Another 2nd mortgage settlement question (DCU)

[MrsDixon]

I also posted this in the BK forum:

I am trying to settle a discharged 2nd mortgage w/DCU. I am currently 120 days behind. It was discharged 20 months ago and the loan was not reaffirmed.

They want me to fill out paperwork for a short sale, which I refused to do. I am either going to settle with them or I'll let the first mortgage holder foreclose. DCU will get $0 since I am underwater on the 1st.

I emailed a hardship letter explaining what I want to do and then they responded that they wanted the short sale package filled out, realtor contact info (my house isn't even for sale), bank statements, taxes, paycheck stubs, 401K info, etc.

I told them that my finances were irrelevant because my personal obligation was discharged 20 months ago. The loan specialist said that they will not even consider an offer until I fill out the paperwork and give them the requested information.

I don't know what to do next. I emailed the CEO & VP to ask for assistance but who knows if they'll respond.

Any thoughts?

[Overmylimit]

If you are truly underwater on the loan they are just blowing smoke and trying to get closure on the loan. If you are current with the 1st, the 1st won't have any reason to try and foreclose and the 2nd can't make them foreclose on you. I wouldn't give them anything at all.... they have nothing at this point except a worthless lien on your house. In order for them to do anything to you they will have to spend more $ and that's the last thing they want to do. Just let it ride and call their bluff.

[justbroke]

Exactly, they are just trying to leverage the situation. Besides, you're doing this on your own, so they get to play games with you. Reads like the second mortgage holder is what I call an ankle biter... you know... credit union or small local bank ("regional" at best).

I agree with overmylimit, you may just want to let it ride out some more. Of course, you realize that you need to think about the worse case scenario and be prepared for it. That may include walking from the whole thing.

[MrsDixon]

I'm prepared to walk.

I think that I am going to stop making payments on the first too. I'll just put all of the money in a savings account and I'll work on a modification of the first. I'm hoping the 2nd will find out that the 1st will foreclose and then take my settlement offer. The problem is that the mortgages aren't above 31% of my gross income.

I have to pay $1000.00 per month in daycare during the summer though, and around $800 per month for my two kids during the school year. My youngest is in daycare and I have to pay school tuition for my oldest.

It's tough! How do they figure out who deserves a mod and who doesn't?

[justbroke]

It's tough! How do they figure out who deserves a mod and who doesn't?

It's not about who deserves a modification. It's about if they'll make money on the modification in the long term.

[catleg]

It's not about who deserves a modification. It's about if they'll make money on the modification in the long term.

Exactly, it's about loss mitigation.

Like being dealt a pair of 8's against a dealer's 10-value upcard in blackjack, do you split, hit, stand, or surrender?

[MrsDixon]

Wish me luck! Someone really nice emailed me from DCU and said that since I was the one making an offer they needed to have financial info. I sent the documents and my settlement offer and she said that they should have an answer in about 7 days.

Fingers crossed that this works out.

[2manybills]

Wish me luck! Someone really nice emailed me from DCU and said that since I was the one making an offer they needed to have financial info. I sent the documents and my settlement offer and she said that they should have an answer in about 7 days.

Fingers crossed that this works out.

Press them for their response in writing so you have a paper trail. That's why I'm doing right now with Wells.

[Brazzy]

Good luck with that.

I dont know why people are so against giving the lender what they want in order to get the wheels moving. I think some people need to get away from the idea that the bank is this money grubbing machine. When dealing with a short sale/short payoff/loss mit specialist you are dealing with a guy or girl just doing their job. Its really no different from anyone else doing their job. These people typically do not work on commission, nor do they get high fives for giving people a hard time. Its no different than dealing with someone at McD's. You ask for no pickles and they give you a sandwich with no pickles. The manager goes up to the employee and asks why there were no pickles on the sandwich. The employee has to cover their ass and justify why they did what they did.

In the instance of a short payoff the negotiator simply needs to cover all bases to show all the possible options and to justify why their choice was the best choice. Understand that this is all after bankruptcy and they arent going to garnish your wages, sue you or do anything to harm you in any way. There are no tricks to this. They have a lien, and thats their token. They just want to know that they are cashing it in at the right time. Nothing more. Now some comapnies are more urgent to cash it in than others and thats up to them. Personally if you are current with the Sr lien holder, and just want to settle the second just for the hell of it, unless you are bringing a lot of cash to the table there is no conversation. Some lenders who know that a person did a loan mod on the first and that there is no threat of foreclosure can and may elect to just say no and sit on the lien til hell freezes over.

As for loan mods its not about making money. Its about not losing money. Dropping an interest rate to 2% is exactly gonna make the bank jump for joy. However, it is better than taking back yet another house. As for the whole making money thing. Banks are no different than any other for profit organization. When the bottom line gets jacked, every organization's morals seem to diminish.

[2manybills]

Good luck with that.

I dont know why people are so against giving the lender what they want in order to get the wheels moving. I think some people need to get away from the idea that the bank is this money grubbing machine. When dealing with a short sale/short payoff/loss mit specialist you are dealing with a guy or girl just doing their job. Its really no different from anyone else doing their job. These people typically do not work on commission, nor do they get high fives for giving people a hard time. Its no different than dealing with someone at McD's. You ask for no pickles and they give you a sandwich with no pickles. The manager goes up to the employee and asks why there were no pickles on the sandwich. The employee has to cover their ass and justify why they did what they did.

