Settlement of Second Mortgages and HELOCs

In May 27, 2011

There is a “hidden” component to the real estate and financial crisis, and it gets very little attention by the media. I’m referring to the problem with second mortgages on homes that have lost market value during the real estate crash. Banks are being allowed by the Treasury Department to keep large portfolios of second-lien mortgages on their books at values close to those before the bubble burst.

Some estimates indicate that up to 50% of at-risk properties include this type of loan, so it’s a huge problem. There are more than $1 trillion in outstanding second-mortgage loans, with more than 40% of that concentrated among the four largest lenders. With housing prices down more than 30% average since 2006, many of these second liens are either completely without equity as collateral, or very close to it. Today, the major banks are carrying these notes at 86-93% of book value, when some estimates indicate that they are actually worth only 40-60 cents on the dollar on average.

Many consumers are unaware that it’s often possible to settle with creditors on second mortgage obligations for greatly reduced principal balances. Why would a second lender agree to a settlement on a debt that is secured? Simple. Once the property drops in value below the level where even the first mortgage is under water, then the second lender is completely exposed and is very unlikely to recover anything by way of foreclosure. In that situation, a settlement for even 10-15% of the face value on the mortgage often makes sense for the lender.

For example, let’s say you purchased a home for $300,000, with $30,000 down payment and a first mortgage of $270,000. Later the property appreciated in value $400,000 when the market was at its peak. Like so many Americans, you borrowed against the increased home value and took out a home equity line of credit (HELOC). With the home valued at $400,000 against a mortgage of $270,000, you had $130,000 of equity to work with. Being prudent, you didn’t borrow all of that, only $100,000. So you had a first of $270,000 and a HELOC for $100,000. Then the real estate crash happened. Your $400,000 house is now worth only $250,000, less than you originally paid for it. This means that the first mortgage of $270,000 is itself under water, since the house would sell for less than you owe on the loan. And therefore the second lien is 100% exposed. There is no collateral at all remaining to cover this note. In practical terms, this type of obligation can be settled the way any unsecured debt (like a credit card account) can be settled.

At ZipDebt, we’ve been assisting some of our clients to settle second mortgages, and the results have been nothing short of amazing. We’re seeing 10-15% settlements routinely, even less in some cases. But it’s important to understand that not all second mortgages can be settled, nor is it appropriate to use this strategy in all cases where the property is distressed. Sometimes there are other solutions more appropriate to the specific situation. It really requires a detailed analysis to determine whether a second mortgage or HELOC is suitable for the settlement approach. There are a number of key factors involved, such as whether the home is primary or a rental property, whether the state the property is located in is a “recourse” or “non-recourse” state, the specific type of mortgage contract involved, and of course, the equity figures relative to loan face values.

UPDATE: April 5, 2012

As of April 2012 we are offering PAID CONSULTATIONS ONLY on second mortgages or HELOCs, and no longer offer free consultations on this subject. Our fee is only $150, and includes 30 days of follow-up support via email. We made this change because our experience has been that each mortgage situation is totally unique, and requires careful analysis and discussion before a solid recommendation on strategy can be made. We have had so many inquiries on the topic of second mortgage or HELOC settlement, that we felt a paid consultation would be the most efficient method of assisting consumers to avoid scams and make the correct strategic decision. For additional details, please visit our other website at


Gerri Detweiler of recently interviewed me on Talk Credit Radio on the subject of second mortgage and HELOC settlements. This is an in-depth podcast that covers a lot of important information consumers need to know on this topic. If you’d like to learn more about debt settlement as it pertains to mortgages or HELOCs, this is the audio file you’ve been hunting for! Click here to download the full podcast free of charge.



  1. Hello, I have a second loan , they are now calling it a home equity loan , but when i refinanced in 2006 it was a mortgage taken out , by a shady broker so i had a refinance , and got a new mortgage, lender now says its a homeequity loan it was for $97k now paid down $91k, they are reporting it on my credit report as 2 yrs at $531.87 a month, I am in the process of a second lien 2my modification, what do you think this reporting means on the credit report. This loan was more fraud than predatory, I just dont understand how it can be a homeequity loan because I did not take a lump sum of money on it . Please explain if you can, I would be most greatful……

    • Mary, I can’t quite tell what has happened here just based on the information you have given. Please feel free to email me at and I’ll try to help you figure out what you need to do.

  2. Is negotiation still possible if the same bank holds both the first and second mortgage?

    • Mike, yes, it is possible to negotiate a principal balance on the second when the first is held by the same lender. It all depends on the relative values between the notes and the current market value of the property.

  3. My 2nd mortgage lender Litton offered 10% of the entire loan to assist in settlement. If I accept the offer they will write the lien off credit but will they send a 1099 to IRS and make me pay on the remainder of the loan?

    • Karen, if the lender issues a 1099-C that means they have canceled the remaining amount. Assuming everything is documented correctly, the settlement should extinguish the lien and the deficiency at the same time. The 1099-C pertains to taxes, not repayment of the debt itself. Generally speaking, the Mortgage Debt Forgiveness Act of 2007 (extended to 2012) does not apply to second mortgages, since most second mortgages were not used to substantially improve the property. However, the standard insolvency exemption for canceled debt would still apply, so if you are insolvent at the time you settle, you may be eligible to exclude the 1099 from income.

  4. Charles can you settle the 2nd mortgage and still remain in the home if the 1st mortgage is current? or inorder to accept settlement offer from 2nd mortgage you must sell your house? Thanks for this forum it has been helpful.

    • Karen, in order to settle a second you have to show the lender that the mortgage is 100% underwater, meaning the first mortgage itself is more than you could sell the home for. In those conditions, it is sometimes possible to settle the second and remain in the home. However, the settlements on seconds I’ve seen were associated with distressed first mortgages, meaning the first notes were also behind. Most of the time, the homeowner is pursuing a loan modification on the first while trying to settle the second.

  5. I have both a first and second mortgage with BOA. The first mortgage was permanently modified (non-HAMP modification) in July 2010. The second mortgage was a purchase money loan that was an ARM and subsequently refinanced 6 – 8 months after origination to a fixed rate loan. We did NOT take any money out, just a straight refi. BOA offered to modify the second mortgage (once with a measly savings of $2.95 over the original payment amount and then again with vague terms and referring to it as a HELOC which it is not – we rejected both offers). The second mortgage has been in default since 3/2009 and has not been charged off. We did once try to settle but was told they don’t do settlements and on another attempt, they rejected the offer. Any advice on how to settle this loan and be rid of it once and for all? We’ve successfully settled other debts with no problem, but BOA will not budge on settling this loan. The second is almost completely unsecured (house is worth 469K, principal balance on first loan is 422K). If they chose to foreclose over the second and you knock off even just 10% for REO stigma, the second is left with nothing so it would make more sense to just work with us.

