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  1. #1
    Join Date
    Feb 2014
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    20

    Default Second Mortgage Settlement

    My question involves collection proceedings in the State of: Wisconsin

    Haven't paid my second mortgage in over 10 years. Asked the lender what they would take as a settlement and they are offering 70% of balance.

    All of the articles I have read state it is normally 5 to 20% asking. I know I may be greedy but I reached out to them as I have received no statements nothing for over 10 years.

    Any ideas on how to negotiate lower? Do I send them a lowball figure and explain that I am willing to pay and this would save on foreclosure costs or a short sale if I decide to do such? Neither is going to happen but I am trying to really take care of this and as much as I haven't cared, neither have they as such with no contact. I figured any money they get from me would be nice.

    Thanks for your help in advance.

  2. #2
    Join Date
    Oct 2014
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    8,238

    Default Re: Second Mortgage Settlement

    Quote Quoting socialyankee
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    Any ideas on how to negotiate lower?
    The most effective thing I've seen work is to contact them and make an offer to send $X in full satisfaction of the mortgage, release of the mortgage lien, and no derogatory reporting to credit bureaus. Make it clear that the funds will be sent immediately upon the lender returning the agreement signed by an authorized official. It's that lure of getting the money immediately that is going to get the lender interested. I'd suggest you have a lawyer help you draft the offer to ensure it's ironclad and will ensure either that the lender will follow through if it accepts or that you will have a good basis for legal action if it doesn't release the mortgage lien as promised. If the lender is willing to entertain the idea but wants more cash, it can counter with what it will accept and you go from there. But at least at that point you have a solid starting point to getting what you're looking for.

    By the way, generally when a loan balance is discharged (cancelled, forgiven) the discharged amount is taxable income to you. However, there are several exceptions to that rule that you might be able to use to reduce or eliminate that income inclusion. You might have to make adjustments to other tax attributes to compensate, though. See IRS Publication 4681 for more on that.

  3. #3
    Join Date
    Feb 2014
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    20

    Default Re: Second Mortgage Settlement

    Thank you so much for your response. I am aware of the tax implications too, thanks for the heads up.

  4. #4
    Join Date
    Mar 2013
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    18,340

    Default Re: Second Mortgage Settlement

    Quote Quoting socialyankee
    View Post

    Any ideas on how to negotiate lower? Do I send them a lowball figure and explain that I am willing to pay and this would save on foreclosure costs or a short sale if I decide to do such? Neither is going to happen but I am trying to really take care of this and as much as I haven't cared, neither have they as such with no contact. I figured any money they get from me would be nice.
    How to negotiate? You send them an offer of the amount you want to pay. That's how. They come back with another figure and you go from there.

    No need to mention foreclosure costs or short sale. They know better.

    It's not that they haven't cared. They are prohibited from pursuing the loan so why bother sending statements. It's dead to them.

    The only leverage you have is cash.

    The only leverage they have is that you can never sell or refinance with the lien on the property and they have no obligation to release the lien. When you die, your heirs will inherit property with equity and a lien and they will have to take care of the balance or abandon the home or spend their lives maintaining a property that they can't sell either.

    On the plus side, if the lender had to sell a non-performing loan they would probably get a dime on the dollar. On the minus side, if they haven't charged off the loan, they keep the balance on the books as a receivable (maybe).

    Be realistic. Offer what you can cover in cash.

  5. #5
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Second Mortgage Settlement

    This poster has a previous thread on the same subject. There is good reason why creating a new thread is a bad idea. This thread lacks an essential piece of information: the loan in question was discharged (and not reaffirmed) in a 2008 Chapter 7 bankruptcy. There's no obligation at this point on Socialyankee's part to pay the loan. There's no taxability issue right now (and likely back then the filer was insolvent).

    The issue now remains his negotiation to remove the lien from the property (he wants to refinance his reaffirmed first mortgage). He should be very careful not to do anything to reaffirm the second. He can get into negotations to determine what the lien holder will take to dismiss that lien. As he was told, he should probably account for this amount in the refinance as nobody is going likely refinance him if they ended up being junior to the existing second lien.

  6. #6
    Join Date
    Jul 2018
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    2,745

    Default Re: Second Mortgage Settlement

    Please don't start new threads about the same topic as your existing thread.

    This thread appears to raise no legal issue, though.

  7. #7
    Join Date
    Feb 2014
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    20

    Default Re: Second Mortgage Settlement

    I asked about refinance before and obligations. Now I realize while it doesnt have to be paid I can offer a settlement amount if they take it. I dont want to refinance if I can get them to take cash from me. I am trying to get 5his all taken care of now. I dont want to refinance because thej it will show on my credit. Right now nothing is on my credit report and I want to try to buy a new house.

    I won't start any new threads. Sorry about that. I figured this was different than what I asked before.

  8. #8
    Join Date
    Mar 2013
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    18,340

    Default Re: Second Mortgage Settlement

    How much is the balance owed on the second mortgage?

    How much cash do you have available to throw at this now?

    Give us some real numbers in answer to both questions and you might get some helpful comments.

  9. #9
    Join Date
    Feb 2014
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    20

    Default Re: Second Mortgage Settlement

    2nd mortgage owed is 54k that includes interest thats been accruing apparently. I just offered them 5% cash and they came back and said no. That my house is worth between 215 and 235 and my first mortgage is less than that so if I sold they would get something.

    I could probably give 20% cash at the most but I'd be pushing it.

  10. #10
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Second Mortgage Settlement

    How much is left on the 1st?

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