Second mortgage and foreclosure
I have two stories to share with you. Both are second mortgage / foreclosure related. Tell you right away, check your state laws. Both cases involve homes less than 50 miles apart, one in Illinois, the other in Wisconsin.
The Illinois case is pretty hilarious, one couple bought a house for $750,000 in 2003. Then late 2005, since values were still going strong more or less, they got $170,000 second lien with Wells Fargo. The first mortgage was with Washington Mutual. Fast forward 4 years, the house was valued in $625,000 and husband had been out of work for 2 years. They wanted to keep the house, but had fallen behind on the second mortgage payments. Wells Fargo threatened foreclosure, but the husband, formerly a mortgage broker did not blink. After going back and forth, they settled with Wells Fargo for $40,000 lump sum. That is on $170,000 second mortgage. For all the foreclosure talks, Wells Fargo knew better. The couple informed that they would foreclose if Wells Fargo did not settle. Had they foreclosed, Washington Mutual would have gotten the $625,000 house while the entire second mortgage would become unsecured. And while deficiency judgements are perfectly permitted in Illinois in theory, they are hard to obtain and even harder to collect in practice, so a few lenders choose to pursue those. The couple is now pushing for a fat mortgage modification, aiming for both, large principal reduction and interest rate cut. And they looked pretty confident last time I saw them.
The Wisconsin story ended much less happily. Even the lenders were the same, only Wells Fargo had the first lien and Washington Mutual held the second mortgage. The foreclosure was for the first $205,000 mortgage while the home was valued on the paper for $230,000. The second mortgage, now with Chase stood at $42,000. From what I heard, the house was sold for $180,000 leaving Wells Fargo with only $25,000 loss. Chase is going full force for now unsecured second mortgage. The owner settlement offer of $7,500 was rejected out of hand. He is now working with a bankruptcy attorney.
The moral is you must know the market conditions and state laws to fully appreciate the circumstances you are in. Only when you fully grasp those, you may know what to do.
Thu Nov 25, 2010 08:11PM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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