    • Angie, part of the problem may be that the second is not 100% underwater. Most of the settlements I have seen on seconds were in situations where the first mortgage was clearly upside down alone, although we did see one recently where there was a short sale with excess proceeds to the second, followed by a settlement at 10% on the remainder. Please email me directly at for further discussion. I’ll need to ask you some more detailed questions.

  6. I have 1st and 2nd mortgage 80/20 with different banks.I owe on 1st 240000 and 2nd 62000. My house is worth no more than 215000.I am current on both mortgages but it is really hard for me
    to keep up.Can I negotiate settlement on my 2nd for one lump sum without defaulting.My 2nd holder mortgage is CCO.My household incomes are around 3200 a month.

    • In reply to Bonko, no, sorry, it’s not usually possible to negotiate settlements on current standing mortgages. You have to be far behind and close to (or even beyond) charge-off before most lenders will consider a settlement. The exception would be a short sale situation.

  7. I own a home that is worth +/- $300,000. I owe $350,000 on a first and $110,000 on the second. I was lucky enough to get a loan modification on the first. I just filed chapter 7 bankruptcy so I have wiped out all my credit card debt. The one thing I have left to take care of is the second loan. It is with Wells Fargo. I have not made a payment in over a 2+ years. I have also not heard from them in over 18 months. What should I do about the second? Wait to hear from the bank? Contact them myself? Try and negotiate a buy out? Do nothing? I want to stay in the house, especially with the terms I got with the loan modification.

    • Bill, to make a solid recommendation one way or the other, I would need more details on your overall financial situation as well as the loan history. In general, my view is that it’s best to settle these mortgage charge-offs, since otherwise they could haunt you throughout the entire Statute of Limitations period and become a nightmare lawsuit down the road. But there are other factors that pertain, such as potential tax impact. Please feel free to request the 20-minute phone consultation over at my other website,

  8. I got a different twist…GMAC which holds my first (126K) and second (23K) asked I send $41K certified fund to release the first mortgage (yes the first). The FMV is probably in the 60K range. So I assume there is big tax impact. My questions-1)should I negoitate to get them to also eliminate the second mortgage 2)given I already have an offer should I hire expert to negotiate for me? I don’t want to do that given I lost 3k to firm promising to negotiate for me about two years ago.

    • Andy, regarding tax impact if this is your primary residence then look up the Mortgage Debt Forgiveness Act, which normally applies to cancelled debt on purchase money loans for primary homes. It does not usually pertain to forgiven debt associated with second mortgages or HELOCs, as those are not often purchase money loans, but the usual rules for a insolvency exemption (see IRS Form 982) would apply if you qualify. Yes, you should try to negotiate settlement on the second mortgage, so you don’t have a deficiency hanging over your head. No, you should not hire a “negotiation firm” to handle it, since that will just lead to a repeat of your previous rip-off experience! If you want coaching assistance, please visit my other website at and complete the consultation request form.

  9. 2nd Mtg Settlement
    We are unable to maintain both our 1st and 2nd Mtg current on both. We are struggleing to maintain this and are unable to continue with this much longer. We tried for HAMP but did not meet the 31% requirement. 1st mtg reviewing our application for in house mod which does nothing to help us with the 2nd. I contacted our 2nd mtg co to inuire on modifications or trying to settle. GT Servicing (owned by BOA) advised settling and keep current on the payments. She stressed the importance of the hardship letter for us to be considered for a settlement with BOA. This sounds too good to be true and you know what they say…It usually is. Should we try to settle for the 5-10% of the bal owed of $184K on the 2nd while we are still current. Situation is home worth ~$320 owe $272K on first $184K on second of which $50K was a 2nd taken out at the time we purchased to avoid PMI.

    • Jac, I see no harm in trying, but I have yet to see a second mortgage settlement that took place on an account in current standing. In fact, most second mortgage settlements don’t take place until after the account has gone past charge-off (after six months). If you want coaching assistance with this project, please feel free to email me directly at

  10. Hello,

    I am current on my 2nd/1st lien,never paid late and FICO is great!

    There is no equity for the 2nd and the 1st is under as well.

    We have moved out of the house and have rented it. And we are renting as well. We couldn’t live in the condo as it was getting very cramped.

    i want to know if /or any options i have to working a settlement w/the 2nd lien. We want to stay in good standings.

    please let me know. thank you

    • Larry, you have mutually conflicting goals. As noted in the above comment to another inquirer, second mortgages don’t get settled without being in default. You will have to decide what is more important, your FICO score, or getting the second mortgage resolved via settlement. It will have to be one or the other.

  11. Can BOA foreclose on my home since my HELOC is 4 months past due? I just received a letter that they were referring my account for foreclosure. Please advise. Thanks

    • Andrea, yes, a lender has the legal right to foreclose on a property when you fall behind, and that is true for second mortgages as well as first mortgages. We usually don’t see the banks moving to foreclose on the basis of a second mortgage being in default unless the home is worth more than is owed on the first mortgage. That leaves partial equity against the second mortgage that can be recovered via foreclosure.

  12. Hello.

    I sold my house is 2009 as a short sale. HFC had both my first and second mortgage.

    We had to send them a letter requesting to sell the house short of what the value was. We were moving due to my workplace causing my to get sick and I was selected for a promotion out of area. We owed about $220,000 on the first and $20,000 on the second. The bank told us just to get an offer and they would work with us. We were offered $190,000 which the bank accepted. Should the 2nd have been included since we no longer live in the house?

    We have been trying to buy a house now in our new location for the last 2.5 years and no luck due to the credit caused by a short sell. The local mortgage company was shocked that the 2nd was still be paid on when there was nothing it was tied to now.

    Help? Please, I need some positive news.


    • Mike, what should have happened in the short sale is a negotiation to release both the lien on the property, as well as any deficiency resulting from the short sale as it pertains to the second mortgage. It sounds like what happened is that the lien was released, which permitted the close of escrow in the short sale, but that HFC did not release you from the deficiency. That would leave the full $20k intact as a debt still owed and appearing on your credit report. Depending on whether or not the loan was recourse or non-recourse, you can probably work out a settlement with HFC. Please feel free to email me for further discussion.

  13. Here is my situation. I live in Arizona (a non recourse state) I owe 154,000 on 1st mortgage through Wells Fargo. I have a HELOC that was non-purchase money of 28,000 through Bank of America which is using the property as the collateral (loan docs state “deed in trust”.

    My house is currently worth around 70k so I am 100% underwater. I decided to do a strategic default and stopped making payments to my first in June of 2011. I continued to make payments to the HELOC and am still current.
    Wells Fargo proceeded with the foreclosure process and my house is now due to be auctioned off April 4th.

