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Can 2nd lender pursue deficiency judgment after charge off?

We've tried several short sales, but the second - B of A - wouldn't budge on their 85% requirement. We brought the first current hoping the second would initiate the foreclosure, giving us protect from deficiency judgement in CA.

They are telling me they have decided to charge off the loan. Two Quetions:

1. How can I sell the house in this situation?
2. I assume they can't go after a deficeny judgement because they have choosen not to foreclose. Am I right or wrong?
3. The B of A agents have been telling me once written off they will consider new guidelines for a settlement.

jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi californiatim,

Charging off the loan does not mean that they have forgiven the mortgage. It only means that your mortgage has been sold off to a collection agency. As far as I know, if you pay off the collection agency, they will have no problems with you selling the property. But you should remember that selling off the property will make your first mortgage due and you may have to pay them off immediately.

As far as your second question is concerned, if you are speaking about the mortgage which is going to be charged off, then yes, they will not go for the deficiency.

I did not understand your 3rd question. If they are charging off the mortgage, then I don't think you will need any settlement with them. You will have to contact the collection agency and pay off the debts to them.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am in Ca. I am trying for a loan mod with Countrywide(1st) and Wells fargo (2nd HELOC). How likely is Well Fargo to come after me for the charged off amont?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Rafffi,

In California, the deficient amount resulting from the sale of the property is not charged by the lender. However, as Wells Fargo has a [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url], it can charge off the mortgage to a collection agency who can collect it from you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can Wells Fargo try to forclose after the fact, since the already charged off. How long can they try to collect? 7-10 years then it drops off. If I don't have any assets what can they get?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hey Raffi,

If the loan has been charged off by Wells Fargo, then they cannot try to collect the debts from you. It is the collection agency who will be collecting the debts. If you pay off the charged off amount, then your credit report will mention it as "paid charged off".

As far as I know, the Fair Credit Reporting Act lets the charge off to show for 7 years, plus 180 days from the last time you paid the account immediately before it was charged off.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

O.K. what is the likleyhood that they may file a deficency judgement. And if I don't have any assets that what can they get?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Raffi,

The lender will always have the right to file a deficiency judgment against you if you are unable to pay off the debts. If you do not have any assets, then they may garnish your wages.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If Wells Fargo(my second) does a charge off on my HELOC. Then do they release the trust deed?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Raffi,

Charge off does not mean that the mortgage has been forgiven by the lender. It means that the lender has sold off the mortgage to a collection agency who will in turn collect the dues from you. In that case, I don't think your trust deed will be released.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Finally I got a modification. So they added all my missed payments and late charges to the end of the loan. Went from 409000 to 429000 and from 5.625 30 fixed to 5.0 40 fixed P and I. That is the first. the second which is not purchase money went from 8% to 0% and from 1000 to 300 a month. Which is great! However, I still cannot afford it. plus I am pay loans that total more now 560000 and the property is worth 400000. I am leaning on letting it go. Unless this new Obama can come up with something more suitable for me. Can't they revaluate based on current market value? Any suggestions?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Raffi,

In a loan modification, the missed payments are definitely added and then a new payment plan is given to you. I don't think lenders will re-evaluate it based on the current market value.

If you are unable to pay the dues after a loan modification, then you can check out the options of short sale or deed in lieu with your lender.

However, both of these processes will affect your credit. A short sale will reduce your credit score by 75-100 points whereas a deed in lieu will lower your credit score by 250 points.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My mortgage company told me they have charged off my 2nd loan, and any payments I send in will be applied to the principal only. I am current on my 1st. My 2nd is due for 5 months. Can you explain how this works.

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Lonnie,

As far as I know, If your loan has been charged off to any collection agency, you will have to make payments to them instead of your original second mortgage holder. The collection agency will collect the money from you to recover the loan amount. You can also negotiate with them and settle the debt for less than what is owed. Thus, if the mortgage company has charged off the loan to a collection agency, they will no longer be collecting the mortgage payments from you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

on a bank document I show a 0 balance the banker assured me I would not have to pay the loan and then out of the blue they sold the loan I am very far behind on my payments any suggestions

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I owe $300k, interest only with an ARM due in 5 months on my first and $40k on second. Home is worth $171k. I have a proposed modification on my first at 0% and just made my second trial payment but still have no formal proposal. I am self-employed. My second had offered me a modification but kept wanting documents which I didn't have when asked. I now have all docs but received a notice today that my second has been sold to a collection agency. So much for the second modification.

Had I done a short sale, the second would be lucky to get $2,000. Can the second mortgage holder get the note back from the collection agency (better solution) or what types of deals can I expect from the collection agency if there are no assets to go after? If I offer them $1,000, would they settle for $5,000? Any payment terms on an amount less than the full $40k? What can I expect and will this mess up my proposed modificaton with the first or will they just not care?

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Robert,

I don't think the [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] holder will get the mortgage note back from the collection agency. They have sold the debt to the collection agency, who will now be collecting the money from you. But since you say you have no assets which they can go after, I believe they will be keen on working out a settlement with you than suing you for the debt. Talk with the collection agency and negotiate with them to settle the second mortgage debt. Your first mortgage has nothing to do with the second mortgage. Thus, the modification process on the first mortgage will not be affected by your second mortgage debt.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My house foreclosed 2 years ago in AZ, and I recently began receiving calls from a collection agency. Wells Fargo charged off the HELOC (not purchase money 2nd). Can teh collection agency file a judgement against me for the $63k even though Wells Fargo wrote it off?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

To Melissa,

A charge off does not mean the debt has been written off or cancelled. If Wells Fargo charged off the debt and sold it to the collection agency, the agency can collect it from you from. They can sue you if you do not pay them off and can garnish your wages or come after your assets. However, you can negotiate with the collection agency and settle the debt for an amount less than what is owed on the property. You can also set up a repayment plan and pay off the debt in gradually.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We are trying to settle our $300K HELOC with Wells. Right now Tiburon Financial is willing to take 10% or $32,5K in one lump sum. We only have $25K loaned from a friend. Should we push to have a settlement lower than 10%? And any other suggestions to make this happen?

