Mortgage Forgiveness and Bankruptcy

On October 19, 2012, in Bankruptcy, Foreclosure, by Robbie L. Vaughn, Esq.

Bank of America mortgage forgiveness and bankruptcy

Recently we have written about Bank of America forgiving second mortgages and the National Mortgage Servicer Settlement. Many homeowners facing foreclosure are anxious to find out if their second mortgage will be forgiven by Bank of America.

Well, it appears that one pattern may have emerged. Many homeowners who have already filed bankruptcy are receiving letters stating that their 2nd mortgage will be forgiven. Great news, right? Maybe.  Some of these debtors are in active bankruptcy (chapter 7 & chapter 13). Some debtors have already received a bankruptcy discharge and are no longer personally liable for their mortgages. Other debtors have “stripped” their 2nd mortgages and BOA will likely receive much less than 100% of what is owed on the 2nd mortgage.

Not So Good

  • It appears that BOA may receive credit, against the amount it owes under the National Servicer Settlement Agreement, by forgiving mortgages they can could no longer collect or only collect a portion of. This may lead to fewer distressed homeowners actually benefiting from the Settlement.
  • There may be tax issues (the advice of a tax professional may be necessary).

Good

  • Distressed homeowners who are not in bankruptcy are receiving letters from BOA stating that their 2nd mortgages are being forgiven. This will make it easier for some homeowners to avoid foreclosure.
  • Debtors in bankruptcy who are paying back 100% of the arrears on their 2nd mortgages and their full 2nd mortgage payment have received notification that their loan is being forgiven. This could alleviate the need for a chapter 13 bankruptcy altogether.
  • Some homeowners may find themselves with instant home equity.

If you have any questions about this or other legal issues, call The Law Firm of Vaughn and Weber PLLC, at 516-858-2620, for a free consultation!

+This is not tax or legal advice.

Chapter 13 Debtor Can’t Strip 2nd Mortgage

On December 12, 2011, in Bankruptcy, by Robbie L. Vaughn, Esq.

In a recent chapter 13 bankruptcy case, IN RE WRIGHT, Bankr. Court, ED New York 2011, a debtor was NOT allowed to “strip off” a second mortgage held by Chase. At trial several issues were raised regarding how the Debtor’s appraiser conducted his appraisal. The Court found that the Debtor failed to meet its burden of establishing that Chase’s lien was wholly unsecured.

A second mortgage can only be “stripped” and treated as unsecured if the chapter 13 debtor can prove that his/her home is not worth any more than their first mortgage.

As always, the bankruptcy Law Firm of VAUGHN & WEBER, PLLC is here to assist you.  We are conveniently located in the heart of Nassau County, Long Island, at 393 Jericho Tpke., #208, in Mineola, NY.  Contact us at (516) 858-2620 to arrange a consultation with a bankruptcy attorney.

Settle 2nd Mortgage for 10% of amount owed?

On September 29, 2011, in Bankruptcy, Debt settlement, Foreclosure, by Robbie L. Vaughn, Esq.

What if your 2nd mortgage holder was willing to settle your second mortgage for 10% of the loan amount owed?

Let’s say you owe 90k on your second mortgage and the bank is willing to accept 9k in full satisfaction. Not bad, right? Well, we have heard of such an offer! Generally, we would want to consider any issues or problems with the 1st mortgage holder. Additionally, among other things, we would want to determine  if the Homeowner could and/or should file bankruptcy and “strip-off” the 2nd mortgage. At any rate, such an offer is certainly worthy of careful consideration.

The Law Firm of Vaughn & Weber, PLLC, proudly assists residents of Nassau county (Long Island), Suffolk county (Long Island), Queens (New York), and Brooklyn (New York) with their legal matters. Call (516) 858-2620 to arrange a consultation with an attorney!

Stop paying my second mortgage?

On December 13, 2010, in Foreclosure, by Robbie L. Vaughn, Esq.

Can you stop paying your second mortgage?

Sure.

Should you stop paying your second mortgage?

Maybe not.

The prevailing theory is that if your home is worth less than what you owe on your 1st mortgage it is highly unlikely that the holder of your 2nd mortgage will bring a foreclosure action against you.

Well, although it may be rare, we did have a homeowner come into our office this year whose 2nd mortgage was being foreclosed although his home’s value was less than the amount owed on the 1st mortgage.  Additionally, lenders can, and some will,  “sue on the note” (bring an action against you to recover the money you promised to repay them) rather than bring a mortgage foreclosure action.

On the brighter side, we have seen 2nd mortgage payments reduced by as much as 80% a month.  Also, some lenders are willing to accept as little as 10% of what is owed on the 2nd mortgage as full payment. Additionally, if bankruptcy is an option, you might be able to “strip off” a totally unsecured second mortgage by filing a chapter 13 bankruptcy (see filing bankruptcy to save home from foreclosure).

We are often asked about paying and not paying second mortgages. Our answer: We can not advise you without knowing your specific situation and considering the particular options available to you.  So, make sure you are fully informed before making a final decision.

As always, The Law Firm of VAUGHN & WEBER, PLLC is here to assist you.  We are conveniently located in Mineola, NY.  You can Contact us at (516) 858-2620 to speak with an attorney.


The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. This website is Attorney Advertising. It does not form an attorney-client relationship. We are a debt relief agency and a law firm that helps people file for bankruptcy relief under the U.S. Bankruptcy Code – Title 11. Prior results do not guarantee a similar outcome. Proudly assisting residents of Long Island, Nassau county, Suffolk county, New York City, Queens, Brooklyn, Bronx, Staten Island, Manhattan