    I was just contacted by a short sell realtor that swears she can get my bank to agree to a short sale and also to settle or write off the HELOC as well. Is this realistic with 1 month until auction? Will Bank of America settle my 2nd even though my financials will show that I can afford the payments and I am a “strategic” defaulter?

    • John, if the HELOC is not purchase-money, then it doesn’t matter that AZ is a non-recourse state — BOA could still pursue you for the deficiency balance. After reviewing your financials, BOA will probably work with the realtor to help close the sale by releasing the lien (probably in exchange for a few thousand from the first lender), but my best guess is that they will resist waiving their right to pursue you for the deficiency balance. If the home is scheduled for auction, why bother with the short sale? It might make more sense to submit a settlement offer to BOA after foreclosure, when the lien is gone and there is only the deficiency balance to be resolved. On the other hand, if the realtor has a buyer ready to submit an offer, there’s little harm in seeing what happens!

  14. Well I understand a short sale is better then a foreclosure for credit reporting. You can also qualify for a new FHA loan 3 years earlier then if you have a foreclosure.

    I talked to the short sale broker today and within hours of her leaving, I received two calls from realtors who had investors that wanted to see the property. I couldn’t believe it!

    The other advantage is that the short sale broker told me that they only negotiate short sales where the home owner (me) will be released of all debts and obligations period. They will negotiate with the 2nd mortgage holder so that I play them only a percentage of what I owe…and the first mortgage holder will also pay them a few thousand as you mentioned.

  15. Hello,
    My rental property is worth $350K and I owe $372K on the first and $148k on heloc(recourse loan took money out) property is in CA. I pay $700 out of pocket every month and can’t afford to keep doing it. Heloc is with BOA, since it is a recourse loan, would BOA settle with me and let me off the hook? I am current on both sofar. What are my options? Any help is greatly appreciated. Thank you so much.

    • Riya, a settlement approach might work in this situation, since the property is worth less than you owe on the first mortgage alone. Another option is a short sale on the property with help from a local realtor.

  16. Hi, Bought home at 353K in 2006 and is now worth 272K(latest county assessment). First 282K(Modified in 2011 Feb from interest only to 30 yrs conventional loan). Second of 71K interest only. Both the loans are with Wells Fargo, not sure how I can handle my second mortgage situation when ARM period ends and not enough equity could be accumulated. Also what is the scope for settlement. Have kids growing and hardly have any money left at the end of month, and afraid if I loose my job. Greatly appreciate your suggestion.

    Thank you in advance.

    • Ashok, if you have already modified the first mortgage with WF, then you should inquire with them about the “2MP”, which is a modification program specifically for second liens. Settlement might be possible in this situation, but my first concern would be that the property might be worth more than you owe on the first mortgage, in which case you would be risking foreclosure. Check the valuation on Zillow and don’t go by the county tax figures, which do not reflect current market values. If your Zillow value is still under what you owe on the first, then a settlement approach might make sense. However, it can take a year or more, and you would need to come up with 10-20% of the $71k as a single lump-sum. So this might not be the best option for you given your tight budget. I also think it would be wise for you to consult with a local bankruptcy attorney, not that you need to go bankrupt right now, but to understand the Chapter 13 option that includes having a lien stripped on a second mortgage.

  17. Charles,
    I previously used your program and methods to settle almost 60K in credit debt!! Many thanks to you!! However, I am still in a difficult situation. My home – 1st mortgage Chase – previously WAMU – 108K and 2nd Equity Loan is with Greentree – 28K. Home value roughly 120K not including seller fees. Divorce is occurring and down to one income. Stopped paying Greentree since 11/01. Any chance of settling? Or is 13 my best option to strip?

    • Ron, your situation is right on the borderline for settlement, since technically there is $12k in equity over and above the $108k owed on the first mortgage alone, so roughly 43% equity coverage against the $28k second with Greentree. That said, it doesn’t mean they would *recover* that much by foreclosing, since there are costs to foreclose and REO properties generally sell for well under current market value anyway. (This is probably why they have left you alone for 4-5 months and made no move to foreclose.) So a settlement approach might work in this situation, although GT is not easy to work with. Please feel free to get in touch with me by private email to discuss further, thanks.

  18. We have $117,000 on our first and $63,000 on our 5 year HELOC which is up next month. We are current on both, but the home is only worth $90,000. The community bank that holds the HELOC wants to convert it to an unsecured loan. Should we offer a settlement?

    • Tracy, yes, that would make sense given the numbers. However, the bank is unlikely to consider a settlement on a currently performing note, so in all probability, you would need to be behind on the second to get a settlement.

  19. My wife and I may be interested in utilizing your services, but want to know if it is worthwhile first. My wife purchased a home in 2007. It went through foreclosure and was sold in Feb 2012.

    Is it possible to settle a HELOC after a foreclosure sale has taken place? We live in Washington State. The 2nd is through Wells Fargo in the amount of $40,000. She has received a complaint and summons from a collection agency with 20 days to respond. I assume they own the debt, but think it would be easier to deal with Wells Fargo instead if possible.

    • Brandon, yes, it’s possible to settle a HELOC after foreclosure. However, if you are already being sued by the creditor, then it’s too late to negotiate directly with them. You need to do your haggling with the law firm instead. It may have been sold, but more likely WF still owns it and is litigating the deficiency claim through an assigned law firm.

  20. I have an 80/20 held by BOA. They have served foreclosure papers on us today. The plaintiff is listed as BOA and my wife and I, along with BOA are lsited as defendants. They also Specifically Waive Deficiency. DOes thsi include the second as well, or because they listed themselves as defendants for the second, does the deficiency waiver only apply to the first. Thank you!

    • Neal, I’m not an attorney, so I can’t comment on an active legal matter. Please get in touch with a foreclosure defense attorney located in your area for state-specific advice on dealing with this situation.

  21. Charles, In conjunction to your reply, as per the Zillow the house is priced at 273K and we owe 275K on our first. Also my first mortgage which was modified is not under HAMP, and I realize reading few forums that my first mortgage should have been modified under HAMP in order to qualify under “2MP” for the second. Both loans as of now are current, Going forward If I stop my making payment on second to get attention of the bank to consider for settlement. If it takes a year time from now and if my first mortgage is still around the border I owe, what could be the repercussion ?

    Again thank you for your time and appreciate your suggestions.


    • Ashok, in many states it’s unusual to see a second lender proceed with foreclosure unless there is recoverable equity. There are costs associated with foreclosure, so $273k value versus $275k loan balance is basically a wash against the first mortgage, leaving the second underwater. The repercussions of an aggressive settlement strategy include (a) serious damage to credit score, (b) possible taxable event (there are some exemptions available if you qualify), (c) technical risk of foreclosure (which would be more of a risk if the property starts to increase in value again), and (d) the possibility of a lawsuit for breach of contract. We have not seen a pattern of (c) or (d) happening consistently with most major lenders, but this may change in the future.