I am still trying to understand that once the loan is "charged off" and sent to a collection agency, can they foreclose if we are current with our first and there is no settlement on the HELOC?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Bridget!

Welcome to forums!

You can negotiate with the lender so that it agrees to settle the dues for less than 10%. However, it will be completely the lender's discretion whether or not he will agree to it.

Once the loan is charged off, the lender cannot foreclose the property. You will have to settle your dues with the collection agency.

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I appreciate the rapid response. I am dealing with Tiburon and they are their "consultants and debt collectors". The manager was telling me that they have never "heard of anyone getting 10%" and that we are the lowest of all their 40 clients in that branch. I find it hard to believe they are only dealing with 40 clients and that they can't go back and say that we only have $25K. This is the same group of people 4 months ago trying to collect $45K and said that it's the lowest they would ever go.

I have also heard that if we let them foreclose they would likely only get $5K on the HELOC....

So that being said, I think we should wait and get them to go down......just a gut feeling. They suddenly were willing to "accept" the 10% offer 4 weeks ago. How low will they go?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Bridget,

It is completely the lender's discretion whether or not they would go below 10%. I would, rather, suggest you that you should pay the required amount that they have agreed to.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

So our second was charged off (Chase) and presumably given to a collections agency. But this was purchase money loan, we have NOT refinanced, and we live in CA. As I understand there can be no deficiency judgements against any purchase money loans in CA, is that correct? So the charge off means what then...?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Mr_Mutt!

Welcome to forums!

The lender cannot come after you in order to collect the dues any further as he has charged off the loan. However, if he has sold off your loan account to a collection agency, then they can come after you in order to collect your dues.

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

As per the Lender of my second mortgage and my credit report, my second mortgage was "charged off" one year ago. The comments on my credit report are "charged off as a bad debt" and "Profit and Loss write-off"

I called them this morning, after one year, to ask if they could send me a letter about the "charge-off". The gentleman on the phone, after taking all details from me and gathering information that I was currently under active foreclosure as my Lender has still not modified my loan after several months....the gentleman on the phone became aggressive and threatened to send court notice to me and said "charge off" meant I still owe the debt and it was very active and they would now write a re-payment plan, and that my account was being re-reviewed, and if I didn't pay, would I prefer a court judgement instead etc?

I hung up the phone after the conversation went too long.

Now I am worried. Did I awaken a sleeping dog?

Also, the Bank is the same for both my mortgages, except that the behind the scenes investors are now different as the Bank has "contracted" with another Investor on the first mortgage.

I am confused and very scared. Please help.

BV

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi BV!

Welcome to forums!

If the debt has been already charged off by the lender, then he won't be able to come after you for it. However, if he has assigned the account to a collection agency, then it can come after you in order to recover the dues until the SOL is over.

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Thank you very much Sussane. I have another question if it is not too much trouble. I had applied for loan modification. After hanging me for 16 months, first the Lender denied me saying that I did not live in my home. I sent utility bills to prove that I do live here. Now they have degnied me saying that I have 'insufficient income'. My gross income is $4100 and my expenses are approx.3800, out of which 3141 is only mortgage, taxes, insurance and condo association fee. I don't want to lose my home. Are they right? Is there anything I can do to get my loan modified. I am in active foreclosure because even while having my loan mod papers, they started foreclosure proceedings.
Please advise. I have no one to advise me and I am living a nightmare.

Thanks again

BV

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi BV,

If the lender thinks that you have insufficient income, then he won't agree to a loan modification. You can re-apply once again in order to check out whether or not the lender will consider your request.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Why would Wells Fargo Financial turn over account to collection agency after one missed payment instead of trying to help you find a way do pay back, whether modifiation or second mortgage?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi bootsie!

Welcome to forums!

It will be discretion of the lender whether or not they will charge off the account and assign it to a collection agency or keep it with themselves.

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My 2nd just "charged off " my #. I finished my bankruptcy in 2009 & did not included my !st & 2nd. My house is upside down, with 90000 value,85000 1st& 45000 2nd. The CA can sue for a judgement,sieze assest & garnish pay However,I work for my self in an L.L.C. & my only assests are 2 cars worh 9000. Can they take the cars? what if one is own by the LLC?What is the SOL time lapse for Michigan?I am thinking,let the CA spend the money to go after me if they want. Their judgement would take little from me.My credit is already bad! Would the 2nd lien disapper after the 7 years plus 180 days?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Rich!

Welcome to the forums!

You have mentioned that you haven't included your mortgages in your bankruptcy filing. In such a situation, you are liable for the mortgage. The CA can take legal actions against you to recover the debts if it is within the SOL period. You can check out all about Michigan SOL from the given page: "http://www.expertlaw.com/library/limitations_by_state/Michigan.html".

Feel free to ask if you've further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

More than 5 years ago I foreclosed on my property. I had a [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] and their account status says closed and charged off. I never received any collection notices from the 2nd mortgage or any collection agencies. Do I owe them money or am I safe because it has been longer than the 4 year statue of limitations in California?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest!

Welcome to the forums!

If the statute of limitations period gets over, then the lender cannot take any legal actions against you to recover the debt.

Feel free to ask if you've further queries.

Sussane

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