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

Posted on: 22nd May, 2006 03:36 pm
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?

we had a forclosure in2007. the mortgage company is saying that after they sold the house, thier was a deficiency of 50 grand. they have charged the debt off, and a collector is after the money. are we obligated to pay the debt, i know the credit issue. Also since our debt was not forgiven do we get a 1099?
Posted on: 23rd Jan, 2008 01:46 pm
Posted on: 23rd Jan, 2008 01:50 pm
Hi Priya,

Welcome to the forum.

Your debt is not forgiven. So I think you will not get a 1099-C form. This form is given when the lender charges off the due debt.

According to the new debt forgiven Law, if the lender forgives the due debt then you need not to pay tax on the forgiven debt.

Feel free to ask if you have any further questions.

Best of luck,
Posted on: 23rd Jan, 2008 01:58 pm
Hi Priya,

Your debt has been charged off which means it has been canceled or forgiven. Hence you will be issued a 1099-C Form which implies that the mortgage company has stopped all attempts to recover the debt. However, they shouldn't have sold it off to a collector.

Formerly the 1099-C Form also implied that you need to pay taxes on the canceled debt which is reported to the IRS as your income. That's the reason this form is being sent to a borrower as well as to the IRS.

However since the Mortgage Forgiveness Debt Relief Act of 2007 is already into effect, therefore you need not pay tax on the canceled debt and hence the lender might send you the Form just to keep a written proof of the fact that he has canceled your debt.

Regarding the collector asking you for the debt, I suggest that you talk to the lender and clarify this. If he has charged-off the debt, he shouldn't collect it. This is not an unsecured debt that he'll ask the collector to collect on his behalf. Instead of collection, mortgages are being foreclosed when a borrower defaults.

Good luck
Posted on: 25th Jan, 2008 04:39 am
Your debt has been charged off which means it has been considered as uncollectible by the lender. But it is not canceled or forgiven. Hence a 1099-C Form may not be issued. However, since the debt is no longer secured (as property is sold off), therefore the lender has sold it off to a collection agency and now it's the latter that will try to collect the unpaid debt from you.

Since the debt is not canceled, therefore the question of paying tax does not arise here.
Posted on: 20th Jun, 2008 11:03 pm
i live in colorado and the 1st mortgage foresloced on the property. what are the chances of the second mortgage company filing a 1099-c or coming after me....legally. help!!!
Posted on: 10th Jul, 2008 09:26 am
Hello Aristea.

Now talk to the second mortgage company. Will the second mortgage be paid off with the foreclosure sale? If not then they can come after you for due loan amount and they can even place lien on your other properties. But if the company forgives the due loan then the second mortgage company filing a 1099-C.
Posted on: 11th Jul, 2008 04:56 am
Yes of course, you are responsible for both...... :lol:
Posted on: 24th Jul, 2008 10:16 pm
Is there a way that I can find out more information. I don't plan to move and I didn't want to have my mortgage charged off. they were working on a loan modification for me I thought on both loans but some how they charged off the second loan. If it is truly charged off can they foreclose?
Posted on: 24th Oct, 2008 10:11 pm
Hi Kevindsr!

Mortgage charge off does not mean that the property will go into foreclosure. It only means that the original lender is not interested to recover it from you so it has sold off the mortgage to a collection agency who will collect it from you. To know more about second mortgage charge off, visit the following link:

You will have to pay your debts to the collection agency and for the first loan you will have to pay according to the alternative plan that will be told to you by the lender.


Posted on: 25th Oct, 2008 02:35 am
I have a 1st and 2nd mortgage on my home. If my 1st mortgage company foreclosed on my property, am I obligated to pay the 2nd mortgage. If so, where can I receive help?
Posted on: 19th Nov, 2008 07:59 pm
Welcome Loretta.

When a first mortgage company forecloses the property, the second lender sends a representative to the auction. This representative has to see whether the home is sold off at a price such that the second lien is paid off along with the first. However, if the sale price isn't enough, you're obligated to pay the second.

"If so, where can I receive help?"
What kind of help are you asking for? Do you wish to negotiate with the second lender and reduce your payments or are you looking for emergency mortgage assistance programs?

Posted on: 20th Nov, 2008 01:19 am
Our house is due to be sold January 6th. 2009 . We are in contact with our mortgage co. . And they are going to do a loan modification . To try to rectify the situation . But we were told that the 2nd. loan was charged off . And that we can call later on to deal with that . What does this actually mean ? Is a modification the usual in this type of situation ? To save our house from sale ? And can the 2nd loan be saved ?
Posted on: 26th Nov, 2008 10:11 am
Hi Hopeful,

As far as I can understand from your question, you had two mortgages on the property. The lender has agreed to do a loan modification for the first mortgage whereas they have charged off the second mortgage to a collection agency.

A loan modification is a good option in this kind of situation. Here the lender will give you an alternative payment plan through which you will have to pay off the dues.

The second mortgage is charged off. This means that the lender is not interested in collecting the second mortgage dues from you any more and thus it has sold your loan to a collection agency. Now it is the collection agency whom you need to pay the second mortgage dues. Charging off second mortgage does not mean that the lender has forgiven the mortgage. You can call up the lender and ask them about the collection agency to whom they have sold the second mortgage.


Posted on: 27th Nov, 2008 01:26 am
Just for anyones info. We had an 80/20 loan with the same company. We did a short sale and they agreed to forgive the balance so we got a 1099-C on both loans, but because of the new law, we didn't have to include it as income for taxes.
Posted on: 27th Jan, 2009 01:32 pm
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