  22. (California) Back in 2008 we welcomed a foreclosure due to extreme violence in the area and the bank unwilling to work with us because we were current on payment. In 2009 the 1st was foreclosed and we moved out. We’ve never received acknowledgment of foreclosure finalization nor have we received a 1099-C (?). Second issue, we also had a 20% Second at the time we moved out. We’ve received a few letters from a third party collection agency but haven’t responded to them. Is it likely that the collection agency will attempt lawsuit if we fail to respond to their attempts to settle on the second? CA being a non-recourse state, does this affect the 2nd mortgage?

    Thanks for any assistance and guidance.


    • Bret, you probably won’t receive a 1099-A for mortgage debt forgiveness since it was a foreclosure on a non-recourse loan in CA. So the first mortgage is probably a moot point now. The second mortgage is another matter, and you are making a potentially false assumption that it’s non-recourse. That would only apply if it was a purchase money loan, meaning a loan that you had to take in order to buy the home, like an 80-20 first-second loan structure. Lenders have not been suing aggressively on second mortgage deficiencies in CA, but that does not mean it won’t happen in the future. We have a 4-year Statute of Limitations in CA, so technically speaking, if this was not a purchase money loan, you are at some risk of legal action until 4 years from the date of default on the note. With a 2008-2009 scenario, it sounds like you are getting close to the SOL expiration though.

  23. (Arizona)in 2009 I had to forclose due to a divorce and job relocation. I had a HELOC as well as a 1st mortgage. The property was worth much less than I owed on the first mortgage. It has been almost 3 years and i am now getting collection letters on the HELOC. What are my options here?

    • John, as noted above in my April update to this post, I now offer a detailed analysis and consultation via my other website ( The cost is only $150 and includes 30 days of follow-up support by email. The short answer to your question is that your options are to either settle it or wait out the 6-year SOL period for AZ, but there are many more factors that must be discussed and considered before I could make a solid recommendation on what to do.

  24. I had a rental property in Arizona which was foreclosed on and sold in January this year. I still have a HELOC/2n on it which was not part of the foreclosure. We are still paying on it because a relative who has perfect credit co-signed on it. My credit is shot, but my relative’s is in the 800s. I’d like to settle it without hurting their credit. What are my options?

    • David, any settlement will negatively impact the credit score of any co-signer of the loan. By definition, a settlement is treated as a charge-off for the part that gets forgiven. I’m not aware of any method of settling a debt that does not entail significant credit damage in the process.

  25. Is 1098 mortgage interest deductible on a cancelled HELOC?

    • Helen, if you are asking whether interest paid to a creditor (and reported to the IRS via Form 1098) is a deductible expense, that answer is obviously yes. It shouldn’t have anything to do with a cancellation of the mortgage balance, which must have occurred after you had made the payments reflected on the 1098. There should not have been any interest payments made after the date of cancellation.

  26. Hello, I settled and paid my WellsFargo HELOC about three weeks ago for 17 cents on the dollar. I’m also in a HAMP trial on my first (which is aslo WF). Today I recieved a 2ndMP offer from WellsFargo. I’m guessing the left hand doesn’t talk to the right because my 2nd is settled. Is this 2MP offer triggered when you qualify for a HAMP? Is this normal?

    • Shane, congratulations on settling your HELOC at 17%. Yes, it’s normal for the lender to offer a modification under the 2MP program when you are in a trial mod under HAMP for the first mortgage. In fact, I believe they are required to do so. As long as your HELOC settlement was properly documented, there should be no need to apply under 2MP — the settlement itself should have extinguished the lien and fully resolved any deficiency on the note balance.

  27. I have a second with Green Tree that I am trying to settle. Green Tree has told me that I need to be current to settle. Is this correct or should I stop paying. Our house is underwater.

    • Tammi, I cannot advise you to stop paying your second mortgage. A recommendation would first require a detailed analysis, which I offer via my SecondMortgageAdvice website. I can tell you, however, that I have yet to see a settlement on a loan that was in current standing.

  28. 1st Mortgage balance is 230k, HELOC balance is 120k…home is worth between 230k-250k (based on CMA). Both CitiMortgages, both delinquent +18 months. 1st in foreclosure process, delayed by defense litigation, HELOC filed too, but also being defended against. Don’t qualify for HAMP, was considering a short sale, but have been recently offered a Fannie Mae loan modification. Bank says pay the 3 month trial period and my 1st is automatically modified. What can I do with HELOC to shore up this offer?

    • Luis, if your second mortgage lender is also proceeding against the property, then this has become a legal matter. I’m not an attorney, so really can’t advise you at this point. Talk with your foreclosure defense attorney about how long things can be delayed with the second lender. If you can perhaps get through the trial period on the first loan mod, then you can also talk with the second about a similar mod. Or you could try offering them a settlement since there is apparently little to no recoverable equity.

  29. CA home use to be our primary. We refi into Option ARM(340K) and then later took out cash HELOC(50K) for total of 390K. Current value 210K. We moved and rented it out- Wachovia modified the 1st as a RENTAL. Husband now lost job and CPA says we are insolvent. We collect $1600 in rent but the combined mortgages is $2150. I would like to stop paying the HELOC but stay current on the 1st. Would I just be looking at a charge off for the $50K and possibly not pay taxes for 1099-c since we are insolvent even with the charge off? Or will we still owe the cash out HELOC and have a lien? Thank you.

    • Louise, HELOCs are usually recourse loans, even in a non-recourse state like CA, meaning they can pursue you for the $50k deficiency. It’s very unlikely a lender would simply write off the note and make no further attempt to collect on it. So you would still owe the $50k and the lien would remain in force unless you settle with the lender. If you are insolvent at the time you settle by more than the amount that gets canceled, then you can claim the exemption via Form 982 and avoid the taxes.

  30. We recently modified out 1st with Ocwen. They also acquired our 2nd mortgage for 44K and are offering us a discount payoff agreement and release of claims. Does the debt forgiveness apply to our second? The 2nd was taken out at the time we purchass our house since we could not get 100% financed on the 1st at time of purchase.

    • Nina, purchase money loans for primary residences fall under the Mortgage Debt Forgiveness Act, which will expire 12/31/2012, so if your second was never modified or refinanced you should be able to claim that exemption.

