Settlement with SLS for 2nd Mortgage after BK 7

[aquavir]

I just wanted to share my experience as an FYI for anyone looking to get a settlement on their 2nd mortgage after discharge of their BK.

I filed (CH 7) in Nov '09 and was discharged in Feb '10. We stopped paying both mortgages in Dec '09 (1st with GMAC and 2nd with SLS; GMAC sold our 2nd a month before I filed).

We were initially just going to wait for the forclosure, but then I did some research here and other places and we decided to work for a modification with GMAC, which we got in Sep '10 (We had owed 240K to GMAC over 30 years @6.25% and it went to 257K over 40 years @4%, and of course since it is just a modification of the original note our discharge is still in effect). We won't be building equity very quickly with the 40 year term, but it beats renting and it won't smack us with the foreclosure.

We had our house valued by a realtor during the BK process at $275K (at the time Zillow had it at about 300K). Now Zillow has it at 320K (the market hasn't really tanked here in our part of CT; my parent's house, less than 2 miles away, just sold for just under the asking price before they put it on the market), so since we hadn't paid SLS in over a year and we didn't want the value of our home to get high enough that they might think it worth while to forclose (unlikely, I know), and because we may want to move in a year or so and it would be nice to have the equity to use as a downpayment on our next home, we decided to call up SLS and ask for a settlement.

So I logged into my online account for them and fired off an email offering a settlement of $2000 on just under $60,000 in debt. They emailed me back and said I had to call them. So I called and offered $2000; they came back with $3600 which was well within the 5-10% range for which I was hoping so I took it (I know I might have been able to haggle, but I figure I'm getting a pretty good deal here so I didn't). So they sent me an agreement and I signed it and sent them the money and now I only have the 1st to deal with.

So that is my story; hopefully not too boring to everyone. I just thought I would write it down here because I had searched and searched and not found much in the way of complete descriptions of other's experience with the actual settlement process.

Have a great Father's Day everyone!

John

[despritfreya]

So I logged into my online account for them and fired off an email offering a settlement of $2000 on just under $60,000 in debt. They emailed me back and said I had to call them. So I called and offered $2000; they came back with $3600 which was well within the 5-10% range for which I was hoping so I took it. . . So they sent me an agreement and I signed it and sent them the money and now I only have the 1st to deal with.

Ok. I hope all is on the up-and-up and I congratulate you if it is. BUT. . . the next questions is "did you get a recorded release of the mortgage or deed of trust"? Because, if you didn't, you just wasted $3,600.00.

Des.

[aquavir]

I haven't received it yet, but they have closed the account online (i.e. I can no longer log in). And before the online account closed I saw the progression of the money: first the money was automatically applied to sequential payments, then that was reversed and I had a $3600 credit, and then I could no longer access the web site. The settlement offer they sent me and I signed also clearly stated that it would release the lien, so if they try to screw me over I'll have something with which to fight them. We'll see.

[justbroke]

Hopefully, that's a recordable document. I would just record the document with the County Registrar of Deeds if your don't see a recorded Release of Mortgage within 60 days.

[aquavir]

Thanks for the warnings and advice. I'll keep you posted. I guess at the very least it makes it that much more unlikely that they would bother to forclose in the future... ;)

[aquavir]

*This is in response to a private message I got on this; my response wouldn't fit, so I'm posting here*

Hey Scott,

For the loan modification we waited deep into the forclosure process (we actually nearly signed a lease agreement on a rental property, but didn't like the pet fees they were going to charge, so pulled out at the last minute). I finally decided to call the bank and they made us do the HAMP thing first, for which I knew we wouldn't qualify because of my salary (our bankruptcy was because of a failed start-up dental practice and had little to do with personal finance). But we sent in the HAMP paperwork and they sent me a letter asking for all sorts of info, most of which I provided with the following letter:

To Whom it May Concern:

I am writing in response to your letter dated 08/20/10 regarding missing documentation for my application for a loan modification. Specifically, you requested pay stubs for [my wife]; she is currently a homemaker and is not receiving a paycheck. Enclosed, please find the last two pay-stubs from my job at xxxxxxxxxxxxxxxxxxxx at which I work on average every second Saturday. Also enclosed are two pay-stubs from xxxxxxxxxxxxxxxxxx, where I began work, forty hours a week, on 08/09/10. I no longer work at xxxxxxxxxxxxxx, having quit that job on 07/22/10 to pursue my current position.

