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1st foreclosed, no word yet from 2nd, should I offer to settle


pineville23
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well, tried to do a short sale, they worked with my short sale people for a long time but EMC (the 1st) decided to foreclose, (it was a junky little house)I haven't heard from the 2nd. I have made several offers to them for approx. 8%. keep getting denial letters stating "offer too low". should I wait for them to contact me in hopes they will give up? or keep offering. I owe $53,000. my last offer was $4,200.

If they sell me to a collection agency, don't they have to let me know? I'm trying to settle before this happens. it's Franklin Credit. I have the $4200. why won't they accept it? are they planning something else? this is in oregon state.

Edited by pineville23
wrong wording
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.

I understand whats going on, I work with these types of cases every week.....

Due to your state laws - your first Lender foreclosed on you, they got the home, and since your state is a non recourse state, they cannot file a deficiency judgment.

However on your 2nd mortgage - its a different story. Similar to credit card revolving debt - the 2nd lien holder can go to court and seek a judgment.

When you are making an offer directly to the debtor, your first offer is 7% of the balance. It is apparent you do not know how to negotiate, you may of already killed yourself. Where you are going to have to pay more to settle.

Seven percent is the standard fee debtors sell bad debt to collection company's. Once there is a collection company - the best I have seen for a settlement has been 15%.

Never - never say you have money. You have to say a family relative (example your brother) is helping you avoid a chapter 7 bankruptcy. Your brother is going to give you $4000, take it or leave it. Again - never say you have any money.

You have to press - by filing a chapter 7, the lender get's nothing.

When you do agree on a settlement - you want that in writing to show your brother so he can forward you the money. If they do not work with you, they are forcing the issue "default is imminent" as for filing a chapter 7.

Important - I do not want to you to consider filing bankruptcy, or even going to speak to an attorney (because they will talk you into one). Bankruptcy is a last ditch option, you can wait till the day before the court date to file. By filing B/R - a chapter 7 can remain on your credit report for 10 years.

I don't know your age - but you really need to have a goal where you are going to be next year, in 5 years, and the rest of you life. I understand credit is not a priority right now, you need to have a recovery plan to better yourself, or live like a bum the rest of your life.

Sorry I am being brunt with you, it is unbelievable the many situations I see, where there is no family organization or interest of bettering their financial status.

I realize there might be a hardship now, which means you are going to have to work hard to correct your problem. If you wait till tomorrow to start working on your problems, they will be twice as hard to fix.

Let us know how it worked out......?????

Ref Oregon Laws -

88.030 Other lienholders and debtors as defendants; effect of failure to redeem. Any person having a lien subsequent to the plaintiff upon the same property or any part thereof, or who has given a promissory note or other personal obligation for the payment of the debt, or any part thereof, secured by the mortgage or other lien which is the subject of the suit, shall be made a defendant in the suit, and any person having a prior lien may be made defendant at the option of the plaintiff, or by the order of the court when deemed necessary. The failure of any junior lien or interest holder who is omitted as a party defendant in the suit to redeem within five years of the date of a sheriff’s sale under ORS 88.080 shall bar such junior lien or interest holder from any other action or proceeding against the property by the person on account of such person’s lien or interest. [Amended by 1985 c.817 §10]

http://oregon.gov/DCBS/foreclosurehelp/laws.shtml

Edited by 2ndTimeAround
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.

I understand whats going on, I work with these types of cases every week.....

Due to your state laws - your first Lender foreclosed on you, they got the home, and since your state is a non recourse state, they cannot file a deficiency judgment.

However on your 2nd mortgage - its a different story. Similar to credit card revolving debt - the 2nd lien holder can go to court and seek a judgment.

Ref Oregon Laws -

88.030 Other lienholders and debtors as defendants; effect of failure to redeem. Any person having a lien subsequent to the plaintiff upon the same property or any part thereof, or who has given a promissory note or other personal obligation for the payment of the debt, or any part thereof, secured by the mortgage or other lien which is the subject of the suit, shall be made a defendant in the suit, and any person having a prior lien may be made defendant at the option of the plaintiff, or by the order of the court when deemed necessary. The failure of any junior lien or interest holder who is omitted as a party defendant in the suit to redeem within five years of the date of a sheriff’s sale under ORS 88.080 shall bar such junior lien or interest holder from any other action or proceeding against the property by the person on account of such person’s lien or interest. [Amended by 1985 c.817 §10]

http://oregon.gov/DCBS/foreclosurehelp/laws.shtml

I have to jump in here and disagree. The second actually has no recourse after a foreclosure. The second lien holder loses all rights to the property after a foreclosure/sheriff sale. The is no reason to pay off a second lien if a foreclosure is taking place. It is a waste of money and time.