In the instance of a short payoff the negotiator simply needs to cover all bases to show all the possible options and to justify why their choice was the best choice. Understand that this is all after bankruptcy and they arent going to garnish your wages, sue you or do anything to harm you in any way. There are no tricks to this. They have a lien, and thats their token. They just want to know that they are cashing it in at the right time. Nothing more. Now some comapnies are more urgent to cash it in than others and thats up to them. Personally if you are current with the Sr lien holder, and just want to settle the second just for the hell of it, unless you are bringing a lot of cash to the table there is no conversation. Some lenders who know that a person did a loan mod on the first and that there is no threat of foreclosure can and may elect to just say no and sit on the lien til hell freezes over.

As for loan mods its not about making money. Its about not losing money. Dropping an interest rate to 2% is exactly gonna make the bank jump for joy. However, it is better than taking back yet another house. As for the whole making money thing. Banks are no different than any other for profit organization. When the bottom line gets jacked, every organization's morals seem to diminish.

While I agree with you that the employees are just the messenger and that they need to get documentation to cover their asses for any decision that they made, I'd have to respectfully disagree with the "banks are no different than any other for profit organization" statement. The thought that this subprime mess, or the way that credit was extended, then pulled back, then interest rates raised was just the way every other organization does business is ludicrist. Someone made some big money in this and a lot of people lost their homes. I understand the current foreclosures are more about the people that are unemployed, but the beginning was all about the subprime loans that were given to people that shouldn't have been given loans.

[liboton21]

What about if both 1st and 2nd belong to the same lender (BofA)? Will they foreclose if I don't pay the 2nd? I'm current with the 1st, started paying last month after the 2% loan mod last February. Also, my BK7 was already closed last May 2010. Thanks in advanced.

[Brazzy]

I'm not talking about the act, or the outcome. Hindsight vision i always 20/20. I'm talking about the mentality. How many times has a business made a move with the expectation of raking in cash hand over fist and have it back fire? I'm just saying that it is not uncommon for people to take chances when the opportunity to make a ton of money is there. As for the people making a lot of money in this. Its not as great as one might think. One of the funniest things about the people who got rich off the housing boom was the fact that most of them did not get out when they should have. Banks, Lenders, loan officers, real estate agents, etc hit it big during the housing boom and thought they could keep the ball rolling. Yeah they got rich... at first. All of which are pretty hurtin right now. The ones who got out are the ones who made their money.

As for the 1st and the 2nd being with the same lender it depends. Basically speaking they will treat these loans independently. If the second falls behind and the home has the value to cover both the first and second in a foreclosure they will consider it. If their is not enough value to justify foreclosure then they will not.

[2manybills]

I'm not talking about the act, or the outcome. Hindsight vision i always 20/20. I'm talking about the mentality. How many times has a business made a move with the expectation of raking in cash hand over fist and have it back fire? I'm just saying that it is not uncommon for people to take chances when the opportunity to make a ton of money is there. As for the people making a lot of money in this. Its not as great as one might think. One of the funniest things about the people who got rich off the housing boom was the fact that most of them did not get out when they should have. Banks, Lenders, loan officers, real estate agents, etc hit it big during the housing boom and thought they could keep the ball rolling. Yeah they got rich... at first. All of which are pretty hurtin right now. The ones who got out are the ones who made their money.

As for the 1st and the 2nd being with the same lender it depends. Basically speaking they will treat these loans independently. If the second falls behind and the home has the value to cover both the first and second in a foreclosure they will consider it. If their is not enough value to justify foreclosure then they will not.

It happens in every field, and believe me, I'm watching the same thing in the legal field where there are certainly some attorneys taking full advantage of this bankruptcy crisis and taking too many cases and not really servicing their clients. So some of these poor folks are getting it from all directions.

And I agree, my sister is a senior loan officer for one of the large banks, and she's (not doing mods) but is working harder and having to deal with more stuff than ever. I'm referring to some of the big culprits in some of this subprime stuff. (Ameriquest, etc. etc.) In So. Cal. there are so many mortgage people, real estate people hurting. It is a sad state for sure.

[subking]

I've heard of situations where the second mortgage will buy your first mortgag at a reduced rate(buy your loan)then foeclose on you for not paying the second since they now own your house.

For example 1st mortage = 130,000
2nd mortgage= 40,000

Home sells on market today for maybe $100,000 if that.

However the 2nd (which you longer pay) decides to buy your first (which your current on) at a discounted rate say for $80,000 and maybe even less then then own your house. Sell it and maybe get most of what you owe.

[Brazzy]

Subking. That stuff happens, but its rare. I will take your example and work with it. If a house on the open market appraises for $100k then the expected recoup after sale, commissions, legal expenses etc is around $70k. That means the 2nd, who already has $40k invested now pays an additional $70k to buy out the first (now up to $110k invested) only to foreclose and recoup $70k (the first wont take less than what they could recoup from foreclosure)? Thats not really how it works.

For the 2nd to buy out the first most common scenario you would find is something like this:

100K owed to the 1st
50k owed to the 2nd

Home valued at $150k.

Customer defaults on the first and the first starts foreclosure. The second does not want this scenario to take place. If the first initiates the foreclosure they will only work to cover their own ass and not a penny more.The first will basically want to move it along as quickly as possible and just get their 100k back with no regard for the second. Typically in this scenario the second will end up with little or nothing. The second may decide to go ahead and buy out the first (possibly at full balance (100k) and initiate the foreclosure themselves with the intent to recoup as much as possible through foreclosure. Lets say they recoup $130k from the foreclosure, they just saved themselves $30k by buying the property and foreclosing themselves. Thats whay it is very common for lien holders to become concerned with property tax issues. City takes the home to sale they dont give a rat's ass about the lien holders. They will typically pay the taxes up to date to avoid any BS.

You dont see these scenarios as much anymore because the housing market is so depreciated that most homes with multiple liens dont have the value to cover the first lien holder.