2nd mortgage wants to foreclose??

[pepperoncini]

(Asking for a friend...)

BK7 papers were filed in April, 341 in May, currently awaiting discharge.

$72K owed on 1st mortgage
$48K owed on 2nd mortgage
house worth maybe $100K (but I believe that is a high estimation)

They have stayed current on the 1st mortgage, 2nd mortgage they let go 4 months ago. "Reaffirmation" boxes were checked on their schedules, but no papers were signed to that effect on either mortgage.

Today, the bank that is holding the 2nd mortgage called their BK7 atty and is threatening foreclosure.

How worried should they be? The 2nd would have to pay off the first, right?

[newbie2]

(Asking for a friend...)

BK7 papers were filed in April, 341 in May, currently awaiting discharge.

$72K owed on 1st mortgage
$48K owed on 2nd mortgage
house worth maybe $100K (but I believe that is a high estimation)

They have stayed current on the 1st mortgage, 2nd mortgage they let go 4 months ago. "Reaffirmation" boxes were checked on their schedules, but no papers were signed to that effect on either mortgage.

Today, the bank that is holding the 2nd mortgage called their BK7 atty and is threatening foreclosure.

How worried should they be? The 2nd would have to pay off the first, right?

They should be worried. Yes, the 2nd has to pay off the first mortgage, but if the 2nd believes they can get some money then they will do it. If the $100,000 valuation is close, even with closing fees the 2nd can be looking at recouping $15,000 or more of what they were owed.

Perhaps your friend should give them a call and offer them a settlement to release their lien.

[starr4law]

Hmmmm . . . did the lender file a motion for relief of stay? This sounds like they are blowing smoke more than anything. If it were me, I would ride it out until the discharge, don't sign any reaffirmation agreements (especially pertaining to the 2nd mortgage), and see if they actually do anything. While it DOES happen, it just doesn't happen that often.

[pepperoncini]

They really have nothing to offer the bank, in terms of a settlement. The 1st mortgage's payment is $737, the 2nd mortgage's payment is $638.

My friend has been digging ditches to support his family, but that work is dependent upon the weather. It's been a LONG few years since he lost his job in March 2008.

So, you think they should call? They could probably offer $200/mo. on the 2nd mortgage.

Honestly, I think the house is worth $85-90K.

[pepperoncini]

Hmmmm . . . did the lender file a motion for relief of stay? This sounds like they are blowing smoke more than anything. If it were me, I would ride it out until the discharge, don't sign any reaffirmation agreements (especially pertaining to the 2nd mortgage), and see if they actually do anything. While it DOES happen, it just doesn't happen that often.

No, no Motion for Relief was filed. They did not reaffirm though. Would that make a difference?

The atty heard from them yesterday and they were threatening foreclosure. The atty said to pay them if they could. But they cannot afford it.

The bank sent my friends a letter wanting them to sign saying that they could speak directly with them rather through that atty. They did not sign...

[momofthree]

I have to agree with Newbie2. If the house is worth $100k, it's worthwhile for the 2nd to foreclose.

[SMinGA]

Sounds like no violation of the stay - contacting the lawyer & only contacting the debtor about communication rights. But once the discharge happens, the automatic stay expires. The 2nd is probably waiting til then, to avoid legal fees for lifting the stay.

No, no Motion for Relief was filed. They did not reaffirm though. Would that make a difference?

The atty heard from them yesterday and they were threatening foreclosure. The atty said to pay them if they could. But they cannot afford it.

The bank sent my friends a letter wanting them to sign saying that they could speak directly with them rather through that atty. They did not sign...

[starr4law]

So, technically, the house is underwater, correct? Even though buy out the first mortgage makes it "appear" as those the second mortgage would get about $15K, they really wouldn't. They need to bid out their own interest and then satisfy the first mortgage. THEN they actually need to dispose of the home before they see dime one. Never happen in my opinion.

I still think the whole thing is a threat. If I were them, I wouldn't talk to them at all and keep making the first mortgage payment.

[pepperoncini]

So, technically, the house is underwater, correct? Even though buy out the first mortgage makes it "appear" as those the second mortgage would get about $15K, they really wouldn't. They need to bid out their own interest and then satisfy the first mortgage. THEN they actually need to dispose of the home before they see dime one. Never happen in my opinion.

I still think the whole thing is a threat. If I were them, I wouldn't talk to them at all and keep making the first mortgage payment.

When combining what is owed on the 1st and 2nd mortgages - yes, the house is underwater.

I'd hate to see them lose their home, but they simply cannot afford it.

I'm just wondering how this will all play out. Before they filed, I asked around and the general belief was that the 2nd would not foreclose for $15K (or so...).

This has really thrown me for a loop... And they're seriously in a panic! I keep reminding them - STAY OFF THE PHONE.

And their finished basement flooded out this weekend. My friend was thinking about giving part of the insurance claim money to the 2nd mortgage...but it's just buying time. FOR WHAT? They can't afford to stay current on both mortgages.