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.

Bank of America Forgiving Second Mortgages!

On October 1, 2012, in Foreclosure, by Robbie L. Vaughn, Esq.

BOA eliminates the full unpaid principal balance on some second mortgages.

Bank of America recently announced that it will be forgiving 2nd mortgages, for some homeowners,  “under Bank of America’s participation in the 2012 national mortgage settlement.” We will be writing more about the 25 billion dollar National Mortgage Settlement soon, but, for now, here is part of BOA’s recent press release:

As part of Bank of America’s ongoing efforts to help customers in need of mortgage assistance, this company is in the process of mailing approximately 150,000 letters to pre-qualified homeowners offering automatic extinguishment of their second lien mortgages. The intention of the program is to place homeowners in an improved financial situation by reducing their monthly debt obligations and, potentially, help them create equity in their property.

The full forgiveness of second lien balances on eligible loans is being extended under Bank of America’s participation in the 2012 national mortgage settlement among the five largest mortgage servicers, 49 state attorneys general and the federal government.

Letters that began mailing in July 2012 and continue through the end of this year inform predetermined eligible homeowners that the full balance of their Bank of America-owned and -serviced second lien mortgage will be forgiven and the bank’s lien on the collateral property will be released free and clear, unless the customer opts out of this relief offer within 30 days of receiving the letter.

Read the full Press Release here.

Our take: We like it! There could be tax consequences, but we doubt that would be reason enough to opt out. It would be wise to speak with a CPA. 

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

This is not Tax or Legal advice!

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