Another 2nd mortgage settlement question (DCU)

[MrsDixon]

In the entire 7 years that I've had my mortgage I have only paid past the 15th ONE time. That one time got me a $60.00 late fee and it was after the mortgage was already discharged in BK. They did refund the fee for me because it was the only time that it had happened but they still charged it.

Are lenders allowed to charge late fees and such on discharged loans?

[albacore44]

and I am really afraid of the fees that are going to be added on as time goes on.

Well technically they cant add any additionall fee's or interest, etc. since your loan was discharged and you dont owe it.

i dont know the internal policies of the banks, but i would think their business practices would require them to charge off any loan not re-affirmed after BK because it becomes an unknown as far as collectable. I know in my business due to Sarbaines-Oxley we are required to identify all risks immediatly and our finance assigns a risk factor, so investors get no surprises when we announce quarterly earnings

[MrsDixon]

OP here.

I have no idea what to do. Brazzy, you're right. I do want to live here and I do want to settle the 2nd mortgage. I'm scared to go but I don't want to be stupid and stay either.

The house is too small for us and the schools here are horrible (state is 80th percentile and the schools are performing at 60th percentile). My kids would be the minority @ 4% of the demographics for this area and there are metal detectors to get into high school. I didn't even look at the school system when we bought the house because I didn't mean to be here for so long. This was our starter home. We were supposed to move when our DD was ready for school. Now we have two kids and my DD is going into 4th grade. (7 years later)

My oldest goes to private school and when my youngest is ready in two years I am going to be paying $500.00 per month for both of them to go to school. That's crazy. Then I'm paying $4-5K a year in property tax for schools I don't even use.

I feel like I should walk but I'm afraid of the unknown. I am probably 46-56K negative. If I could get rid of the 36K second loan I would feel better about staying here. Then I would feel better about paying private school tuition knowing that down the road I could sell this house and maybe break even or make money in 5 years when my DD is ready for H.S.

Private H.S. is 8K per year, per child. That's NUTS! I should be spending that kind of money on college or retirement savings, not high school.

I've already paid DCU $11K that I didn't owe them. Now they want an add'l almost 11K?

I have made so many bad financial decisions in my life I really wanted the BK to be my "fresh start". Here I am almost 2 years out and I am still not over all of this crap.

I have no idea what to do. I could rent a bigger house in a better school district for around $200 more per month. Between mortgage + tuition I would be about the same or a little less.

I'm also worried about the difference in my income tax w/o having the mortgage interest to write off. I wonder how much it would affect my taxes.

Anyone want to calm me down?

Thanks for any insight or opinions. I am so scared to walk away. 210 days is frickin' January! Would we really need to move in the winter? In the Chicago winter. Ack!

I really don't know what to do. Wells Fargo has said that they might work with me on a loan mod to save me money. I just hate that the 2nd mortgage will be lurking indefinitely and I am really afraid of the fees that are going to be added on as time goes on.

[Brazzy]

i just think they are inundated with defaults and dont have enough people to process them all.

Very True LOL

[albacore44]

Well i keep getting calls from my 2nd asking if i can pay xxx. i got a call again today, and i said i'm sorry, I dont owe you anything the debt was discharged in BK and I keep telling the others that call, and they say ok we will forward it to this to the BK department . I also told her, you must know, because you closed my account may 20, i can see it on my credit report, and I could have had my attorney go for sanctions against you because you called continiously during the automatic stay. i'm sorry sir, i'll try something different this time to get it to the BK department. i just think they are inundated with defaults and dont have enough people to process them all.

[2manybills]

Dont let it wait too long. I know you dont want to seem eager, but checking in with them is not a bad thing. Some lenders have some very weird policies about contacting BK customers. Its nothing against the customer its just that some dumb policies are put in place in response to things the bank has been burned on in the past.

I notice with Wells, they'll call, but then they say stuff about not really being able to negotiate because of the BK. I'm sure their hands are tied as far as implying that they are "attempting to collect a debt that has been discharged". Thanks for your input Brazzy. It helps to get perspective from someone in the business.

[Brazzy]

Dont let it wait too long. I know you dont want to seem eager, but checking in with them is not a bad thing. Some lenders have some very weird policies about contacting BK customers. Its nothing against the customer its just that some dumb policies are put in place in response to things the bank has been burned on in the past.

