Do I need to pay for second loan even after charge off?

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Icon Mini Profile Buck





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Post Posted: Mon May 22, 2006 3:36 pm    Post subject: Do I need to pay for second loan even after charge off?
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I was recently in foreclosure (twice) and during the first round, I received a 1099 (Cancellation of Debt) for my second mortgage. I was just recently hit with back taxes for not reporting this. My mistake. However, in looking to refinance my home, my lender that charged this off now says that I need to pay this in order to get a clear title. So, am I responsible for both the loan and the taxes?

HELP!
douglas

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Post Posted: Mon May 22, 2006 3:47 pm    Post subject:
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Hi,

You must understand that a second mortgage charge off is not a forgiveness of the debt. It is only an accounting entry.

Douglas

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Icon Mini Profile Samantha
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Post Posted: Mon May 22, 2006 4:06 pm    Post subject: charge off
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Hi,

Welcome to MortgageFit Forums.

I am afraid to say that you need to pay them in order to get a clear title and enable you to refinance.

Now, a charge off means that the lender thinks the debt can't be collected from you and he writes off the loan from his account and absorbs the outstanding balance as a loss.

But it will not affect whether you still owe the money. You are not freed from the debt with a charge off. In a charge off the lender passes the loan to a collection agency to recover the debt.

This has a serious effect on your credit report and stays on your report up to seven years. So, if it is possible for you to pay it off then negotiate with the lender to make out a deal where you can pay the debt and the lender changes the status of the account to "Paid as Agreed". Try to get in writing if you attempt to do this.

God bless you.

For MortgageFit,
Samantha

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Post Posted: Mon May 22, 2006 4:31 pm    Post subject:
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Hi,

As your charge offs are recent, it's better to pay it off. If it was 2 years older or more then, you would not have to repay the debts as you could have been able to manage a mortgage with the sub-prime lenders under that condition.

But in case of a conventional loan, you will be still required to pay it off even after 2 years.

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Icon Mini Profile Buck





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Post Posted: Tue May 23, 2006 10:22 am    Post subject: 2nd Mortgage Chargeoff
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OK, if I pay this off, am I still required to pay the 1099 (Cancellation of Debt) taxes also? What happens if I pay off the debt. Are they required to reverse the 1099? I believe the charge off occurred around mid-year 2004, I know the 1099 I received was for 2004. My first is a conventional fixed rate loan and the 2nd was a 15 year with balloon payment at the end. I'm just trying to better understand my options. Thanks for your help.
Icon Mini Profile Caron
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Post Posted: Tue May 23, 2006 9:08 pm    Post subject: RE: Foreclosure and 1099-C
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Hi,

In cases of foreclosure, generally, a person loses his home and he also has to pay a tax bill. Since you have received a 1099-C form, it implies that your property has been sold off for an amount lesser than the loan amount. But you may not have to pay the taxes if you are insolvent.

Usually a debtor is considered to be insolvent when his liabilities exceed the fair market value of all his assets. So, whether you will have to pay the entire back taxes or a part of it depends on your liabilities. And, even if you pay off the debt, the 1099 will not be reversed.

I would suggest that you consult a tax professional for further clarification. He will help you to determine how much of the 1099-C is taxable. Be quick or else, the IRS may file Federal Tax lien and then take further action against you.

Thanks,

Caron.


Last edited by Caron on Mon Aug 21, 2006 8:40 pm
Undecided....

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Post Posted: Thu Aug 03, 2006 5:44 pm    Post subject: 2nd Mortgage charge off
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Hello all, Due to unemployment our 2nd mtg is now 8 months behind. Our lender is willing to let us do a Short refinance. If we can't get approved for a half way decent program then we will have to do a short sale. Our liabilities well exceeded the fair market value of our home. My main question is....How does the charge off effect title. Will the 2nd mtg still show? The current lenders we are working with know are situation and seem to think we can still refi and at least pay the 1st off. Any extra of course will go towards 2nd. Is this possible? Should we receive a 1099-c for the 2nd even if we do end up reinstating and continue to pay the 2nd down? We have been approved so far for a 2/28 or 3/27. This would help us definately re establish a clean pay history again and hopefully refi before the rate starts to adjust. Do you think this would benefit us? Any info and advise would be GREATLY APPRECIATED!!!!! Thanks....Our state of residence is Indiana, in cause you need that info....also only 1 mortgage is reporting and no charge off,as of yet is showing on our credit bureau. THANKS!!!!
Undecided

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Post Posted: Thu Aug 03, 2006 5:46 pm    Post subject: 2nd mtg chargeoff
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Also from previous posting...Both mtg's are with the same lender...
Zeal_Deal

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Post Posted: Thu Aug 03, 2006 7:35 pm    Post subject:
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I Think your lender is right you can opt for refinancing and pay off atleast your 1st mortgage.