I am unsure whether I will qualify for any federal programs, but am interested in an in-house modification vs. completing the foreclosure process if a federal program is not available. My acceptance of such a modification would be predicated on my ability to negotiate a settlement on our second mortgage (with SLS). If no such settlement can be reached with SLS and/or no modification is possible with you (GMAC) I would have to let the foreclosure process run it’s course.

Thank you for your time; have a pleasant day.

Sincerely,

John

So anyway, they rejected the HAMP and then called me and asked what payment I was looking for. I told them that I wanted it to be at least several hundred below the previous payment (~$2000 with escrow). They modified it as I outlined in my post bringing the payment to just under $1700 (with escrow). I ended up not having to worry about getting the 2nd taken care of first (as I had warned in my letter to GMAC) because, of course, the modification left the discharge in tact.

OK, so to your real question. As I detailed in my post I felt it was a good time to try for a settlement on the 2nd. We had given them nothing for almost 1.5 years and the market is still down; also, I had seen rumors of SLS taking between 5 and 10% (simple Google search). The actual email I sent was pretty benign. Something like: I have received a chapter 7 discharge of my debts, including SLS loan xxxxxx. I would like to speak with someone regarding a settlement on this uncollectable debt. I am offering $2000 for settlement of the debt in full and release of the lien.

That got me an email saying basically that they don't do this over email and I have to call. The phone call went like this (after all the menus and account verification stuff):

Me: Hello I would like to settle my loan?

Them: How much were you looking to settle for?

Me: $2000.

Them: Let me talk to someone.

5 minutes or so.

Them: We would be looking at $3600, which would be about 6%.

Me: Sounds fair, ok.

Then they sent me a 3 page "Short Payoff" agreement for my wife and me to sign. And I sent a payment to them through my bank's bill pay. I watched the online account as I detailed in my post and the money was first automatically applied to consecutive payments, but then that must have been manually reversed, because then my account showed the full balance again, but also a $3600 credit; then the account was no longer accessible. I guess it is possible that they could be scamming me, but I doubt it. I'll probably call them in the next couple of weeks to confirm that everything is settled.

I really thought it would be a bit more difficult than that, and as I said in my post, I guess I could have haggled the price, but I do feel fortunate to have come through the bankruptcy in pretty good shape and while I think it is perfectly ethical for me to take full advantage of all the bankruptcy "perks", I don't want to be a douche about it.

Hope that helps. Good luck with everything!

John

[considering7]

THanks for sharing your experience. Glad it was so easy for you.

Once SLS sends you the lien release letter, what's the next step? Do you take that down to your County Register of Deeds office and they just accept the letter and remove the lien from the recorded deed?

[aquavir]

Once SLS sends you the lien release letter, what's the next step? Do you take that down to your County Register of Deeds office and they just accept the letter and remove the lien from the recorded deed?

You know...that's a good question, I really hadn't thought about what I might need to do other than pay them. Anyone know if I need to do anything after receiving notification of the lien release? Again, I'm not particularly concerned, but I do want solid confirmation that they no longer hold any claim on the property.