The second cannot just sell the debt to a debt collector. They need to get a judgment in order to attempt any action during/after a foreclosure. Since the house was taken back by the first, the second has no recourse. That is one of the risks that comes with not being the most senior lien holder.

Edited by HobbesMG
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I have to jump in here and disagree..

Let me explain my point of view.....xdancex

When you want to know what the state guide lines are, you have to go directly to the "states" website. That's why I listed the state link to check state laws.

I actually read Oregon gives the Lender the option to go through the legal system to seek a Judicial foreclosure, to receive a court ordered sale. Then a deficiency judgment can be awarded. If they do not go through the court system, and a trustee sale happens, then the Lender cannot do a deficiency judgment.

In today's economy - going through the court system for a Lender is not feasible, because many houses are upside down on the value to what is owed on the property. Tacking on legals costs for a Judicial sale is not practical. Compared to a Non Judicial sale through a trustee. Laws are different between states - some are Judicial - some are non-Judicial, some are recourse, where some are no-recourse states. In either case - the states statue can dictate what Lenders can, can't do to a homeowner in default of their secured loan.

Recourse or no-recourse - this is not the issue. As I mentioned above - the Lender can go to civil court and seek a judgment to what they have lost. Ultimately it is up to the Lender to seek judgment, to try an recover any of the debt... Again negotiating for the lowest settlement is the best option, before it gets to a JUDGMENT.

Just last week - an example of a person I was trying to bring into our law firm for the last 2 months. He had two property's, each with a second mortgage. Hadn't made any payments on the 1st or 2nd for over a year. I warned him when I met with him initially, in his pile of paperwork we went through, found a letter stating one of his 2nd mortgages won a judgment. Last week the courts froze his checking account, and is going to be garnishing his tax return until the amount is paid back. When I last talked to him, said I could no longer help him.....

I am pointing out - it is to his advantage to negotiate that lowest possible settlement before it gets to the courts. The chances are good to do it sooner then later, because the Lender does not want to pay future court or attorney fees.

Further more it is important to understand the Art of Negotiation with the Lenders, so you are on the same level as they are. This is the mistake homeowners make when dealing directly with the Lender. You have to know how banks make their money.

Most people think the interest rate on the loan is what they pay- that is true for the homeowner. Looking at the banks perspective - this is a small way they make money - called a Simple Pass-through Security. Example the interest rate is 4%%, they pay investors 2%(savings, CD's, Bonds, etc), they keep a 2% profit. Many smaller private banks, CU's, and S.L's operate through this Pass-Through Security's method.

Differently - larger banks make money with mortgages after they are pooled with other similar loans. Noting each pool is rated from a ratings agency (example S&P, Moodys,...).

The Lender can put different $1,000,0000 plus pools together all similar types of loans. Then it is split into shares and sold to investors. On AAA rated shares, Fannie and Freddy purchase. Then sell to Wall Street as AAA rated Mortgage Back Securities.

You may recall the mortgage collapse of 2007 - it started when Fannie and Freddy brought CCC rated pools and sold it as AAA. When homeowners missed payments caused fluctuation in payments to investors. The investors started selling their shares which ultimately caused the collapse of Wall Street.

The 3 ways of the monetary system the Fed is doing to help boost the economy. The fed has already lowered the overnight lending rate, next we are going to see over bank reserve requirements reduced. In doing so is putting more money back into the economy. I read a report a few weeks ago from a BoA executive, saying he expects rates on 30yr mortgages to be below 4% for the first quarter of 2011.

In either case knowing how a Lender has the mortgage segregated, into which type of pool or bond rating. Noting the 31% limit set by President O'Bama, how much equity is in the property, and how they have to pay investors. It can really make a difference in a temporary modification, to a 5yr or 30yr modification period. when you are negotiating with an official, manager or vice president at a bank.

Sorry went a little over board -

.:)

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Let me explain my point of view.....xdancex

Sorry went a little over board -

.:)

Ok yeah, did you did go overboard but it is good info that most people dont know. :)

My point is this... if the first goes the judicial system path, the second is listed in the case. The case goes to the end, house is sold in aution, all liens are wiped off.... second is wiped away.

Yes technically second could try to get a judgement for that debt in another case. They lost their claim because of a legal action initiated by the first in which the second was listed as a defendant. They could have their day in court then. They really wont get far in a second civil case. It isnt' even worth the time, money and hassle the second would have to put in to get a deficiancy judgement, assuming they would win it.

Yes the potential is there, but from my numerous experiences, I dont believe the OP should put forth this effort and monetary loss to pay off a debt that is wiped out by the initial forclosure. Just my humble opinion.........

