MANY homeowners with first or purchase mortgages also add on second mortgages such as home equity loans. Unfortunately, job loss and tough economic times can cause homeowners to become delinquent or even default on second mortgages. Lenders holding defaulted second mortgages sometimes write them off, though those loans’ borrowers may still face certain consequences over them.
Who can help you write down your second mortgage?
Answer: For one, your second lien holder will definitely be the one to talk to first, to see if you even have the option to discount the balance. Now, remember when you call to negotiate your second mortgage, you have to be prepared to negotiate, bring the funds to the table and close within 30 days.
This is usually how it might work, you are in some kind of a hardship, you have tried to modify and or tried to refinance but are getting nowhere. So, then you might be able to borrow some money from a relative to pay down your second lien. Maybe paying 20-30 cents to the dollar and having the lender write off the difference.
Loan write-offs
Another term for Write offs is Charged off’s. when a lender charged off an account, its usually because the homeowners not paying their obligation and the lender would then stop trying to pursue the debt. When a lender writes off something like a defaulted second mortgage, it’s actually just showing that loan as a loss on its books. Written off loans haven’t actually been forgiven or canceled, though, meaning you still owe the debt on them. Lenders writing off second mortgages or other loans still retain the right to collect against them. In many cases, written off loan debt is also sold to collection agencies that then try to
Write-offs versus forgiveness
Whether your second mortgage’s lender writes off or forgives your loan is completely its own choice. If you’ve received a 1099-C from your first or second mortgage lender, your obligation to repay that debt has been permanently canceled. Forgiven or canceled mortgage debt can’t be assigned for collection or sold off to collection-type firms. Through at least 2013, up to $2 million in qualifying first or second mortgage loan debt forgiven by your lender is also excluded from taxable income rules.
Remind you, you would qualify for the debt forgiveness if you no longer own the property at time of forgiveness. If the lenders agrees to settle with you on a note and gives you a 1099 C, that means you will need to file taxes on the 1099 C and you will owe the IRS money. Cancelation of debts not thru debt relief act to the eyes of the IRS is an earned income. Debts you don’t have to pay back is earned income. Please consult with your CPA to clarify your current situation.
I have seen more and more lenders agreeing to settle with less than amount owed on second mortgages, you have to prove your cause of hardship and be prepared to pay off the agreed settlement amount right away in order to have a leverage over your request for a discount.
Overall, loan modification and debt relief movements by the lenders are aggressively becoming more visible and successful. I seem to be getting lesser calls about homeowners needing assistance, I do know that there are still a lot of homeowners in distress and upside down with their mortgages. Hopefully you can try and find some kind of help from your lenders.
The California economy still is showing signs of slow recovery and the job market still is very soft. The Construction sector is weak due to builders having a hard time looking for qualified or skilled laborers. As I have said repeatedly we need the construction jobs to come back to California in order for our status to go up a notch.
The Real Market sort of has another artificial bubble due to shortage of housing inventory, the prices going up by 5-10% per year due to the housing shortage might change rapidly with and when more properties come to the market for sale. Your house value is worth more today because there are only about average 3-5 houses for sale in your immediate 2-3 mile radius. But if that ratio becomes 8-12 in the same distance, your home will be worth less. Of course, unless all the 12 homes are priced 8-10% above average home prices, then you will see your area continue to rise in prices regardless.
Conclusion
Loan modification is a daily topic and help is easier to obtain for qualified homeowners. Second mortgages are most definitely negotiable now a days. Job market still soft and constructions job sector needs to get better in order for California see a better future.
As always, “CASH IS STILL KING” learn to save, conserve and be frugal with your spending habits.
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Thanks for your calls and comments, please call Ken Go at 1st Innovative Finance at (562) 697-7028 or call (562) 508-7048 or write to [email protected].