[aquavir]

FYI: Here is the bulk of the agreement, minus the cover page and return/payment instructions (and, of course, personal info):


THIS COMMUNICATION IS FROM A DEBT COLLECTOR. THIS IS AN ATTEMPT TO COLLECT A DEBT AND ANY
INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE
06/03/11
JOHNxxxxxxxxxxxx
xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxx
Re: SLS Loan Number xxxxxxxxx
Property Address: xxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxx
Short Pay, Contingent Approval
Dear JOHN xxxxxxxxxxx
xxxxxxxxxxxxxxxxxx
Specialized Loan Servicing LLC (SLS) has been authorized by the Investor to accept a “short payoff” in connection with
the above referenced property, release the lien secured by its Deed of Trust or Mortgage, and release you from liability
under your promissory note, contingent on the fulfillment of the conditions listed below:
1. Return of signed acknowledgement of this approval agreement by fax
1. Receipt of Minimum Net Proceeds in the amount and timeframe specified in this agreement
The minimum net proceeds approved of $3600.00 (US) must be in certified funds and the payment dates are as follows:
Due Date of Payment Payment Amount
06/13/11 $3600.00
If any of the above requested documents and information, as well as the Minimum Net Proceeds are not received in our
office by the date given, this approval will be null and void and you will need to contact our office for updated approval.
SLS will continue to make normal servicing disbursements for items such as taxes and insurance, which may increase the
Minimum Net Proceeds required. In the event this occurs, SLS will send an updated approval letter reflecting the
increased Minimum Net Proceeds required for closing.
If you have not already done so, please send the requested documentation and a contact number to SLS at the fax number
referenced below so that we can make arrangements for direct payment of the proceeds. If you are a customer in
bankruptcy, a written approval from your attorney acknowledging acceptance of these terms must be received in order to
complete this process. Please return the approval letter to SLS with your signed documents.

You will waive your rights to any unearned premiums for taxes and/or insurance, any escrow funds and
overages for fees associated with this sale or property securing this loan or loans, which includes, but is not
limited to attorney’s fees, any and all pro-rations and escrow cushion.

Please be advised the acceptance of this short payoff transaction is being made in reliance upon the information
you provided to SLS, including the financial representations regarding amounts and sources of your income,
your other assets, and your debt obligations.

All proceeds must be made payable to Specialized Loan Servicing LLC in the form of a cashier’s check and
remitted immediately to: etc...

[HHM]

Please be advised the acceptance of this short payoff transaction is being made in reliance upon the information
you provided to SLS, including the financial representations regarding amounts and sources of your income,
your other assets, and your debt obligations.

All proceeds must be made payable to Specialized Loan Servicing LLC in the form of a cashier’s check and
remitted immediately to: etc...

What bothers me is the above language. That is a pretty hefty "out clause".

[aquavir]

What bothers me is the above language. That is a pretty hefty "out clause".

The funny thing is that I didn't give them ANY information. I figured that it was all boilerplate stuff. I guess the question would be: Is the deal "locked-in" once I "fulfill[ed] the conditions listed below"? I.e. can they trigger the clause you referenced after I have done both items on their list?

I'll call them in the next few days and inquire about the status of my loan and more specifically the lien.

Again, thanks for all the input. This forum is such a great resource. And, it is refreshing that there is so little of the trolling, sniping and flaming that is so prevalent on other forums. A great community.

[aquavir]

Update: I did not get a chance to call SLS in the last few weeks, but today received a letter stating:

Dear Borrower;

Our rcords indicate this loan has been paid in full to Specialized Loan Servicing, LLC

Please retain the enclosed document(s) for your records.

The release or satisfaction of mortgage document has been sent to the County Recorder's Office for recordation. Upon receipt of the recorded release or satisfaction of mortgage from the County Recorder's office, we will forward it to you.

We at Specialized Loan Servicing, LLC thank you...

Attached to this letter was the note for the 2nd mortgage (it appears to be an original).

[HHM]

Good news, way to go.

[aquavir]

Again, thanks for all the help. I never would have even thought to ask for a settlement if not for this community!

[despritfreya]

Congrats. Nice to see a success story. . .

Des.