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In order for the 1st to foreclose, don't they have to satisfy the second somewhat to remove the 2nds lien? or does the 2nd just get ignored by the 1st and left on their own to collect? what did you mean that I may have already killed myself? as in, paying way too much to settle? Yes, I'm not great at barganing. I just need to know if they have to contact me first before they persue any judgements or sell my debt to collections, or garnish my wages. I really appreciate your help but some of your guys answers are vague because I need laymans terms rather than abreviations and technical facts that are hard to interpret.

thank you for the responses.

sorry, I'm not dumb, just need easier to understand terms. thanks in advance for all answers.

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.My point is this... ...They really wont get far in a second civil case. It isnt' even worth the time, money and hassle the second would have to put in to get a deficiency judgment, assuming they would win it.......

Agree and understand your point- it all boils down to the amount owed on a HELOC. Also noting - people also have lines of credit as 2nd liens. Since you work in the loss litigation business, you know every case is different......:). Last week - spoke to a man in Maine - he had a 2/48 I/O with a HELOC, that was behind on his payments. I heard about the 50 year loans a few years ago, but never wrote one. Everyday I am faced with different scenarios....:confused::confused::confused:

On smaller amounts, there is a good chance a bank might not do anything. We have been seeing this in Las Vegas Nevada where 80% of the homes are upside down of the CLTV. Florida is in a close 2nd place for the amount of homes upside down. People are living in their homes for the last three years, since their last mortgage payment.

On larger amounts - lenders will do anything they can to keep what is owed to them.

My point as far as settling with a debtor on a lien - before them adding the legal fees and court costs, and mention to idea of going into bankruptcy. It is very easy to negotiate the debt down.

....

......In order for the 1st to foreclose, don't they have to satisfy the second somewhat to remove the 2nds lien? or does the 2nd just get ignored by the 1st and left on their own to collect?

....what did you mean that I may have already killed myself? as in, paying way too much to settle? Yes, I'm not great at bargaining. I just need to know if they have to contact me first before they peruse any judgments or sell my debt to collections, or garnish my wages.....

..... thanks in advance for all answers.

My answer to your first question - have seen after a foreclosure, when there is a 2nd lien. The first lender sometimes pays the second lender a small amount so there a free and clear title, in order to sell the property. It really depends on the lender.

Again every case is different.....

Go for the lowest amount when you are negotiating - they can either say yes or no.... Say a relative is helping you avoid bankruptcy. Once they accept a lower amount to settle. Get that in writing, either emailed, faxed, or mailed to you. Mention you need to show the relative that amount so they can give it to you.

Important note - tell them you want them to contact the credit bureaus showing the debt "Settle As Agreed" to be listed on your credit report.

As far as auctioning your personal property, or garnishing your wages - this can come after there is a judgment not before. My point if you know they are trying to collect. It is in your best interest to settle at a lower amount before it gets to court.....:)

If you don't settle and are waiting it out whether or not they will take this to court. You taking a gamble.

My point - by settling at a lower amount, getting a letter that amount is satisfied, the next step is getting your credit report cleaned up and rebuilding your life!

:):):)

Good Luck...:)

.

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they take me to court, or seek a judgment, or garnish my wages, or sell my note to a Collection agency?

I don't understand your technical language answers. it seems that you guys just want to argue between yourselves instead of answering my questions. thanks.

The law is technical, that's why lawyers spend so much time and money in law school.

As the first already has foreclosed, it has wiped out the second's lien on your property. My (admittedly limited) understanding of Oregon law is that mortgage loans are non-recourse. (This means that the second can't pursue a deficiency judgment against you personally).

Since the lender cannot pursue a deficiency judgment against you personally, they have no basis upon which to garnish your wages or "sell [your] note to a collection agency."

If there is indeed a collection agency which claims to have purchased the debt from the second mortgagee, remind them that since the debt was non-recourse, they cannot pursue you personally. Then, tell them if they do not cease and desist, permanently, their collection efforts against you, you will seek damages against them under the Fair Debt Collection and Practices Act.

However, in the event the collection agency disagrees with the above analysis, and does pursue court action against you, they will have to give you notice of the lawsuit and an opportunity to be heard. This is constitutionally required under the "due process" clause.

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  • 7 months later...

I think you should hold and wait for a better opportunity to come in the near future or opt for a good real estate agent who may help you to get better returns of the money invested. I know there is a high rate of foreclosure in Las Vegas but still I think the property market will rarely fall and due to increase in the population there are many people opting to invest in real estate.

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To the OP- what was the second loan? Were the loan proceeds used to secure funding to purchase the home? The answers to your questions really depend on the facts of your case. Here is why you are getting technical answers.

A few states, including Oregon, have "purchase money exceptions" to the general rule that allows lenders to seek a deficiency judgment against any funds not repaid by the sale of the your property following foreclosure.

ORS 88.010 provides a deficiency judgment against the borrower for the remaining amounts following sale of the property, subject to ORS 88.070.

