Post discharge.....Post close...Attempt to settle/modify mortgage

[clunk]

So, our case closed earlier this month and we didnt reaffirm our home mortgages(either of them). Our first puts us about 40k underwater and the 2nd is another 35k, we planned on staying and paying under the pretense that upon our case finishing that we would attempt to settle our 2nd and try to get a modification on the first. So today I contacted Bank of America, and simply asked what I need to do or who I should talk to in order to work a settlement in which they would release interest in our home. I was informed that Bank of America does not settle on accounts discharged in BK. They only only are interested in continued payments or payment in full.....In order to ensure I heard everything he said correctly, I repeated it and he responded that is correct. To which I asked "So more or less my two options are continue making payments, or walk away from a house that is $75K underwater?" The guy I was talking to responded with a yes.....Is it just semantics, and should I have asked to modify the loan? Has anyone else had this experience with BOA? I hesitate to even contact my first mortgage(who is chase), until I have taken care of the second....

[LadyInTheRed]

They may change their tune if you stop making payments on the 2nd. They have no incentive to settle if you are still current. Also, to settle, you will probably have to be able to come up with a lump sum payment.

If you want a modification, that is what you should ask for. But a modification does not release the lien. Depending on your circumstances, you may also have to stop making payments before they will modify the loan.

Symantics are very important. In a settlement, you pay less than is due on the loan in exchange for a release of the lien. In a modification, the terms of the loan are changed to make payments more affordable. It may be an decrease in the interest rate, a lengthening of the term of the loan or, in VERY rare circumstances, a reduction in principal. But, the lien remains and the bank can foreclose if you default on the new terms.

ETA: It is possible that Chase will modify the 1st even if you don't settle the 2nd. But unless you show your income is not sufficient to pay the mortgage, you are unlikely to get a modification.

[clunk]

My ultimate goal is a settlement....I just wasnt sure if I was using the correct banking jargon.....We would like to stay in our home but at the same time being $75k upside down in our home was one of the reasons we filed BK. Maybe I should start looking at a short sale.....

[clunk]

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[bcohen]

Of course, no bank will agree to settle, modify, or forgive any portion of the loan when you're still current on the payments! In fact, since you have discharged the second mortgage in bankruptcy, and are "underwater" on the first, you have zero incentive to continue paying anything towards this loan! If you quit paying the second mortgage, BOA cannot report any negative information to the credit bureaus (that would violate the bankruptcy discharge) and they cannot foreclose (because they'd have to pay off the first mortgage to do that).

Thus, if your goal is to stay in the house, you should keep paying the first mortgage, quit paying the second, and let it charge-off. After charge-off, you will be able to settle it for a fraction of the current balance.

That being said, unless your mortgage payment on the first mortgage is significantly cheaper than rent in your area, it may not even be in your interest to keep the house at all. $40,000 of negative equity (in the first mortgage) is a lot, plus figure another $6,000 to $9,000 (to settle the second mortgage) and that's almost $50k which you may never recover. It may therefore be in your interest to quit paying both mortgages, drag out the foreclosure for as long as possible, and save up money while you live payment-free.

[LadyInTheRed]

Why bother with a short sale? If you want to walk away, stop paying both mortgages and stay for free until Chase forecloses.

If you want to stay in the house and are okay with the first, stop paying the 2nd and wait a few months to offer a settlement. Or, they may make a settlement offer first in which case you will probably want to counter offer.

Can you rent for less than the mortage on the first, taxes, insurance and maintenance expenses? If not, it makes sense to keep paying the first even if you can't settle the 2nd. The 2nd isn't going to foreclose when the house is worth $40K less than the balance on the first mortgage. If you pay only on the first, you are likely to be able to live there for many years before there is enough equity to make it worth foreclosing on the 2nd. In the meantime, Bank of America may sell the 2nd to somebody who is more willing to settle.

[clunk]

For us, there are a few things to consider our mortgage is about $1500 a month and utilities are about 300. Rent is just about the same, we do however spend about $500 a month in gas in order to commute. So walking away was one option we had thought about. I was not aware that BOA couldn't foreclose without acquiring the first position from Chase.