  31. I recently lost my job, and have stopped paying my HELOC with Wells Fargo, currently two months behind. I am making my first with B of A in a timely manner and taxes and insurance are escrowed, never late. I also make my HOA dues on time. WF has been dunning me daily, several times a day, for the last month. I now have one point of contact there so the calls should stop. However, they are telling me that I still need to make a payment and have sent me a package via over night FEDEX, requesting a copy of my unemployment award letter, that they will review and come up with some type of payment they expect from me for the next three months, at which time they will revisit with a copy of a new award letter, and make a decision on how much I will pay for the following year. Upon my return to the work force, they will expect me to pay them current, including all late fees and accrued interest! After that, time my payments will go back to the original contracted amount. They are also threatening me with foreclosure. When I mentioned possibly a short sale, the contact said that they would then send me a 1099. My first is $156k, and the Heloc is $100k, house is now worth $122,500 according to Zillow.
    Any suggestions?

    • Mary, if your property is worth only $122,500 and you still owe $156k on the first alone, it is very unlikely that WF will foreclose. I would need to do a detailed phone consultation with you (see above update) to make a solid recommendation one way or the other. But from what you have described, you are just getting standard collection pressure as the HELOC falls farther behind. Don’t get talked into anything, and you should consider seeing a local attorney for foreclosure defense advice.

  32. I have a HELOC with Chase that is interest only for now. Balance is $80,000. We filed BK against both 1st and 2nd and have not signed any re-affirmations. However we have continued to pay and keep both current. I am now looking into negotiating with my HELOC to settle for less. I have stopped payments as of May 1st. Do I have to submit a package with bank statements, paystubs, hardship etc. or just a proposal letter? Any advice on key items I should include would be greatly appreciated.

    • Tiffany, it’s very difficult to get a mortgage settled without submitting financials, even if you had previously discharged the debt in bankruptcy. They usually ask for 2 years of tax returns, a personal financial statement, pay stubs, and bank statements. This can be a tricky situation, depending on the “water line” for the property. You have to force the issue by suspending payment, and yet if the property is worth more than you owe on the first mortgage, there is risk of foreclosure. If you would like a detailed analysis and recommendation, please visit and order the consultation package. I would be glad to discuss the matter in more depth with you.

  33. I am a few weeks from a short sale closing in MO. I have relocated to FL. There is a 2nd mortgage involved, which is a $29k HELOC which was acquisition debt (80/10/10). The 2nd lender has agreed to release the lien for the sale to go through, and they will get $5k at closing. In their short sale approval letter, the 2nd lender does not release me from repayment of the remainder and I must contact then within 30 days of closing to make satisfactory repayment arrangements. At that point it would basically be an unsecured recourse loan, I believe, since the deal would have closd and there is no house involved any more. My plan is that once the deal closes, I can then work with the 2nd and try to negotiate and offer a reduced one-time payoff with a release of the deficiency, and have them file a 1099C in this year for the forgiven debt amount. I am prepared to let the HELOC loan payments fall behind to get their attention for settlement. Am I missing something, or does this sound like a reasonable strategy given the situation? Do you have any advice on negotiating down the settlement amount? On an original $35k loan, they will have some recovery plus the interest I have paid over the years. I have lost a lot of equity on this house. The primary lender has taken a loss. Is it unreasonable to expect the 2nd lender to be willing to take some of the loss and share the burden in these circumstances? It would help the negotiation if I know what their perspective would be on this. What amount should my initial one-time payment offer be? Thanks for your advice.

    • RC, if your $29k HELOC was a purchase money loan, then it should be non-recourse unless your state specifically permits deficiency judgments on purchase money loans. It sounds like the second lender is trying to get you to commit to repayment by holding hostage the short sale transaction. You should discuss the purchase-money nature of the loan with the realtor assisting you with the short sale negotiation. Perhaps it can all be handled as part of the closing. In short-sale situations, it’s often the case that the first lender will agree to pay something to the second lender so the case can close escrow. Settlements of 5-6% are common in this type of short sale situation, meaning the first lender pays that much to the second. If you can’t negotiate away the deficiency (assuming they are entitled to one) as part of the sale process and you’re left with a residual debt, it should be something that could be settled in the 10-20% range depending on the lender involved. If you would like a detailed analysis and recommendation, please visit and order the consultation package. I would be glad to discuss the matter in more depth with you.

  34. we owed 95k in our second loan from pnc. our home was forclosed and pnc charged off $4500 from it. do i owe they original amount or only the charged off amount?

    • Alejandra, you don’t provide enough information for me to answer your question, sorry. When the property was sold after foreclosure, were the proceeds sufficient to pay off all but $4,500 of the $95,000 owed on the second mortgage? How were you informed about the $4,500 amount? Did they send a 1099-C to that effect?

  35. I have an 80/20. In 2006 I bought my house for 207k. Currently, Primary with Ocwen which was modified recently and Im very comfortable with it with a balance of 145k. However the 2nd with GMAC I stopped paying more than 12 months ago and was charged-off. Currently I owe them 41k. My house is worth 161k. Any chance I can even offer to settle with GMAC for less than 10%?

    • David, you can certainly offer less than 10% in your proposal to GMAC. However, they are less likely to accept a low offer when you’re clearly staying in the property. A settlement in the range of 10-15% would be a far more probable outcome.

  36. I need advice. I am currently in a chap. 7 bankruptcy. I want to stay in my home but am in the process of trying to get HAMP. I have a 1st mort. with Wells Fargo that is 170,000 and a 2nd (Heloc) with BOA that is 55,000. I have been told by WF that i can apply for HAMP, i meet the criteria but will be denied because of Neg. NPV. I was told by Wells fargo that my house is worth $223K. I believe it would appraise for less. I am in default by recommendation of WF to apply for HAMP. I am also in default with the 2nd BOA. I would like to settle with BOA since it is an interest only loan and i can’t get ahead. I wonder if you think this is possible and would there be tax implications.

    • Kristi, if your home is worth $223k, and you owe $170k on the first, that means there is $53k of equity covering the $55k HELOC with BOA. The only conditions under which it’s possible to settle a second mortgage or HELOC are when the loan is fully upside down, with no recoverable equity. In other words, the banks settle when it’s the best they can do. Otherwise, if there is equity in the property to be recovered via foreclosure, settlement is not a feasible strategy.