ORS 88.070 shuts down this personal deficiency judgment possibility if the deficiency is due to a loan tied to purchase money. I read the statute as 1) the first lienholder in any amount, 2) the second lienholder up to $50,000, and 3) if the first and second liens are held by the same lender, then they are treated as one lienholder for purposes of this statute and no deficiency is possible. If I spent anohter 30 minutes researching this, the answer would be more clear, just don't have time.

The key here is that even in states such as Orgenon that have purchase money exceptions (ie nonrecourse) laws, these laws do not apply to any money that was borrowed after the sale, or if you refinanced your loan. Many people living in nonrecourse states have recourse loans, typically because they took out HELOCs, home equity loans, or because they refinanced to take advantage of the great rates. If any of these things occurred in your circumstance, then your second lender may seek a deficiency judgment.

In my state (PA), this is all done through the courts. You would have time to defend yourself from the judgment though not sure what that defense would be. Oregon is also a judicial action state, so the same process would have to unfold prior to judgment, though collection activities never require a judgment. So your debt could be sold or they could attempt collection without ever going to court. That may be the likely scenario because mortgage deficiency claims have low recovery rates.

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Got ya', seven months old. These bots are shameless. :)

Dito on the seven months - wonder what was the outcome?

jq26 - non recourse states having recourse loans, agree. At the closing table, documents are signed agreeing to the terms, recourse or not.

Every case is different......

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jq26 - non recourse states having recourse loans, agree. At the closing table, documents are signed agreeing to the terms, recourse or not.
Its not the documents though- they never supersede state law. Its that recourse states are only recourse for purchase money loans. Sometimes the piggyback loan is considered purchase money, sometimes not (dependent on state law). And almost always, HELOCs, home equity loans, and all refinancing loans are never considered purchase money loans, thus are recourse in all states. This is the general rule, and each nonrecourse state has some form of this. Recourse states have their own combination of laws, but they are less onerous.

The biggest quagmire that I foresee is that some states have very lengthy deficiency claim statutes of limitations. Florida comes to mind. Lenders have FIVE YEARS to sue for any short sale or post-foreclosure deficiency. Many borrowers don't realize this, and once they get on their feet a couple years after the foreclosure, the lenders (likely JDBs) will come out of the woodwork and sue for the deficiency, which will have now grown even larger.

------------------------------------------------------------------------

Chrestensen v. Eurogest, Inc., 906 So.2d 343 (Fla. 4th DCA 2005): this case involved the question of when the five year statute of limitations begins to run on an action for deficiency. The trial court ruled, based upon prior case law, that the limitations period begins to run when the note is defaulted. The appellate court reversed the ruling and held that the five year limitations period does not begin until the foreclosure sale has occurred and a deficiency can be determined.

Edited by jq26
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This forum is indicative of the situation I am in with a home that foreclosed and sold at a Trustee's Sale in August of 2008. Here are the circumstances of the situation:

1. Refinanced both the 1st and HELOC in June, 2006 with GMAC, home located in Nevada.

2. Stopped making payments in Aug, 2007 (or thereabouts)

3. 1st mortgage, Foreclosed and was recorded on Aug 8th, 2007.

4. Received a letter from GMAC dated March 17th, 2011 that the draw period on the account will expire on June 30th, 2011 and the outstanding principle balance is $85,000 and the payments will begin immediately.

5. My credit report "Pay Status" indicates this account has been categorized as "collection/chargeoff." and the remarks indicate it has been "charged off as bad debt" or "unpaid balance reported as a loss by the grantor."

After my wife and I spent $3500 for a failed attempt using a lawyer to help modify our existing loan for primary residence in California, we were severely crippled financially. However, I found a better job, and continued making my payments and Chase actually offered to restructure my 1st mortgage, not the HELOC. We do not have any money left over. I am in sales and own my vehicle outright.

I have successsfully fended off a collection agency when they attempted to collect on a repossed RV using the DV strategy.

Questions

1. What steps should I take to address this situation with GMAC?

2. Have the SOL expired since my last payment fo this account was in August, 2007?

3. According to the credit report, the amount has already been charged off and reported as a loss so why is GMAC sending me correspondence and not a collection company?

Please help...

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Even though the 1st has been foreclosed. Who initiated the notice of default and the notice of foreclosure. You are saying EMC did, but could it be MERS? Check your mortgage agreement and see who the mortgagee is? If it is MERS and you were trying to negotiate a modification with EMC, but they did not hold the mortgage. Talk to an attorney.

In Michigan, there was a rash of foreclosures initiated by MERS. Somebody was wise to what was going on, consulted an attorney. The attorney put together a class action suit. The MERS foreclosures were reversed by the court. Now, what is happening is that HUD is having to go back and re-forclose. The jist of it is the title companies have haulted all closing on homes sold after MERS foreclosed in the county that it happened in.

Even though the result of the foreclosure is not making your payments. If the servicer was not honest with you, then you could get damages.

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