in California. His first his first mortgage is $360K and his second is $44K. The property is valued at $345K. He was current on both at the time of filing, which was middle of June. He intends to ride through and not reaffirm.

What is the status of the 2nd mortgage? Post discharge is the 2nd still considered "secured" since the property has negative equity? What happens if he continues paying the first and stops paying the 2nd? What recourse would the 2nd lienholder have? What are his options?

[HHM]

The 2nd mortgage still has a security interest, yes. As a practical matter, they will not enforce the security interest (i.e. foreclose) because they will not recover any money. The bankruptcy does not discharge the security interest (i.e. the lien), it only discharges the debtors personal responsibility to pay the debt if the collateral is not worth what is owed on the loan.

[BKMarty]

I would wait a year or so without making payments and then make them an offer for pennies on the dollar to release the lien at that time. I would enclose a few comps with your offer at that time so they can see that they have very little chance to regain some equity on their investment. If you are in California your house should still drop another 50K before hitting bottom. good luck.

[albacore44]

Falling, falling, and still falling. My 2nd of $240K has for all intents and purposes become unsecured, due to a forclosure that recently sold. Guess I dont feel quite as bad as my neighbor who paid $800K mid 2006 for the same house now worth about $350K

[Amy26]

I just looked up my home value and there is a condo exactly like mine on sale right now for 135k >< ... Paid 250,000 for it in 2007. Its been on the market a while though. Stupid housing market....

[OhioFiler]

With so many homeowners so far upside down I think the best thing to do is walk away from the property whether one files bk or not in the above situations. The more houses on the market via foreclosure the more likely the market correction will occur and stabilize home values.