  37. I need help…had 80/20 w/boa in 1/07, forclosed in 3/09. both purchase money same lender, second sold to new servicer 6/11 over two years after foreclosure. new servicer transferred loan to their own internal collection agency. collection agency states that they know that they cannot come after me (by judgement) but if i want it off my credit i must settle. but according to prior court ruling: Simon v. Superior Court [4Cal.App.4th 63, 5 Cal.Rptr.2d 428 Cal. App. 1 Dist., 1992.]
    The Court shot Bank of America down and said: “…we hold that, where a creditor makes two successive loans secured by separate deeds of trust on the same real property and forecloses under its senior deed of trust’s power of sale, thereby eliminating the security for its junior deed of trust, section 580d of the Code of Civil Procedure bars recovery of any “deficiency” balance due on the obligation the junior deed of trust secured.”
    The Court went on further to explain the rationale: “As the holder of both the first and second liens, Bank of America was fully able to protect its secured position. It was not required to protect its junior lien from its own foreclosure of the senior lien by the investment of additional funds. Its position of dual lien holder eliminated any possibility that Bank of America, after foreclosure and sale of the liened property under its first lien, might end up with no interest in the secured property.
    Key wording is NO deficency balance…not deficency judgement. how can a collection agency try to collect on that and state that i am not liable “but” if i want it off my credit i have to settle…it is already on my credit from the orginal loan as a charge off….is that not a hit enough? i feel like i am being taken advantage of….do i need to seek legal counsel?

    • Janene, yes, I would seek legal assistance with this. It sounds like a collection agency is trying to trick you into paying when you otherwise have no actual liability here. The key thing to understand is that your credit report is one thing, while the status of this debt is another matter entirely. The agency is being untruthful if they say that a settlement will “remove” the derogatory entry associated with the second mortgage. Rather, it will simply show that the debt was settled. It won’t necessarily improve your credit score, not immediately anyway. And a settlement isn’t going to remove the foreclosure itself from your credit report.

  38. This is our situation:
    House originally purchased for $ 688,500 in 2006( first Mtg with Suntrust 400k interest only ) and second ( with Chase for 288.5K at almost 9%)
    We “Modified” both tr HAMP 1 and 2MP. We dealt directly with the banks and did not hire a firm.
    At this point the first one is at 2.25 % for the first 5 years and will cap at 4.35% on the 8th year. The second also modified at 1% principal and interest for the first 5 yrs and will cap at 4.85% on the 8th year ) I know the conditions of the both loans are pretty good but we are still struggling. We currently owe 389K on the first and 278K on the second and we just got the house appraised for $356,000. So the first is well under water. Our FICO scores are in the upper 700s and have not defaulted in any payments so far, but we don’t want to tap anymore into savings. We are considering a cash settlement and offer Chase 10% to 20% of the second loan ( 55K – 27K) if this option does not work we would have to short sale and they won’t see a dime either. My husband and I are on the 1st together and the second one is on my name only. I have been unemployed since 2008 and we just had our second child ( 2 mos old).
    We have more hardship conditions now than we did when we applied for HAMP , what would be our best option? and how realistic is it to get a cash settlement approved by Chase.
    Thank you

    • Daviegirl, if you have an appraisal for the property at $356k and you still owe $389k on the first, then there is no question the second is completely “out of the money.” That means a settlement is a possibility, although it’s always much more difficult to obtain a settlement when you are staying in the property, and there is no guarantee that the creditor will approve a settlement. Given your hardship situation, you would also be wise to have a consultation with a local bankruptcy attorney to crunch the numbers and see what a Chapter 13 lien-strip would entail. Depending on your exact figures for income and allowable expenses, it’s possible you might end up paying less via Ch. 13 than via a settlement. So I would look at both of these options and then figure out which one makes the most sense mathematically for your situation.

  39. I got a house in 2007 in SC the kind of 80/20, 1st $ 253K, I own $216K 2nd $28K I own $26K, house value $250k. BOA owns both loans. I have tried to get a modification since 8 months ago because I got separated from my husband ( his income didn’t count), with no luck, means I’m behind 8 months in both loans. Attorney sent me 3 months ago notification of foreclosure, but it won’t be effective until I try to get a mod. This modification process is getting nowhere. I have $23K in credit card debt. I want to do short sale. I don’t want to keep the house. Is short sale the best option or maybe bankruptcy? My husband has just bought a house in NC . what should I do?

    • Eleana, before you decide anything, I recommend that you have a consultation with a couple of local bankruptcy attorneys. Sit down and crunch the numbers, so you have a clear understanding of what BK would entail in your situation. Since you don’t want to keep the property, it could be that a bankruptcy makes more sense than a short sale, as it would also address your $23k in credit card debt at the same time. At least have a couple of consultations, so you’re making a fully informed decision.

  40. My idiot ex was a spender and I was an idiot for blindly signing whatever he told me to.

    1. Our home is worth about $330K and we owe $345 on the first mortgage with WF. It’s an interest only adjustable loan so pretty insane.

    2. Our second mortgage is $112K with Greentree and has a high interest rate, around 11% I think.

    3. My ex filed Ch 7 and I’m filing Ch 7 in the next week or so. I’ve been unemployed over 13 months and between that and the divorce my income dropped from about $13,000/mo to $2500/mo. I have unemployment income but from what I hear, I can’t use it.

    4. I’d like to stay in the home but need to get rid of the equity loan. I want to get a modification and settle the debt with Greentree, but they don’t want to because I want to stay in the property. If I can’t settle, it will foreclose and I won’t be in the property.

    5. Could you tell me the magic formula for determining what income I need to show WF to get a modification? I don’t have it myself, but I’m going to get a contribution letter that will need to match what I need – it can’t be too high and it can’t be too low.

    Think I can successfully negotiate a modification with the 1st and settle the 2nd? I assume I have to do them concurrently? If the terms of the first change I worry the 2nd wouldn’t want to settle. And if I settle the 2nd with borrowed money then can’t modify the first, I’m worse off – the bankruptcy will wipe it all out.

    • Lindsey, I’m not a specialist in loan modifications, but my understanding is that they apply the 31% rule for maximum housing expense, to include principle, interest, taxes, and insurance (PITI). So if your monthly PITI were, say, $2,000 under modified terms, then your gross monthly income would need to be around $6,500 or more to meet the 31% rule. Yes, it’s possible in this situation to negotiate a mod on the first and settlement on the second. However, if you plan to file Chapter 7 BK, you should consult with your attorney about all of this! Although the lien itself cannot be stripped under Chapter 7, you can remove any personal liability you would have for the underwater second. Then the lender could only proceed against the property itself, not you personally, and they are very unlikely to do so when there is nothing to recover via foreclosure.

  41. Charles,
    Have you seen chase settle a 2nd completely out of the money prior to a short sale? Clearing our second for 10-15% would allow us to stay in our home. Would being behind on the 2nd but current on the first matter?

    Home=225k, WF =300, Chase=70k.

    • Greg, yes I’ve seen settlements with Chase prior to short sale. However, regardless of the creditor involved, settlements are very hard to come by when you’re still staying in the property. Financial disclosure demonstrating hardship would definitely be required in that scenario. FYI, most of the settlements I’m seeing are on deficiency balances post-foreclosure or short-sale. There is no guarantee you’ll get a deal, and you would probably have to push it way past charge-off to get any traction on a settlement negotiation. You do need to understand that your home would be at risk of foreclosure meanwhile — it’s unlikely Chase would foreclose since the mortgage is completely upside down, but technically they would have the right to do so.

