My Second Mortgage has been charged off.

domsmom44 · Joined: 24 Oct 2007 Posts: 10 4.56 Dollars($)

I am currently 4 months behind on my 2nd mortgage. I pulled my credit reports and it shows they "charged off" this month. Can someone please explain what this means? Are they foreclosing?

Guest 0.10 Dollars($)

If they charged it off, I think that means you are no longer liable to pay it but it lowers your FICO. Will they still try to come after you? I am not sure.

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.80 Dollars($)

Hello Domsmom,

A charge-off means that whatever balance of principal and interest you had of your second mortgage, the lender considered it uncollectable and has written it off.

Charge-off has negative effect on your credit report. It is better to come to a settlement with your lender and pay off the debt.

You have to talk to your lender to find out whether you have to pay IRS tax on this forgiven debt or not.

Under the current laws, you are required to pay tax on this. But if the Mortgage Forgiveness Debt Relief Act of 2007 passes as a law after its approval, then it will provide tax relief to you.

Guest 0.10 Dollars($)

My lender has not told me about the charge off. I happened to pull my credit report and saw it on there. It was charged off the first of this month. My concern is, can they foreclose on the property, being a second mortgage?

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.80 Dollars($)

Hello Domsmom,

If you are continuing with a first mortgage, then the second mortgage lender cannot foreclose on your property because the first mortgage has the primary lien on your property.

Guest 0.10 Dollars($)

Do you know this for sure? Thanks.

Guest 0.10 Dollars($)

Hi,

There is every possibility of the second mortgage lender to foreclose on your property even if you have a first mortgage but the chances are less.

The second mortgage is also a secured loan having your property as the collateral and so it is treated like a first mortgage in case of a foreclosure.

If your first lender is willing he may step up to buy out the second lender's interest in the property. On the other hand, your second lender has to pay back the first one and then have a clear title.

Both these are a little complicated but not impossible altogether.

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