Trying to decide how to deal with second.

[Ineedhelp2]

Our Chapter 13 was dismissed because we could not keep up with our payment plan.

Since we filed over two years ago, the value of our house has plummeted, and I think we're at a point where the value is now less than the 190,000 we owe on the first.

We also have a $70,000 second, and they have foreclosed on us.

I think they thought there was enough in our house for them to pay off the first, sell it, and recover their investment, but I have done some research and looking at homes and selling prices, and feel fairly confident they could go deeper in the hole by taking our house.

We are behind on the first, but talking with them, and we will possibly get a loan modification.

The second is talking with us too, and they would possibly modify, though the orginal loan was for an outrageous interest rate, and they don't want to lower it. But...as things look now, any arrangement we make with them would be a favor TO THEM, as I see it.

I sent an email to my attorney asking about the possibility of stripping this loan, since the house values have fallen below what we owe on the first, but it seems like we can't do that now, and must rever to the values as per when we filed.

Anyway, we want to stay in the house. The second wants to foreclose, but I see no benefit for them, though they possibly think they could sell for more.

Any suggestions what we could do?

[famlena]

the other option would be to offer the 2nd a settlement 10-20% of the balance. this is if you have a lump sum or could borrow it from a friend or relative.

[Ineedhelp2]

I don't have the means right now to make that kind of offer.

If I'm right about our house values, I wonder what they will be thinking when the reality hits them. It doesn't seem to make much sense for them to buy it and hold it, waiting and hoping for prices to rebound. That would be further risk and they could do better buying another house.

I wonder what would happen if they do nothing and if I do nothing and I work with the 1st.

They could keep tallying the interest and penalties and some day foreclose again when the price is right?

If it were just about money, I would not hesitate to walk. We are way upsidedown. But we want to stay if at all possible, if we can make a reasonable agreement.

[famlena]

i understand what you're going through...
the 2nd also forclosed on me. i wondered the exact same thing. although, my home is not underwater to the point that it is less than the 1st. it's very close though. however, if the 2nd did go through with the foreclosure then they would not make much or even anything from it.

i was foreclosed on in august and there might possibly be a sale date sometime late nov. i'm in CA.

i've offered to settle them 11% of the balance. of course i don't have the money but will borrow it from family. submitted the offer yesterday and was told that by next week the negotiator will contact me.

which state of you in and how far along is your foreclosure?

[Ineedhelp2]

I'm in Oregon.

I have a sale date in November.

It's hard to believe that just a couple years ago we filed chapter 13 instead of 7 because of our huge amount of equity, and because in OR you only get to keep $40,000. Little did we know it could come crashing down so far.

Anyway, I think the second thinks there is a lot more value there. If I can demonstrate they have little or nothing to gain, I wonder what they will do.

I also wonder if they would foreclose as a matter of principle and to make me "pay" at least by throwing me out.

But the bottom line for them is that according to what I'm seeing in the real world, once they pay off the first, they will have a challenge just to get that money back, let alone their principle from the second.

This loan was a mistake and a bad idea from the start, and it was at over 13% interest. I figured it would be temporary and with the rising values be easily refinanced. It was a balloon loan, so it's totally due now, even if I did catch up on our arrears.

[famlena]

is your 2nd a purchased money? i don't know the law of OR but in CA it is a non-recourse state so the lender can not come after the homeowner as a personal liability (deficiency judgement). however, they can if the 2nd was refi then it would become a recourse loan.

could it be that this is the case in your situation? i also, don't see why the 2nd would foreclose if they won't benefit anything from it. i'm so curious too. i will find out my fate by next week.

[Ineedhelp2]

If I understand my bk attorney correctly, I don't think I'm liable for anything that the 2nd can't recover.

I'm just straining my brain trying to figure this one out and wondering what I could offer the second, or if I should offer anything at all.

Please keep us posted with your situation, and good luck.

[famlena]

i just saw this forum on the web relating to OR foreclosure law. you may want to check it out. good luck to you as well and i will keep you post when i find out next week. thanks!

http://www.expertlaw.com/forums/showthread.php?t=62805

[HHM]

the other option would be to offer the 2nd a settlement 10-20% of the balance. this is if you have a lump sum or could borrow it from a friend or relative.

That strategy really only works if you file a chapter 7 bankruptcy before you do the settlement. Reason being, the 2nd is only left with a foreclosure right, the BK discharges your personal guarantee of the mortgage, so they have no recourse to come back after you for the difference.

[albacore44]

Very interesting. The big question here is why is the 2nd forclosing and buying a bad investment ?? possibly their just going through the process and really dont intend to forclose. the way i understand the process, on the auction date, they would have to bid the total owed on the 1st and 2nd.

mabee this is what the banks are doing with the federal stimulous money instead of lending it

[justbroke]

Or, the lender purchased some sort of private mortgage insurance (PMI). I don't even have a clue why a lender would foreclose at a loss.

If Ineedhelp2's Chapter 13 was dismissed, why not just refile and strip the 2nd? I won't even want to speculate. I'm sure the 2nd lienholder got some sort of BPO or even ran several AVMs to determine the price. How do you know your home is actually below the first mortgage value? Did you just guess at the value? Perhaps your lender did the same thing.

[albacore44]

Btw- Which Banks are we talking about here ??

[Ineedhelp2]

The first mortgage is B of A. The second is private money.

I think when they started the filing process that they thought there was enough value in this house to recover their investment. I thought there was too, until I started looking in the real world and the actual selling prices.

They might be thinking they can take over the house and let the market recover and then sell it, but that would also be foolish, since they could find better deals than what they would have to pay on the first.

But let's assume they now realize they have nothing to gain and possibly could lose more, what happens if they decide not to foreclose and if we still don't pay them?

Also, I don't think I can file again and have the mortgate stripped. I think I'm locked into the price for when I first filed.

[justbroke]

Also, I don't think I can file again and have the mortgate stripped. I think I'm locked into the price for when I first filed.

No. Valuation is the day you file. If your case is dismissed and you re-file, the valuation is the date you just filed. The only time valuation goes "back" is if you re-opened your case.

Have you even consulted legal counsel on filing a new petition.

(The only way I think you could have run into trouble, is if they had a motion for relief from the automatic stay granted in the prior action.)

[Ineedhelp2]

I fell behind on payments during chapter 13 and they filed for and received a relief of stay.