Default Status

k2cm94 · Joined: 26 Apr 2007 Posts: 6 3.08 Dollars($)

I am in default status with my mortgage company. I live in IL. Two questions: 1. Can my second mortgage company come after me? 2. Do you know of anyone that will consolidate my loans with my status?

Sorry if this is a double post. I'm new at this.

Thanks.

miller_st · Joined: 17 Jan 2007 Posts: 917 168.84 Dollars($)

Hi K2cm94,

Even if you are in default because of financial problems, there can be ways to bring your mortgage current. You should get in touch with your mortgage company and explain your financial situation. They will try to develop a plan by which you can continue making the payments.

If the 2nd mortgage is not in default then you can continue making payments on it. The second mortgage company can only recover their dues only after the first mortgage is been paid off in case of foreclosure.

Miller

k2cm94 · Joined: 26 Apr 2007 Posts: 6 3.08 Dollars($)

I guess I should have been more specific. I am on a repayment plan, and of course, the payments are really high. I cannot afford to make payments on the 2nd mortgage. I just received a call from the 2nd company, and they are "threatening" to put my house into foreclosure. I just didn't know how that was possible when I am still considered in default status with my 1st lender until September.

colin · Posted: Thu Apr 26, 2007 11:32 am Post subject:

Hi,

2nd mortgage company, if forecloses will have to buy out the 1st mortgage debt, as 1st mortgage company has first lien for recovery of the debt and only after that 2nd mortgage will be paid. So, if they are saying that they would foreclose then they will have to pay out the 1st mortgage holder then only they would be able to foreclose.

And if they do not pay off the 1st mortgage company, and foreclose then from the foreclosure sale amount the first debt will be paid off then only anything left will be used towards pay off of their balance.

Colin

k2cm94 · Joined: 26 Apr 2007 Posts: 6 3.08 Dollars($)

Even if the 2nd Mortgage is a fraction of the first, they are able to foreclose? Do you know if that is common practice?

This is really good stuff. I like this website.

No one's addressed my second question. I guess I'm an idiot for asking. I just don't know how to get out of this situation without doing some sort of consolidation.

miller_st · Joined: 17 Jan 2007 Posts: 917 168.84 Dollars($)

They can foreclose but then they would hardly gain anything from it as most of the proceeds will go over to the first mortgage company. I haven’t seen many second lien holders foreclosing when the first has a large unpaid balance.

Consolidation of your other debts is possible, which will allow you to have more money to use towards paying your mortgage.

Miller

blue · Posted: Thu Apr 26, 2007 12:01 pm Post subject:

Hi k2cm94,

Also go through this page ( http://acornhousing.org/TEXT/fap.php ). It’s about ACORN's Foreclosure Assistance Program, in which there can be substantial reduction in interest rate to allow to you continue with the payments and avoid foreclosure.

It can be helpful for you with the situation you are in.

Thanks
Blue

k2cm94 · Joined: 26 Apr 2007 Posts: 6 3.08 Dollars($)

Blue,

Thank you for the website info. I will definitely look into that, especially since there is an office located in Chicago.

I'm sure I'll be in touch.

Thanks again to all. I appreciate all your responses. Have a good day.

carnahandavid · Joined: 21 Dec 2006 Posts: 239 58.41 Dollars($)

k2cm94 · Joined: 26 Apr 2007 Posts: 6 3.08 Dollars($)

Unfortunately, there really isn't any other debt besides my car note ($400). It's just day to day living (and it's no where near lavish) and a big mortgage payment that is weighing me down.

carnahandavid · Joined: 21 Dec 2006 Posts: 239 58.41 Dollars($)

I understand your situation. Keeping payments on two mortgages can certainly be difficult. Is the property market good in the region you are in? In that case you could have thought about selling the house and pay off the mortgages. Also has any equity developed in the house from the time you had taken the mortgage?

k2cm94 · Joined: 26 Apr 2007 Posts: 6 3.08 Dollars($)

Houses are moving really slow in my area. I love my house, and I would rather not uproot my family - forced or not. Due to a series of very unfortunate events, I am put in a difficult position. I guess I'll pray about it.

Thanks for your advice. I appreciate it.

blue · Posted: Thu Apr 26, 2007 2:08 pm Post subject:

Hi k2cm94,

You are not going to lose your home as a repayment plan is already in place. If you somehow continue with it and find some other extra earning scope then gradually things will improve and after the first mortgage comes out of default state, you could consider possibility of a refinance.

In this present situation, the second mortgage holder is threatening to foreclose but they are also aware that they won't have anything to gain from it as all the proceeds will go the first mortgage company.

And as you said property market being very down, a foreclosure sale will be the last thing in their mind. Plus there would be many expenses that they will have to bear to start the foreclosure process and spend a lot of time into it.

Also look into the ACORN program I mentioned earlier to know if it can be of some help.

Thanks
Blue

helping_user

Hi K2cm,

The second mortgage company cannot foreclose until and unless the first loan is paid off. I mean the first lender has primary rights on the property and the second loan is subordinate to that of the first. So, if at all foreclosure happens, it can be initiated by the first lender and not the second mortgage lender. And, it's not a common practice for the second lender to foreclose the loan prior to the first lender doing that.

The general rule is that the first lender may foreclose if you default and cannot follow even an alternative payment plan. Through foreclosure, the home is sold so that the first lender gets back his money while the second mortgage should be then paid off by you in installments or as lump sum as required by your second lender.

Thanks.

Samantha · Posted: Fri Apr 27, 2007 2:28 am Post subject: RE: consolidate home loans

Hi K2cm,

Since you are seeking consolidation against secured loans, you will not be eligible for debt consolidation or more specifically debt-settlement programs. But you can qualify for a debt consolidation loan. It is generally a secured loan offered at a low interest rate but for a long term period. hence, even if the interest rate is lower, you will be paying a lot of interest if you consider the long term associated with it.

However, the advantage is that you get temporary relief from managing two loans and avoiding a foreclosure and if you carry on with a well-planned budget as advised by a credit counselor, you will be able to deal with such loans successfully.

I am aware of one such community, debtconsolidationcare.com which offers debt consolidation services. You may contact them for further clarification.

Hope this helps...

God bless you.

Samantha

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