[MrsDixon]

I owe them $36K and I offered $1800.00. They refused my offer today and counter offered with 10,5000. They said that they didn't know if upper management would even approve the 10K but it was a start. I emailed back and reminded them that I've already paid them 11K I didn't owe them after discharge and the maximum amount that I could pay after borrowing $ from family is 3K. We'll see what they say but I did let them know that I am going to cease making payments on the 1st mortgage. I mean it though. Starting this month I am no longer making any payments on the mortgage. Hopefully DCU will come around and if they don't, I'll move. I just don't really want to move in the winter which is about 210 days from now (usual time line for FC in IL)

[krk123]

DCU settlement.

Hi MrsDixon,
Could you please let me know if you heard anything back from DCU. How much % are you offering ?
We are trying to settle our second with them for almost 2 months with no luck...thanks...

Krk123

[Overmylimit]

$630k on the 1st, and the house is worth $355k. thats almost $300K upside down on the 1st. no wonder the 2nd is sleeping.............and i thought I had it bad

LOL...remember there's always someone always has it worse off than you

[BCA2009]

Easy. Foreclosure is not like a typical sale. If a home appraises for $205k. The recoup when its all said and done will be more like $143K after the foreclosure sale and legal fees. The hit is that big. He is talking about settling the second lien, not the first.

Thanks for commenting Brazzy,

If the Recoup is really that low (143K) based on a sell value of 205K, it obviously is expensive for the second to foreclose! If that is the case, which basically means the second can get nothing out of this loan, maybe they will accept 30K-40K from me (maybe not). I certainly understand what you are saying about them not accepting pennies on the the dollar for underwater loans, but I am hoping that they will eventually settle with me for about 25% 30% of the loan balance.

I am four months behind right now and I am NOT going to contact them, I'll just wait it out and maybe they will eventually start the process and I (hopefully) will be a in better negotiating position then. It totally makes sense that if you contact them first they know you really want to stay in the house and will hardball you. I do really want to stay here but not enough to pay 80K more than its currently worth. I'll just ride it out, rebuild my credit and buy a 200K (or less) home in a few years.

Thanks again!

[albacore44]

This is good info; Thanks Brazzy



My 2nd hasn't done anything and at some point I will make them an offer to close the lien. The 2nd if 177k and the 1st which is totally current and has been modified is 630k The most recent appraisal came back at 355k so SLS would get zero if the foreclosed....

$630k on the 1st, and the house is worth $355k. thats almost $300K upside down on the 1st. no wonder the 2nd is sleeping.............and i thought I had it bad

[Overmylimit]

This is good info; Thanks Brazzy



My 2nd hasn't done anything and at some point I will make them an offer to close the lien. The 2nd if 177k and the 1st which is totally current and has been modified is 630k The most recent appraisal came back at 355k so SLS would get zero if the foreclosed....

[Brazzy]

Not sure. I will say that a vast majority of insurance companies that insured loans are now belly up. AIG is one, but they are not alone. A lot of loans were originally written under the assumption they would be insured. Then the insured files BK and essentially throws the lender the finger and now they have to deal with it themselves. Thats something that is a lil too common, not just in home loans.

[albacore44]

Well the thing is that a lending institution that sits on the seconds will not let you bully them. If you are looking to settle on the second then you already showed interest in keeping the property that it is worth something to you. A good negotiator for a Jr lien holder needs to be tough. The bank has already determined that the account will be a total loss and the negotiator needs to have the "nothing to lose" attitude. When the bank charges something off they budgeted and planned on that to happen and anything above it is gravy. Someone comes to me claiming they will let the first foreclose and of course ( I hate hearing it cuz it changes nothing) that if the first forecloses the 2nd will get nothing. A good negotiator will reply with something along the lines of... "OK". The natural response by the debtor is always to be shocked, but thats how it has to be. There are lenders just settling for any offer that comes across the table because they are not ready to take a loss, but they need to be. The catch is that the debtor who threatened to let the house go to foreclosure is typically not ready to let the house go either. They formulated a plan and thought out a way that they thought they could find a way to keep the house AND get it out from under a second for pennies on the dollar. In my experience the debtors are at a point of high hopes and typically are not ready if their bluff is called.

in your opinion, how many 2nds are backed by insurance (AIG) and after charge off the lender passes the loss to the insurance, then the insurance persues or settles depending on circumstances ??