Zeal_Deal
Icon Mini Profile Caron
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Post Posted: Thu Aug 03, 2006 9:22 pm    Post subject: RE: Refinance to avoid short sale
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Hi,

Welcome to the forums.

Quote:
How does the charge off effect title. Will the 2nd mtg still show?

Your debt will be considered as "charge off" if the lender does not collect the payments from you anymore. Usually, charge off affects the title as repayment of any debt against your property is necessary to ensure clear title.

The second mortgage will show up on your credit report only if you are unable to pay it off and the lender regards your debt to be uncollectible (that is, charge off).

Quote:
Any extra of course will go towards 2nd. Is this possible?

I think refinancing will be a good option. At least if you can refinance before the rates start to adjust, you will benefit from this process. But see that you can get a rate lower than the one at which you pay the current lender. Refinance will help you pay off the first and anything extra can surely be used to repay the second mortgage.

Thanks,

Caron.
Icon Mini Profile Jessica
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Post Posted: Thu Aug 03, 2006 9:32 pm    Post subject: RE: 1099-C form for second mortgage
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Hi,

Quote:
Should we receive a 1099-c for the 2nd even if we do end up reinstating and continue to pay the 2nd down?

Your creditor will not offer you a 1099-C form as your debt is not cancelled; rather you will still be paying for the second mortgage.

Quote:
Do you think this would benefit us?

If you can look out for rates lower than that of your current mortgage rate, then you are likely to benefit from a refinance. Also, if it can re-establish your credit history, then it is surely a good option.

Quote:
Only 1 mortgage is reporting and no charge off,as of yet is showing on our credit bureau

Since no charge off is being shown on your credit report till now, so if you can pay off the debts, your credit profile won't be affected negatively.

Regards,

Jessica.
DJ

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Post Posted: Fri Jul 20, 2007 10:03 am    Post subject: Forclosure
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We recently had a forclosure, which we also had a 2nd mortgage. When we were in preforclosure both mortgage companys approved a short sale because what we owed was now more than what the home was worth because of the declining market in our area. We received a contract on our home and for 2 months no word from anyone. Our agent called them every 3 days but 2 days before the auction date, they decided to refuse the offer. Our agent could see no other alternatives because both mortgage companys were fighting over the fact that the 2nd mortgage needed more money than the first was offering. I need to know if we are obligated to pay the taxes and I believe we are still bound to pay the 2nd still. We are still unable to pay anything towards the 2nd and they now are saying they will garnish our wages. We have already filed bancruptcy in 2001 so we dont have that option yet. I originally lost my job and the job I now have did not cover our payments anymore. Do you have any suggestions for us.

Thank you for your time.
racheal j

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Post Posted: Fri Jul 20, 2007 7:11 pm    Post subject:
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Quote:
We are still unable to pay anything towards the 2nd and they now are saying they will garnish our wages.


Which state are you in? I am asking as in some states after getting a deficiency judgment the lender cannot garnish wages for recovery of his dues.
Icon Mini Profile adonis
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Post Posted: Fri Jul 20, 2007 9:23 pm    Post subject:
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Ya, if the second mortgage isn't paid off, the lender can proceed to garnish wages. But I could not get as to what taxes you are talking about? The property taxes or the taxes one pays due to debt cancellation But none of the lender has cancelled the debt through charge-off isn't it? oh and one more thing, garnishment can happen but it will depend on whether you state allows it.
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Post Posted: Wed Sep 05, 2007 1:39 am    Post subject: 2nd LIEN CHARGE OFFS
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YOU PEOPLE ARE ALL..YES ALL WRONG!!!!!!!!!
WHEN A LENDER CHARGES OFF THE 2nd LIEN...THEY WILL 1099 YOU FOR THE DEFICIENCY AND YOU WILL NOT..YES I SAID NOT HAVE TO REPAY THE DEBT..YES YOU DON"T HAVE TO REPAY THE DEBT...YOU WILL HAVE A CLOUD ON TITLE WHICH MEANS NOTHING IF YOU AREN"T MOVING.

GET A CLUE PEOPLE..>YOUR DISINFORMATION CONFUSES EVERYONE IN THE FORUM

MIKE
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