Bank of America-2nd Mortgage

[1richard1]

Our 2nd mortgage lender is Bank of America, unsecured lender based on comparable homes sales. We're currently in a Ch. 7 bankruptcy proceeding, which will discharge the debt. We're 100% current on our 1st mortgage, different lender.

In speaking with Bank of America (2nd mortgage) bankruptcy department they indicate not offering settlements. Instead, advised that they'll initiate foreclosure proceedings after the bankruptcy is discharged in a few months. However, there's no equity in the home and Bank of America (2nd mortgage) would not be paid even 1 cent off the $102,000 second mortgage loan. Anyhow, advised after the BK discharge and stay process removed that it's their policy to proceed with foreclosure proceedings, even on 2nd mortgages, no equity. Advised they get paid $0, yet will proceed.

Anyone have experience with BOA, thoughts or advice? We're interested in making a settlement offer, which their BK dept. will not even consider or filing a Ch. 13 BK after our Ch. 7 is discharged. We live in CA, attorney advised our Central District Court requires 4 years after the BK 7 discharged to file the Bk 13 for lien strip purposes. In the meantime, surprised that BOA with $0 equitable interest in the home would initiated foreclosure, force a home sale to get $0.

[shark66]

It's your house and not mine, but if there's no equity they are bluffing.

They might decide to foreclose once the market goes up, the principal on your first mortgage goes down etc. but I very much doubt that they'll do anything right now. They would lose a nice chunk of money and gain absolutely nothing.

Good luck.

[1richard1]

Our attorneys says the same thing, BOA second mortgage will just do a waiting game. They have a legal right to foreclose, yet won't since
no equity for them to get anything. Our anxiety is that'll take 4 years in CA after our BK 7 discharge to file a BK 13 and then lien strip BOA.
In the meantime, the debt is being discharged through the BK 7. Still, BOA BK states that since we discontinued payments to them once out
of BK stay process they will begin foreclosure proceedings. I advised them if they do an appraisal, or review comparable homes sales they'd
get $0. I proposed a settlement offer, they say no to this too.

[laurannm]

Agreed with Shark, they are bluffing. Search around the forums on here, plenty of instances where people ad underwater 2nd mortgages with BoA and they eventually settled

[1richard1]

Can a 2nd mortgage lender initiate foreclosure even if the 1st mortgage is paid, 100% current? Meaning, does a 2nd mortgage in my case BOA have to get approval from my 1st mortgage holder to initiate foreclosure proceedings? I am hopeful they'll eventually settle, no equity in the house. We put 20% down payment on the house 6 years ago, yet still about 10% upside down, even on the 1st mortgage. We could not qualify for a Ch. 13 at this time, based on income level, so we filed a Ch. 7 for discharge.

[laurannm]

Yes, when you default on the 2nd mortgage they have the legal right to foreclose. However, if they did foreclose, the 1st lien holder (first mortgage) must get paid first with the proceeds of the sale. So in your case, BoA will get nothing, and will probably lose more money on top of that in the form of legal fees, etc.

I would wait it out and see what happens. It is highly unlikely they will foreclose; I am willing to bet this is just a scare tactic to get you to make payments on that 2nd mortgage. Like I said, quite a few posts on here and other boards about people who settled their 2nd mtg with BoA, so I am highly suspect of this alleged "policy" that the BoA rep told you on the phone

[1richard1]

Yes, when you default on the 2nd mortgage they have the legal right to foreclose. However, if they did foreclose, the 1st lien holder (first mortgage) must get paid first with the proceeds of the sale. So in your case, BoA will get nothing, and will probably lose more money on top of that in the form of legal fees, etc.

I would wait it out and see what happens. It is highly unlikely they will foreclose; I am willing to bet this is just a scare tactic to get you to make payments on that 2nd mortgage. Like I said, quite a few posts on here and other boards about people who settled their 2nd mtg with BoA, so I am highly suspect of this alleged "policy" that the BoA rep told you on the phone

That was my thought too. I was highly concerned when BOA BK dept. advised me that regardless, they will initiate foreclosure regardless of no equitable interest once the BK is discharged. They said my account will remain in their BK dept. even after discharge, yet go to their foreclosure dept. next.

[shark66]

One word: BS

Good luck.

[ryan]

I have a BofA second in default, and a BofA first in FC. When I first fell behind on the first loan, I asked them, naively what would happen if I couldn't also pay the second as well. They indicated to me, the second would probably be negotiable, if I caught up the first... I think they almost always will consider a settlement on the second when there is zip for equity. Who knows how long it will take for prices to come back? 10 years? longer?

[pcn]

Agreed with Shark, they are bluffing. Search around the forums on here, plenty of instances where people ad underwater 2nd mortgages with BoA and they eventually settled

Can you point me toward some links or posts please? I have not had much luck finding any of these, and when I start a thread asking for people that have done it, I don't get any responses. Thanks.

[albacore44]

their bluffing. i have not paid my $241K 2nd to HSBC since my discharge a year ago. in all my studying i have found no instances of an underwater 2nd foreclosing. And i think there are hundereds of thousands of people defaulting on their 2nds. I think the banks are hiding the problem on the 2nds so the government doesn't catch on to how bad it really is around the whole country

[spidge]

I agree that they are bluffing. I had not paid them for over two years and they rarely even called.

I do wonder, if you intend to strip the second eventually why did you not file a CH 13 in the first place? This would reduce the risk of a market upswing, although unlikely, causeing more difficulty.

[laurannm]

pcn - just do a search for "2nd mortgage settlement" or "2nd mortgage underwater settlement" and you should find some posts. Try using Google as well, lots of articles and other forums with all sorts of people doing this

Albacore - out of curiosity, are planning on settling at some point with HSBC?

[Charlie777]

BOA is a giant, immensely stupid bank. They are reading from a "script", and will simply not do what makes sense because they don't want to realize the loss on the loan, or possibly securitized it and would have to pay off investors as well as book the loss.

Any intelligent financial person would realize that the Net Present Value of full collection on the lien in 15 years when the equity has returned or you sell is less than what you might offer now.

So sit tight, let the BK discharge come through, keep paying your first, manage your finances to recover, and wait until BOA sells the loan.

[1richard1]

We filed a Ch. 7 vs. a Ch. 13 based on the income means test. In our situation, insufficient income to qualify for a Ch. 13 repayment plan
of all the unsecured credit card debts and the BOA heloc. The Ch. 13 would be a 5 year repayment plan, payments significantly reduced
yet all about the income means test.

So, BOA heloc will be discharged through the BK, no further payments to them. We continue to be fully current on our 1st mortgage, One West
Bank (formally Indymac Federal Bank).

Is there any validity to this: If a second mortgage initiates foreclosure proceeds, they are then required to make monthly payments to the 1st mortgage, each
and every month if the borrower defaults on the 1st mortgage? With a second mortgage default, they'd be forced to pay the attorney fees, further at time of home
sell pay off the entire balance of the 1st mortgage, then pay their REO dept. fees, realtor fees for buyer/seller agent. So, my assumption that is why banks are sitting on seconds, hoping the market turns around in a few years.

Hopefully BOA will settle, say like 5% of the balance after the BK closes. What dept. would we talk with, at that time. The BOA BK dept. has nothing to offer, just says after close of the BK that they'll transfer the account to their foreclosure dept. Does a foreclosure dept. extend settlement offers, in this case BOA? If no settlement, then forced to file a Ch. 13 in 4 years, force BOA to reconvey their lien off the property.