[bcohen]

For us, there are a few things to consider our mortgage is about $1500 a month and utilities are about 300. Rent is just about the same, we do however spend about $500 a month in gas in order to commute. So walking away was one option we had thought about. I was not aware that BOA couldn't foreclose without acquiring the first position from Chase.

Like I said, as a junior lienholder, BOA would have to pay Chase's lien in full (i.e. pay off the remaining balance of the first mortgage) in order to foreclose. As the house is worth less than this amount, this isn't going to happen. The second mortgage is worthless, and BOA knows this. After you quit paying, they will charge it off quickly, and they will be willing to settle at that point, although it may not be in your interest to keep the house.

[ValleYum]

For us, there are a few things to consider our mortgage is about $1500 a month and utilities are about 300. Rent is just about the same, we do however spend about $500 a month in gas in order to commute. So walking away was one option we had thought about. I was not aware that BOA couldn't foreclose without acquiring the first position from Chase.

I remember that you live here in my state, can't remember if you are in my area or not (SW). We stopped paying on our Chase mortgage in October 2010. We moved out in October 2012 after a lousy loan mod offer (reduction in payment of $50 less per month (and also b/c we found the PERFECT rental opportunity and due to some health issues for me living in a 2 story home). Chase has YET to even change the locks - even though I have notified them numerous times and cancelled the homeowners insurance on the house as well. Chase is moving very SLOWLY here in my area from what I can see on the tax assessor's website.

Your commute expenses and time may be worth investigating renting in an area closer to your work. In the meantime, SAVE your 1st and 2nd payments and either force a mod/settlement or have a super great nest egg for moving.

Good luck and keep us posted.

[clunk]

Yes I do live in the same state as you but, I am in the puget sound area....thanks for the heads up on chase's slow movement as well. I think what we have semi-decided to do is to stop paying on the second, and continue paying on the first. Then next year rent out this house while we rent another to establish a year of rental history for our credits sake. Also at the same time we will be establishing a year of rental income, so that at the end of year two we should be in a situation where we can start talking about buying another house.

[jst4f]

Most of the big banks will not settle with the home owner post-BK as a matter of principle. If you want to settle for penny's on the dollar you need to stop paying the second. Then go to a local real estate club and find those that deal in note buying. Someone the banks deal with regularly. Cut a deal with them to go buy your note from the bank and then buy it from them. The banks will sell non-performing notes to third parties. Get the deal in writing prior to proceeding. This is assuming that the first mortgage is small enough to want to stay.

Other options may be easier.

[clunk]

This is assuming that the first mortgage is small enough to want to stay.

Other options may be easier.

Honestly, if was just my wife and I, we would just stop paying now and save all those payment $$$ for the next place. It sounds like from others about a year is the norm for the foreclosure process, just putting that alone into savings would give us a $15k nest egg. But, unfortunately with two kids in school, my flexibility is somewhat limited. Hence the stop(payments on the 2nd),stay and pay on the 1st. I'm hoping to just wait out the 2nd, because when we built the house it was 152 we owe 170 now and it's valued at 134 now. The delta between past value and current isn't too far off and could be overcome with a few years of positive growth. But I can't see the holder of the second ever recouping their investment.

[btbeme]

Stop paying BofA. Yesterday. When you are about 4-6 months in arrears on your second (assuming you did not reaffirm) then call them to see if they would like to discuss a settlement. After their laughter dies down, politely inform then you will call again in another 3 months. Lather, rinse, repeat. And bank the would-be payments.

Somewhere along the line they will offer you about a 60% settlement. Counter with a 5% settlement. Continue the non-payment and occasional calls until you get an agreeable settlement; say, 10-20% of the note (expect that you will have to have that as a lump sum). When negotiating, I recommend that you study the historical methods of one Vyacheslav Molotov, whose diplomatic negotiating style earned him the moniker of "Iron Pants" for his steadfast refusal to give even an inch.

You will not get a mortgage modification on your first until the second is out of the way - either paid in full, paid under an agreement, or somehow rolled in under the first (not going to happen with two banks involved).

If you cannot get an agreeable settlement on your second, I suggest that you start serious consideration for halting all mortgage payments and stretching your stay as long as possible before foreclosure. Your only other option is to continue to pay full boogie on both mortgages.