SCRA Notice

[laurannm]

We stopped paying our completely underwater 2nd mortgage with First Horizon back in January of this year, with the plan on settling eventually. We haven't heard a peep from them (which I expected since the loan was discharged and not reaffirmed as part of Ch 7 a few years ago), other than a monthly statement that showed the minimum payment due.

Yesterday out of the blue we received a one page notice from First Horizon disclosing our rights under SCRA (Servicemember Civil Relief Act). From my research I found that lenders have to send this out to defaulted mortgages. I also know in Massachusetts (where we live), as part of the foreclosure process the lender must file a complaint in land court which gives the borrower 30 days to respond if they are protected by the SCRA (SCRA does not apply to us)

My question is whether or not this is a precursor to foreclosure by First Horizon? I have received no other notices from them, and I am probably panicking over nothing but was just curious if this meant anything. FYI, I believe our home to be worth around $250-$270k, we owe $296k on the first to Citimortgage and $121k on the 2nd to First Horizon.

Thanks!

[justbroke]

Regardless of the status of being underwater of not, the 2nd lienholder is best served by following the book and making all notices necessary. Whether they foreclose or not is their decision alone. When you stopped paying the 2nd, you took the risk that the 2nd would foreclose. Perhaps they think the home is worth more. It is anyone's guess at this point.

What are your intentions anyhow? Are you going to attempt a settlement? Or, are you just not going to pay them and hope they go away? You must have some strategy around what would happen if they foreclose.

[laurannm]

Thanks Justbroke

My intention is to eventually settle, and I was planning to start that process early 2012 (I wanted to save up a little more money). I understand the risk we are taking when we decided to stop paying and I certainly know they won't just disappear. . I have received no other notices from FH (notice of intent, etc.), and under Mass foreclosure law I have 90 days to cure the default and/or work out something with the lender so worst case I can catch up if need be.

I guess my question is more around whether or not sending out this notice is standard when a lender is beginning the foreclosure process, or is it a case where maybe it was auto-generated in their systems due to HUD disclosure requirements.

[albacore44]

I doubt it's a move to foreclose due to the underwater condition. i was discharged in may 2010 and stopped paying HSBC on my 2nd, which at the time I owed $243K. I have heard nothing in well over a year. I live in one of the cities with the highest foreclosure rates in the country. some of these forclosures, like my house, have resold for more than I owe on my 1st. However, there are a lot of costs, the 2nd would have to bear to foreclose, including paying off the first. so your house would clearly have to be in the money for the 2nd to gain anything.

I dont worry about the 2nd foreclosing, I worry about the 2nd selling their note to another party, who might negotiate with my 1st to pay it off, and gain control of my property.

There are billions of dollars worth of defaulted 2nds sitting on the books of the various banks. how they are keeping this information secret from the regulators is the 900 lb gorilla in the room.

[laurannm]

Thanks Albacore. That was my thinking as well, and combine that with the fact that HUD has compliance requirements around lenders sending these out, I am inclined to think this is just FH verifying that they are in compliance and generating notices for those who haven't received them as of yet to remain in compliance. But hopefully I am not wrong

[justbroke]

I too believe they are just notices that may be benign. I was hoping, and am now happy, that you were not one of the people who thought bankruptcy would save them from foreclosure even though they weren't paying on their mortgage. It's always a little more complex than that, and I'm glad that you have a strategy to settle the 2nd.

If that's a deed of trust, then under California laws, I believe they need to file a Notice of Deficiency which is your official 90-day warning.