1st mortgage solved, here is the deal on the second

[albacore44]

More info on the Obama 2nd legislation...

http://online.wsj.com/article/SB124091319810563169.html

All they did was saw the leggs off the Cram down Legislation. Who do they expect this to help ?? They still have not addressed the fact of those properties that are underwater. Which bank is going to write down $200K in principal on an underwater property ??

[StartingOver08]

There is no true plan to help those of us underwater. There is lip service and token plans to help a few homeowners.

Many home purchases originated in the last decade were either 80%/20% loans or 80%/15%/5% type purchases. The first mtg is in great shape.

The plan is this:
1) homeowner goes into default, lender has mortgage insurance on the property (either paid by homeowner or lender paid blanket insurance),
2) lender may 'offer' to work with homeowner, lender ends up foreclosing in most instances (in our area more than 90% of the time the foreclosure is completed rather than worked out),
3)lender collects 19% to 35% of the original mortgage balance from MI depending upon policy
4) lender puts asset (property) on market and sells for current FMV

Steps 1 -4 are well documented.

So the first mtg got FMV + 19% to 35% of the originating loan amount pd from MI policy and is in usually very good shape.

Second mtg gets the MI policy only. I suspect that these 2nds also were hedged thru that credit default swap policies that have been paid out now at 100% thru AIG. (FWIW I don't have hard evidence of what is happening with the 2nds yet).

If the lender writes down the 2nd $200k then they do not qualify for the MI payout.

I hope that Relief and others qualify to get the 2nd written down - or paid off as planned. I would rather see the current homeowner be able to stay in their home, pay 10% on the 2nd, get the lien released and have the 2nd collect on whatever MI policy is in place. This will be the only way we can begin to truly recover. I don't see any of the lenders doing this for a large percentage of the upside down homeowners as a matter of policy. JMO.

[albacore44]

There is no true plan to help those of us underwater. There is lip service and token plans to help a few homeowners.

Many home purchases originated in the last decade were either 80%/20% loans or 80%/15%/5% type purchases. The first mtg is in great shape.

The plan is this:
1) homeowner goes into default, lender has mortgage insurance on the property (either paid by homeowner or lender paid blanket insurance),
2) lender may 'offer' to work with homeowner, lender ends up foreclosing in most instances (in our area more than 90% of the time the foreclosure is completed rather than worked out),
3)lender collects 19% to 35% of the original mortgage balance from MI depending upon policy
4) lender puts asset (property) on market and sells for current FMV

Steps 1 -4 are well documented.

So the first mtg got FMV + 19% to 35% of the originating loan amount pd from MI policy and is in usually very good shape.

Second mtg gets the MI policy only. I suspect that these 2nds also were hedged thru that credit default swap policies that have been paid out now at 100% thru AIG. (FWIW I don't have hard evidence of what is happening with the 2nds yet).

If the lender writes down the 2nd $200k then they do not qualify for the MI payout.

I hope that Relief and others qualify to get the 2nd written down - or paid off as planned. I would rather see the current homeowner be able to stay in their home, pay 10% on the 2nd, get the lien released and have the 2nd collect on whatever MI policy is in place. This will be the only way be can begin to truly recover. I don't see any of the lenders doing this for a large percentage of the upside down homeowners as a matter of policy. JMO.

And that's just the thing..........none are writing down principal. Guess I can understand their reasoning. If the 2nds are in fact collecting on the MI policy, then it seems it might be a better deal for them to let the homeowner default, then collect the MI, and sell the rest off to a JDB. I am probably going to go the route of BK but keep paying 1st and 2nd, then stop paying 2nd and roll the dice and try to settle with the JDB for a lein release.

[spidge]

Thanks for the links, but if I read them correctly it only helps those that qualify for any of the current government backed programs?

Again, I'm out.

[spidge]

Interesting.

BofA has taken over the Countrywide home loan links. I signed in to check the status of my modification file for my heloc and it now states that it is in active proccessing.
Time will tell, but I am looking to pay my attorney by the end of this month to file ch 7 and I plan to offer the owner of the heloc a 5% settlement.

[spidge]

Anyone have updates on thier efforts for the 2nd's?
BofA keeps calling and I ask them what they would do but they stay with the script and always respond with "are you planning to pay some time in the future?".
It seems by most of the posts here the borrower instigated the settlement offers. Is that what I need to do to get them to start offering me something?

Also one of the posters mentioned settling with payments within a year. Wouldn't that be admitting to the ability to make a payment?

If I were to settle with the 2nd over time, would the payments be considered prefered payment and put the BK at risk of abuse issues?

[frankies_mom]

Anyone in this thread have any experience with JDB on 2nd mortgages. CITI didn't work so well with us and United Guaranty bought it up in the middle of a loan mod. So our 2nd is paid in full and off CITI's books but we are now dealing with collections. Any probability of settling with them? If we were to sell our house today, it would just cover the 1st mortgage, 2nd would get nothing if that is helpful info. Also, we are post BK7 and did not reaffirm either mortgage. Any advice on getting them to negotiate would be greatly appreciated.

[spidge]

Thinking out loud.

I wonder if one solution could be that the lien holders of the 1st and 2nd could write down an equal amount and become equal partners in this so that both could benefit in the long run. I am struggling with how to put it into proper terms but they could become one lien holder in a partnership with the borrower having only one loan to pay on, but both partners gaining the interest revenue over time from one lien.
I know some of the government programs leaned towards something like this but I think it may have been miss-applied therefor not utilized.

Just a thought.

[joecitizen]

albacore44...

...I was watching court records for him...