  42. Charles: If a mortgage account gets “charged off” by a lender, is it no longer collectable? I understand the deed of trust or mortgage secures the property and remains foreclose-able regardless of charge off status. But what does charge off status of an account mean to the borrower?

    • Kristine, a charge-off absolutely does not mean that the debt is no longer collectible! Please see my blog post on the subject of charge-off for further information. Although that post was written with credit card debt in mind, charge-off on mortgages work the same way. Basically, what it means to the borrower is a derogatory credit entry, since the creditor had to formally declare a loss on the account.

  43. I just wanted to post an endorsement for Charles. I have been working with him for a couple of weeks now and already I feel that I have more than received my money’s worth of help and advise. He is creative, extrememly well informed and prompt with his answers and advise. My settlement is still a work in progress but I feel that the help Charles is giving me will assure the best outcome possible in my situation. His fee is extremely reasonable for the services he performs and I would recommend him unconditionally to anyone trying to go through this process on their own.

  44. I was skeptical about getting advice online, but certainly wasn’t finding the information I needed anywhere else. Charles helped clarify my situation and a direction for settling a default HELOC in the initial consultation. I feel more empowered knowing I have his expertise for the next 30 days.

  45. Charles: I have a HELOC (42k)in default. I live in my home and I can’t quite qualify for HAMP assistance on my first by 2-3%. First is Conv Jumbo (256k)and the county calcs this years Actual Value at (201k). Green Tree has aquired the loan, and has offered to settle for 50% (21k)which sounds too good to be true. Coming up with the 21k to make the deal is nearly impossible. 1) Is this offer on the up and up? 2) Do I have any other options? 3) Can they foreclose on my house and/or get judgement to garnish my wages?

    Can they, or would they even want to foreclose on this property with an upside down first, as a second lien holder?

    Any assistance or direction you can give would be greatly appreciated.

    • Richard, it does sound like a legit offer by GreenTree, although 50% is high for a mortgage settlement. You can negotiate for a better deal, but there are other aspects you need to understand, like potential tax liability for settlements. Yes, they have the legal right to foreclose, but will probably not do so if there is no equity to be recovered.

      If you would like a detailed analysis and recommendation, please visit and order the consultation package. I would be glad to discuss the matter in more depth with you.

  46. Charles, in an earlier post you stated HELOC’s and seconds aren’t usually covered in the Mortgage Debt Relief Act because they aren’t normally used for substantially upgrading the home. What if the second(or home equity loan in my case)was used to purchase the house and nothing else? Would it be covered then?


    • Shane, if the second mortgage or HELOC was exclusively used for closing the original sale, as I understand the definitions that would make the second a “purchase money” loan. The Mortgage Debt Forgiveness Act applies to purchase money loans for primary owner-occupied residences, so provided the settlement happens by 12/31/2012 (when the act expires) the loan should be covered.

  47. Charles, my house is worth approx. $580,000, I have no equity in the property. My first with HSBC is $580,000 and my second with Chase is $103,000. I am current on both and on paper have the means to continue to pay both. Do I have any chance at a shot at a settlement with Chase?

    And a second question (I just want to confirm that I read the Attorney General settlement right with respect to Chase) – that it applies only to first liens?


    • Nick, if you are referring to the national mortgage settlement with the 49 AG offices, of which Chase was a participant, my understanding is that some provisions of the settlement dealt with principle reductions on second mortgage balances. I haven’t seen any reports yet of second liens being modified under the national settlement though, and not sure when (or if) this will actually start happening. On your question about settlement, yes, you have a chance to settle an underwater mortgage. However, there are serious consequences to this approach, like credit impact and potential tax liability, with no guaranteed outcome meanwhile. If you would like a detailed analysis and consultation for your situation, please visit and order the consultation package.

  48. Charles, I am facing serious hardship; this is my primary residence in Florida (a recourse state).

    Property value BPO: $210,000 (as of June 2012)
    1st with Chase: Owe $164,000 (Never late, current).
    2nd Heloc with Citi: Owe $183,000 (90 days late) Stop paying 2nd: April 2012

    If Citi Heloc forecloses this is what they will get:
    Home value $210,000 – 1st $164,000 – REO $50,000 = -$4,000

    If Citi heloc does not settle, I will forced to file Chapter 13 BK which should convert this 2nd citi heloc to unsecured debt and included in the BK plan.
    My Goal is to settle the Heloc with Citi for 5-10%.
    Will Citi Mortgage settle or foreclose our home if there is only a negative $4k after REO expenses?

    Note: I do want to keep my home!

    • Mark, I cannot predict with certainty whether or not Citi would foreclose in this situation, but in my opinion the odds are very much against it. For one thing, Florida is a judicial foreclosure state, so it’s a more protracted and costly process than in non-judicial states. As you correctly point out, their carrying costs while the property was an REO would likely offset any proceeds received from the foreclosure sale after Chase has been paid off on the first lien.

      If you would like a detailed analysis and consultation for your situation, please visit and order the consultation package.

  49. Home value 459K
    1st w/ Chase bank 385K, current
    Heloc wth CCo mortgage 140K 6 months behind and in a process to negoiate for a settlement. Is it possible for a settle or CCo can foreclose? we want to keep the house.

    • Sam, a second lienholder has the right to foreclose whether or not you are current on the first. Normally, however, they won’t actually proceed unless there is something to be recovered. I would need to know more about the situation in order to advise you. If you would like a detailed analysis and consultation, please visit and order the consultation package.

  50. I just sold a property (Short Sale.) Wells Fargo had both loans. The 2nd is a HELOC that was written as part of a 75/25 loan. At the sale the 2nd released the lien but not the deficiency. The property closed in April. How do we now negotiate with them at this point?

    • Matt, the short answer is that you need to write up a proposal and get it to the right department at Wells Fargo. If you would like a detailed analysis and consultation, please visit and order the consultation package. I’d be glad to walk you through how the process works, and help you frame a good starting offer.

  51. I live in michigan and I owe 92,000 on my first which is underwater, and my second is 22,00. I went through a bankruptcy five years ago and kept the house. We are current on our 1st, but have not paid or heard from our second after the bankruptcy. A year and a half ago the portfolio of our second was sold and they offered a settlement of 5,000. I was let go from my job at that time and it took six months to find a new one; so we ignored the offer and never heard from them after. As of this month I found out that the portfolio was sold once again and the new company wants to start collecting and offered no settlement option. What should I tell the new company? I cant afford to start paying on this.

