Foreclosure Alternatives and 2nd Mortgage Forgiveness
by Joseph from Stratford, New Jersey and by Don in Cedar Rapids, Iowa
Ask Kate about HAFA foreclosure alternatives after bankruptcy and the nightmare of failed 2nd mortgage forgiveness: Which would be more beneficial after Joseph's chapter 7 bankruptcy? Short sale or deed in lieu of foreclosure for his rental and personal residence? Don just received notice that his forgiven 2nd mortgage has since been sold to another lender who is demanding payment... now!
Short Sale and Deed in Lieu of Foreclosure After Bankruptcy By Joseph from Stratford, NJ
In September, my wife and I received a chapter 7 bankruptcy discharge on two mortgages. Both are now in the foreclosure process.
The first property was a rental condominium which we are currently in the process of listing with a real estate agent for a short sale (hopefully a HAFA).
The second, my home, I am thinking of a deed in lieu of foreclosure (hopefully a HAFA).
Would a short sale be better than a deed in lieu for our personal home?
I have been told that once a discharge in chapter 7 is on your credit report, it can no longer be updated by the lender with a negative remark. Is this true?
Second, the lender has created a new account number for the foreclosure on my home. Is this normal?
Ask Kate answers: Short Sale and Deed in Lieu of Foreclosure After Bankruptcy
I'm happy to hear you are participating in the Home Affordable Foreclosure Alternative (HAFA) program, that is, exiting gracefully versus walking away from the two properties.
In fact, effective December 2014, homeowners who have modified a mortgage in the HAMP program are eligible for up to $10,000 cash for relocation expense when using HAFA's deed in lieu of foreclosure program.
HAFA Less Harmful to Credit Rating
It's generally accepted that short sale or a deed in lieu of foreclosure lowers a credit rating less than a foreclosure. Furthermore, Making Home Affordable claims that by participating in the HAFA program versus a conventional short sale, credit scores are even less harmed.
But which HAFA program would benefit you the most, short sale or deed in lieu of foreclosure? This may depend on the worth of your home, your financial profile, and your timeline. Ask your loan servicer, short sale real estate agent, and bankruptcy attorney for their personalized input. Another source of advice is a free HUD-approved housing counselor
Whoever you consult, take detailed written notes because the threat of foreclosure probably has your brain running on overload.
Can Creditors Update Credit Report with Negative Remarks
Creditors are not free to report as they please after your bankruptcy. For example, your bankruptcy and resulting discharge can only be reported for a maximum of 10 years.
Additionally, The Fair Credit Reporting Act restricts creditors from adding negative remarks, for example, delinquent payment dates, charge-off status, or unpaid balances, after you've filed for chapter 7 bankruptcy and received the discharge of debts.
Multiple Loan Numbers for One Mortgage
Multiple loan numbers for one mortgage can quickly become a nightmare. This occurrence is not restricted to foreclosure. It also happens when lenders buy and sell mortgages. Likewise, when lenders increase credit lines, many borrowers end up with multiple loan numbers on one lien.
Dig through the mail you started receiving once you missed payments. Carefully note the account numbers and be on the look-out for changes. Keep the paperwork so you can match up duplicate account numbers to each mortgage in the future.
Lender Demands Payment on Forgiven 2nd Mortgage By Don in Cedar Rapids, Iowa
My 80/20 mortgage was approved in 2009. I needed it because of disabling accident at work. The primary loan was $51,000 and the 2nd mortgage was $19,000.
Eventually, the 2nd mortgage was forgiven and written off by HSBC. 5 years went by and somehow HSBC sold my 2nd mortgage to another lender, Greentree, who demanded immediate payments.
According to my credit report, the 2nd mortgage written off HSBC didn't even have a loan number. I contacted Greentree to inform them that the loan was written off as part of the loan agreement. They said forgiven doesn't mean forgiven, and that I needed to start making payments.
I hired a lawyer 5 months ago, have paid him $1000, and given Greentree his name and permission to discuss my case. It's been 5 months and they refuse to talk with my lawyer. I have not received another payment demand from them since I hired the lawyer.
Is this a scam? If I make one payment, am I on the hook for the balance?
Ask Kate answers: Lender Demands Payment on Forgiven 2nd Mortgage
Was the loan forgiveness part of the 2012 National Mortgage Settlement?
Or did HSBC merely write the debt off their books and turn the account over to a collection agency?
National Mortgage Settlement
If the mortgage forgiveness was through the National Mortgage Settlement, you received a letter detailing the terms. You also were required to accept the terms. Locate this letter, probably in your permanent house records, and submit it to the attorney.
This paperwork will also display the loan number of the 2nd mortgage. Alternately, the mortgage payment coupon book or annual loan statement from HSBC should have the account number. Make sure your attorney also possesses this documentation to verify that Greentree is not attempting in error to collect on another borrower's 2nd mortgage.
At the same time, ask your attorney if the loan number should be submitted to the credit bureaus.
I'm not aware if making a payment would obligate you to the entire 2nd mortgage debt. That is a legal question best addressed to your attorney.
Consumer Finance Protection Bureau
If you feel you are being scammed, the Consumer Finance Protection Bureau provides an efficient form for filing mortgage complaints. Even so, I suggest bringing your attorney into the loop before reporting Greentree.
Best wishes and good luck clearing this up,
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