2nd Mortgage Modification

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We are in default on both our 1st and 2nd mortgage. In July 2009, we received a trial modification plan and began making reduced payments towards our first mortgage. Then in August, we received a verbal agreement from the second mortgage for a reduced trial modification payment. We were told to make the trial payments until the formal modification agreement had been worked out. We made the first trial payment on the second mortgage by August 20, 2009. Then in mid-September, we viewed our credit report and the second mortgage showed charged-off and we had taken a 150 pt credit hit! Upon realization, we immediately called the 2nd and notified them of the mistake. They said they would look into the issue and call us back. We received a call on October 19, 2009 from the 2nd mortgage and they said the loan had been reinstated, but if we did not make another trial payment by October 27th, the loan would be charged-off again. At this time we are trying to stay in our home and we continue to make our trial mod payments on the first, but we are absolutely unable to make that trial payment on the second by 10/27/09. In addition, the 2nd will not provide us with anything in writing concerning the trial modification payments. Do we have any ground against the 2nd since we made the initial trial payment in good faith and they charged it off anyway? And after it is charged off this time after October 27th, can we still negotiate a loan modification with the 2nd? If the second forecloses, will the 1st mortgage cancel our negotions for the loan modification?

Any input would be helpful. Thanks!

jenkin7 · Posted: Sat Oct 24, 2009 3:12 am Post subject:

Hi Angela,

It is strange that the second mortgage company charged off the mortgage even though they verbally agreed to accept a reduced trial modification payment. It also sounds strange that they said they had reinstated the loan, but would charge it off if you do not make another trial payment. In this situation, you do not have any ground against the second mortgage company as no written agreement was signed between you and the company. It is true you made the first trial payment in good faith. But since there is no written agreement regarding the trial modification plan, they had the right to charge it off.

If it is charged off, the second mortgage lender will no longer be in charge of collecting the debt. Thus, you will not be able to enter into any sort of loan modification agreement with them. However, you can negotiate with the collection agency or the mortgage company, which holds the debt after the charge off. You can set up a repayment plan and pay off the debt installments. You can also request them to accept a short pay off and settle the debt.

savior70 · Posted: Sat Oct 24, 2009 4:43 am Post subject:

To Angela,

If the second mortgage holder forecloses on the property, it is obvious the first lender will cancel negotiations for loan modification. If the property is going to be foreclosed and sold, what purpose will the modification serve? Modification is a loss mitigation process that helps avoid foreclosure. Now, if the property is foreclosed, there remains no significance in a loan modification. Is your property underwater? In case it is, chances are that the second lender will not foreclose on the property. The reason I say this is, the second mortgage lender holds a junior lien on the property. When the property is foreclosed, the first lien will be paid off first. This is why if the property is not worth much, the second lender generally does not foreclose on the property.

loanday123 · Joined: 28 Oct 2009 Posts: 16 3.83 Dollars($)

I also heard that Obama might be doing something with 2nd mortgages? Not sure if that is true or if that would even help me since I have a private lender?

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