July 22, 2013

Trying to settle a defaulted HELOC or second mortgage?

By Timothy Stull (http://www.fresh-start.co)

Since the great recession took a firm grip on the economy in 2007, many homeowners stopped paying on their second mortgage debt or HELOC debt.  At one point, there was an estimate that nearly 45% of this particular type of debt was in default.  The advice that was given by the banks & counselors during the crisis era was to forget about all other debt except for the first mortgage.  Much of this debt was placed in a dormant collection status by the banks….they were simply waiting for the economy to stabilize.  Our firm always wondered what would happen to all of this debt, once the economy rebounded.  After all, it is an incredible amount of money…nearly 700 billion dollars at the peak of the financial crisis in 2009.  So why is the default ratio so high on this debt?  High unemployment & overall household income reduction are partly to blame.  However, the Federal Government has laid out a frivolous notion that this debt really does not count….that is does not exist….it is simply “monopoly money”….and they can make the debt vanish.  However, now many people are realizing that the debt is real….a real monster of a collection problem.  You must understand that a lot of this debt is placed in the same collection status as a credit card / credit line debt.  Since the economy started to stabilize, many junk debt buyers have started to buy this debt….keep in mind that this debt purchasing frenzy has only hit high levels in the last 8 months.  These junk debt buyers ~ Real Time Resolutions, Ocwen, NationStar, Penny Mac ~ are purchasing the debt a 2% or less of face value.  Then they simply start the collection cycle ~ harassing phone calls and letters.  Many debtors are in a state of shock….they don’t know what to do….they assumed the Government was going to make this 60K, 80K, 100K+ debt go away.  Many try to handle the problem on their own ~ with help from sites like http://www.loansafe.org/forum/debt-settlement/37996-strategy-settling-your-2nd-94.html.  Though these forums have good intentions of helping, they put the overall problem in a “rose colored” light….portraying the problem as a small issue….one that can be resolved quickly and easily.  Keep in mind that you still need to settle this debt with a bill collector…and the stakes are high.  When the stakes are high….the commission is high for the bill collector.  Bill collectors are trained to do two things ~ collect money and get critical information.  The information that you disclose to them could be used against you in a civil lawsuit ~ it could lead to wage garnishment, bank levy, ect.  Remember that civil judgments last for 20 years….they typically force people into bankruptcy.  More and more second mortgage / HELOC debt cases will move towards lawsuit ~ it is the natural collection cycle.  Since I worked in the legal collection industry for 12 years, I strongly recommend never representing yourself on high end debt settlement.  There is simply too much to lose if you are trying to rebuild your future credit profile.  Any questions on this matter can be directed to 877.297.7011.

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7 Responses to “Trying to settle a defaulted HELOC or second mortgage?”

  1. Maria Delgado Says:

    So what am I to do? I settled on my first debt with my mortgage company and it was then sold to OCWEN, so now I am paying my 1st mortgage to OCWEN. My second loan was sold to Real Time Solutions over 2 years ago but I have not paid them. Mainly because I was not comfortable settling anything with them because they just sounded like a debt collector instead of a mortgage company. Now I want to repair that and I am nervous about contacting them because I am afraid of what they are going to try to get from me.

  2. Timothy Stull Says:

    Hello Maria: You are in a very similar situation as my of our current clients….old second mortgage / HELOC that is now causing multiple problems. There are a number of questions that need to be addresses before a strategy can be implemented to solve this problem. Is there currently equity in the property on either the first or the second mortgage? Was this a closed end second mortgage or a HELOC? Was this a purchase money transaction or refinance? What state do you live in? What year was the loan originated? Amount owed? All of the large end settlement cases are very complex and take a long time to resolve. Feel fee to call us at 877.297.7011 for further help.

  3. Sylvia Hunt Says:

    I have negotiated a contract with Real Time resolution to settle a HELOC still open after i claimed bankruptcy. I am nervous to start sending payments specified , because the contract does not state a guaranteed reconveyance letter, even after i have made all payments. I feel like my payments will go into a black hole.. I asked them to revise contract to specify, after all payments, a reconveyance letter will be granted, but they will not modify contract verbiage. help.

  4. Sylvia Hunt Says:

    The contract does state, this will be considered full settlement. is that the same as a reconveyance letter.

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  6. Tina Culjak Says:

    I cannot believe that someone has not sued Bank of America for selling our loans to these crooks. They got out of modifying loans, helping people from Hurricane Sandy and avoiding having to give a single point of contact that the lawsuit against them required. Plus so many others things. My second mortgage (purchase money only at 9% interest and a balloon payment) was sold to Nationstar. The first Mortgage was sold to Greentree. After my Husbands job transfer out of state twice in 4 yrs and myself having to quit to move with him, we decided after 4 yrs of taking a $700.00 loss per month, (And that was if the place was rented!) That we could no longer keep this property as it had gone down in value even more, and with me having to leave my job we could no longer afford to take this kind of loss. Greentree agreed to a DIL after short selling didn’t work out and of course it was based on Nationstar releasing the lien in exchange for a settlement offer from Greentree. After losing paperwork 4 times and switching us from one point of contact to the next and lying to our congressman in the meantime about the status of our file, Greentree gave up after over 4 months of waiting and offered us a modification instead. The new payment not including Nationstar would at least only have us coming out of pocket approx. $60.00 per month instead of the $700.00 like before. But that’s with it rented. We will have a hard time making the payments if it sits empty for long and could force us back into delinquency. We need to settle with Nationstar. They are totally underwater as the first mortgage is over $116,000 and nationstar is $30,000. The condo is only worth about $85,000 at best. The association fees are ridiculous also at $275.00 per month. The condo is in NJ which is a judicial foreclosure state taking over 800 days to foreclose and I don’t see them doing that as they would have to buy out the first that is underwater, and spend a lot of money for up keep and foreclosure cost. We have no assets, and have not seen the place in over 5 yrs. We have to pay a property management company to take care of it.. I really don’t want the place as NJ is not our home of record and we will never live back there again. My husband’s job was there for over 3 years and if we had known the market would fall like it did we would have never bought this place as it has been a big nightmare for us. Oh and the last part of this, is that we asked for our note 3 times and they could not produce it! Not sure if that has any pull or not? Any suggestion’s would be greatly appreciated!! As for Bank of America, it just seems like what they did should be illegal. I may be wrong but go with me on this! If a judge tells a Husband in divorce court that he will have to maintain the payments and repairs on his ex wife’s car she gets to keep after the divorce and he just decides, “Hell with that, I’ll just sale it and problem solved”.. Isn’t that illegal??? To me, that’s what Bank of America did!!

  7. Timothy Stull Says:

    Tina Culjack: It sounds like you need assistance in pushing through the deed in lieu of foreclosure. The contract will need to be specific to release of all liability. We have handled many successful deed in lieu cases. Feel free to call me at 877.297.7011.

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