Settlement with SLS for 2nd Mortgage after BK 7

[newphoenix]

Congratulations! I am preparing to offer a settlement on my 2nd mortgage this week. I hope mine goes as well as yours.

[Drazil65]

I am sorry but am trying to clarify why you went through this process after the discharge. Do I understand you did this to insure that SLS would not come back at some point and initiate the foreclosure process? I mean the debt was discharged in the chp 7 so you no longer have an obligation to pay anything to them right? I am guessing that because you rec'd a loan mod. from your 1st mtg company to be able to afford to stay there you did not want to take the chance that SLS would sneak in and start to foreclose, right? Did the mofification put you back on the hook with the 1st mtg company so to speak after it was discharged? Thank you for clarifying as I would not think to do it this way and find all these different stories very interesting.

[Drazil65]

Also, I am interested in this because BOA just sold my 2nd to SLS on our out of state condo but we are surrendering the condo with the chp 7. But we are not filing until late Oct or early Nov at this point and someone suggested I try to go the short sale route with BOA ahead of time (they will give a DIL if the property does not sell in 120 days) but now with the 2nd in other hands (SLS) I am not sure BOA will do anything now. BUT, perhaps if I could do something with the 2nd like you did then may BOA would relent? Sorry, just trying to learn the tricks of the trade!

[aquavir]

Drazil65:

The reasons to settle with SLS are twofold.

1) It is possible, though unlikely, for the 2nd to forclose. It would only force us to leave, as our modification with the first did nothing to affect our discharge status, i.e. we are still NOT on the hook for ANY of the money.

2) We will likely be moving in the near future and since our property value is likely $60-90K more than the current balance of the 1st mortgage we saw the settlement with the second as a chance to buy equity at pennies on the dollar. Without the settlement we would have to pay off both the first and second (which would likely include a ton of fees tacked onto the balance, at least $60-70K). This way we should have a decent downpayment for our next home instead of walking away, as was our original intention. So the $3600 now is an investment that, depending on how our property value holds up, could pay a VERY big dividend in the near future. In fact, one of my goals out of bankruptcy is to not buy ANYTHING of substantial value without a sizable downpayment. Without the settlement, we likely would not be considering a move at all, until we could build up enough savings for a downpayment.

If we were underwater on our house we would not have settled at this time (although we probably would have still modified the first and waited...the modified payment plus escrow is still $400-500 less than renting a comparable house).

We are also in a good position in that the town we are in has a stronger real estate market than surrounding towns which are a bit more rural with bigger houses (we are looking to go from 3 bedrooms right downtown to 4-5 bedrooms in a surrounding town). So the time may be right in the next year to take our equity out of this house and sink it into a house in an area with home values that have fallen farther. Although there is no guarantee that the values won't fall even farther, we are looking to buy a house to LIVE in for years to come, so our primary concern is getting more house for the money at this time.

Anyway, that is some of our thought process. Hope it helps you. Good luck!

[Drazil65]

Thank you for the clarification. I think I understand your thought process a little better. We are 3 weeks late on our first missed payment with SLS and they left a message on google voice for us to call them asap! We are trying to get into the co-op short sale program with BOA for the first mortgage just to try to get them to possibly offer a DIL if we can at some point get SLS to cooperate at all.

The thing is that we are not under water on the first mortgage so if we could do a short sale then BOA would end up being paid in full in all likelyhood, then underwater part is all the 2nd with SLS. At what point do you think (or anyone) we could approach them about a settlement to open the door for the SS? BOA would require we keep it on the market for 120 days before we could do the DIL. We are trying to find a way not to have to wait through the foreclosure process as there are HOA's on this property that we are paying and keeping current so are looking to stop the bleeding on this with a DIL.

[aquavir]

You are basically in the same situation as we were (with the addition of HOA's). We never really considered looking into the DIL (but that was without the HOA's). I definitely wouldn't spend the money on a settlement with SLS just so you can give your house away in a DIL; by that I mean, if you are able to get the settlement then you should sell the house and take the money, as you will now no longer be underwater (assuming you have enough equity to cover closing costs). If you aren't able to get a settlement it would be a moot point, as you would likely have to wait for the foreclosure. But I'm no expert in this; maybe other's will chime in with more insight. Good luck.

[Drazil65]

Thanks, we no longer qualify for the BOA co-op SS program as SLS does not participate in that program with BOA. So we have been directed to the regular SS dept. at BOA but as always almost impossible to get anyone on the phone in that dept. If they will agree to a regular SS they will be paid BUT they cannot transfer the deed until the 2nd is squared away and there will not be enough money in the sale to pay off the 2nd. The 2nd mtg is $28,000 and they will probably get about 5,000 to 8,000 at most from what I can tell. Maybe they will settle for that, come after us for the remainder which will be discharged in the chp 7? We just want to be free of the HOA's as soon as we can arrange it!

[aquavir]

What if you offered $1000 or so to SLS. If they said yes you could do the SS (or maybe even just sell the house and come out of it with $$...you'd have to see what closing costs are). I guess it comes down to how much are the HOAs costing you per month and how long do you think it will take the foreclosure to take place. Maybe try low-balling SLS and go from there. I'm just wondering if they will be willing to settle really low when you are just late on 1 payment; but if you stress the BK...

I don't know; just thinking out loud. Take what I'm saying for what it's worth...which likely isn't much.

Good luck!

[aquavir]

Sorry...I just reread your posts; I had missed that you had not already been discharged. Not sure if what I'm saying will work in that case...