I am in riverside, california how do i go about watching court records here? thx

[Lajazz947]

Update:
Spoke to GMAC this morning. I offered them a 5% buyout of the lien. They came back instantly at 10%. Telling me it is a great deal, etc etc. I told them they will get far less from a JDB or litigating. That the debt is basically an unsecured loan which I can BK. Said I would think about the 10%, but we need to get closer to 5%...

Hey, I like to think that I negotiate well but you take the cake my friend.

I am kind of in the same situation. If you read my posts I have WACHOVIA and WF fighting over who is in first position.

You have given me inspiration.

Good luck.

[Lajazz947]

Opps - sorry. Drinks for all the BK forum members in the IE. OMG that would be a blast!

Can I come too?

I am in LA but I will gladly make the drive.

[BKINAZ]

Spoke to GMAC this morning. I offered them a 5% buyout of the lien. They came back instantly at 10%. Telling me it is a great deal, etc etc. I told them they will get far less from a JDB or litigating. That the debt is basically an unsecured loan which I can BK. Said I would think about the 10%, but we need to get closer to 5%...

Wait a second. GMAC is your second??? How is that an unsecured loan that you can dump in BK? You can't, all seconds are protected in BK aren't they?

That part aside...please tell me is that your second and they really came back at 10%? We have gone the route of our bank (second) putting us into collection and being done with us. It's now in the mafia section of the bank and they have been taking $250 payments for the last few months, but they said they won't forever. I think forever is today or next month. So I will be hitting them with a settlement.

SPIDGE "Also one of the posters mentioned settling with payments within a year. Wouldn't that be admitting to the ability to make a payment?

I didn't see where that was written...but 9 out of 10 times you tell them you are getting the money from relatives to pay. In fact I say that and then say "they will not pay anything, unless it is to pay something off."

[justbroke]

Wait a second. GMAC is your second??? How is that an unsecured loan that you can dump in BK? You can't, all seconds are protected in BK aren't they?

While there is a lien, it is considered undersecured or wholly unsecured when there is not enough value in the property. That does not, in any way, automatically remove your pledge of the property as collateral for the loan. In other words, there's still a lien, regardless of value! The trick is, that the junior lienholders know that it's undersecured and want to get "something" back. Their only other choice is foreclosure, which really nets them nothing (and more losses from pursuing the foreclosure action). That's why they are wheeling and dealing these days, rather than have people go into Bankruptcy and discharge the whole debt and walk away!

[BKINAZ]

Time out...I still have to argue because well...I have been doing this for quite awhile (thinking about bk/research/lawyers) and EVERYONE has told me the opposite of what you just said. Actually...not the opposite. But they made it clear...the 2nd does not go away and will indeed get some money from chapter 13 and is still owed in chapter 7. (I could have them flipped...it's been a little while since I looked at BK)

Regardless...you make it sound like they have the power of a credit card now, is that right? Yes...they could foreclose...but they get a house that is worth $100,000 less than is owed on it...so they don't do that, correct?

So their only thing is to lose...everything (according to you) in BK or dealing with me?

Tell me more.

What are they settling for now? I have to have this conversation with my second in the next day or so.

"Relief" in this thread said they were considering her offer...but she never said what that was.

[justbroke]

Time out...I still have to argue because well...I have been doing this for quite awhile (thinking about bk/research/lawyers) and EVERYONE has told me the opposite of what you just said. Actually...not the opposite.

Did you post this to me? If so, please re-read. I wrote that the lien stays their. Your personal liability goes away, but the lien certainly does stick, giving the junior lienholder an interest in the collateral.

But they made it clear...the 2nd does not go away and will indeed get some money from chapter 13 and is still owed in chapter 7. (I could have them flipped...it's been a little while since I looked at BK)

Let's be perfectly clear on how this works. In a Chapter 13 context, the 2nd "might" get some money. In my Chapter 13, my 2nd will receive nothing, unless I start earning a lot more money (which is unlikely). I'm in a 0% payment plan to unsecured creditors. So, they will get nothing. In the Chapter 13 context, the 2nd would only get payments as a secured creditor, if the lien is stripped and it is determined to be unsecured, by motion or complaint of the debtor. In other words, many 2nd mortgages survive as secured debt in a Chapter 13 and are paid just as normal. They are not relegated to unsecured status.

Now, for a Chapter 7, if you don't reaffirm or redeem the 2nd, then your personal liability is discharged. However, the lien is still there! The creditor could turn right around, after your discharge, and foreclose! The only reason why they don't these days... is the condition of the housing market. They sell them to JDBs for 10% or less and just wipe their hands of the mess. The JDBs will put "light" pressure on your to pay, or will just sit on the debt waiting for the earlier of you selling the home, or the home appreciating... at which point they can foreclose!

Regardless...you make it sound like they have the power of a credit card now, is that right? Yes...they could foreclose...but they get a house that is worth $100,000 less than is owed on it...so they don't do that, correct?

No, they have the power of a creditor with a properly recorded lien and have all rights you granted them for security in the collateral. They are and remain a secured creditor. See my previous paragraph for why they don't foreclose today.

So their only thing is to lose...everything (according to you) in BK or dealing with me?

No, they could sell it to a Junk Debt Buyer (JDB) for 10% (or less). The JDB just sits on it for years, until you go to sell! Then voila, you have to pay the JDB!

What are they settling for now? I have to have this conversation with my second in the next day or so.

The number 10% has been thrown around alot these days. They seem to jump at 10%, because they get less, usually, when selling to a JDB. So, if you can offer them 5% and they bite... excellent!