    • David, the very first thing you should do is confirm whether or not your second was included and therefore discharged in the bankruptcy case you filed. If you filed under Chapter 7, included the second, were discharged and did not reaffirm the note, then they are not supposed to be attempting collection against you personally. They can only go after the property via the attached lien under those conditions, which they won’t do when there is nothing to recover. Before you do anything or even communicate with this new agency, go back and review with your attorney how this account was handled in your BK.

  52. I got a loan mod from Chase in 2010 on my first loan with a balloon payment due in 10 years of $40,000. I had a home equity loan of about $25,000 that I had bought insurance for in the event that I became disabled (2007). In 2011 I did become disabled and unable to pay the equity loan. I wrote Chase and told them I had this insurance and they told me I had cancelled it which I have no recollection of cancelling it. After a few months, on their website on my account, the equity showed a $0-zero balance. I didn’t question this as I just figured the insurance paid it off. However it has been over a year now and it is still on the county recorder’s books as a lien. Also when I checked my credit report at the site, I saw where it looked like Chase had actually sold this loan to somebody else although I have yet to hear from these people and I cannot recall who they were because I was planning on printing out the credit report to peruse later but when I tried to print their site locked up and I couldn’t print and have tried unsucessfully to no avail to get a free report. Have you ever heard of Chase selling off home equity loans. Don’t they have to send me notice of who the new owner is? I don’t know if I still owe this or if the insurance paid it off.

    • Kathy, it’s quite possible that Chase sold off your loan after it reached charge-off. Normally you’d receive a notice from Chase to that effect, or the entity that purchased the account would notify you. But sometimes there are long quiet periods while the loan is in transition and bundled with thousands of others that were sold as part of a portfolio transfer. So don’t assume that the insurance paid it, especially if Chase told you that it had been canceled. The zero balance is more likely due to the charge-off and sale than the note having been paid by insurance. Also, if the insurance policy had been in force, and had paid the loan, you surely would have received mailed notices to that effect. All I can suggest at this point is that you write to Chase and ask them to specify precisely when the insurance was canceled. Ask them what date it was canceled, and what record they have that it was canceled.

  53. I am going to the recorder’s office next week to see what the record says.

  54. I have a heloc after a foreclosure it was charged off now chase is offering me to settle fo 5 percent should I except what will be my scenario with tax

    • Ars, settlement is a taxable event unless you are insolvent at the time of settlement. Unless the HELOC was taken out at time of purchase, the Mortgage Debt Forgiveness Act won’t apply. See IRS Pub. 4681 for details on the insolvency calculation.

  55. Charles, my 1st mortgage is being modified and currently on trial monthly payment. The lender servicing the loan gave a principal reduction on the loan balance. Is the principal reduction amount forgiven cann br excluded from tax filing and how will it get excluded.

    • Ro, if this is a primary home and the principle reduction is being granted this year, then you are probably covered under the Mortgage Debt Forgiveness Act, which expires 12/31/2012.

  56. Filed Bankruptcy 7 last year and both Chase 1st and 2nd were included and not reaffirmed. A notation was written indicating I would continue making payments because I disired to stay in my home. I could not afford to continue paying Chase 2nd and stop making payments in January/2012. I owe $70,200 on Chase 1 and $76,000 on Chase 2. My file was sent to the charge off department last month and I sent in a hardship letter and settlment offer of 7% ($5,320). Please tell me if I’m aiming correcly – was told settlements are going between 5-10%. Also, once settlement is done – will I have to pay the amount forgiven since I filed bankruptcy 7 last year.

    • Pat, your starting offer is a reasonable one. Most of the settlements I’ve seen range from 10-20%, but some come in single digits so it’s wise to start low and see how they counter. Having filed BK previously may complicate the process, if they still have a stay in place on collection for this charged-off balance. Hopefully you will get someone there to discuss your offer with you. On your last question, I suspect you meant to ask if you will have to pay *taxes* on the forgiven balance? That depends on whether this was a purchase money loan that falls under the Mortgage Debt Forgiveness Act (expiring 12/31/12). If not, then you would have to show that you are insolvent by more than the amount forgiven. Please see IRS Pub. 4681 for details.

  57. Also, Chase appriased my home at $114,000 but I sent in a BPO that indicated the value at $91,000.

  58. Would you be able to provide advice on modifications?
    Both my 1st and 2nd mortgage are with chase..the 1st loan has a balance of 301k and the second 37k. The house is worth around 310k. We are current on the payments so a settlement on the 2nd mortgage won’t work. Do you think we could get a modification? The mortage payments each month are $2950..our income after taxes is $3600 due my husbands hours being cut at work. We can barely make ends meet and our savings are depleting. It won’t be long before we start missing payments. We dont qualify for the govt programs bc we refinanced in 2010. What do you think our chances are of getting approved for a mod?

    • Mary, I don’t specialize in loan modifications, so I do recommend you seek additional input. If you refinanced in 2010, then you’re correct that a HAMP modification would be denied, since it’s only applicable to loans originated on or before January 2009. So you would need to pursue a private modification with Chase directly. I cannot say for sure whether they would agree, but based on your payment amount, it certainly seems like you must have a high APR — and therefore there may be room to have it lowered so the payment comes down. Start by asking Chase what internal programs they have available for people who still need help, but do not qualify under HAMP or HARP.

      Also, quite frankly, $3,600 net income when your mortgage payments are nearly $3k is simply an unsustainable situation, and you might still be in financial difficulty even if you are successful in obtaining a modification. I know you probably don’t want to hear this, but I strongly recommend that you have a consultation with a local bankruptcy attorney. If you are about to start missing payments, then your home will soon be at risk of foreclosure. You therefore need to be aggressive in exploring ALL of your available options.

  59. I have a first at 280000 and a second at 190,000. Our second has a ballon payment due in 4 years and we are thinking we should do something now about this. We are self employed and our income is way down where we would not qualify to refinance . We want to stay in our home. Should we stop paying the 2nd and see if thy will settle? We have a way to get the funds if thy agree to a 10-20 percent settlement. But because we have about 60,000 equity in the 1st are we doomed?

    • Linda, just based on your comment, I don’t have enough information to make a recommendation. It depends on the history of the loan (recourse vs. non-recourse), comparable property values, what state you’re in, who the lenders are, and a number of other factors. Via my other website, I offer a paid consultation for $150 where I will analyze your situation with you in detail, and then make a recommendation on your best approach. The consultation includes a phone session plus 30 days of follow-up support by email. I’d be happy to review your situation and give you an objective opinion.

  60. first: 55K we live in Phoenix, AZ
    2nd: 21K
    Value: 50-53k

    Is it possible to try for a settlement on a second mortgage after a non re-affirmed BK 7 ??? We filed a BK 7 yrs ago, and were not properly advised of the need to re-affirm. Now husband suffered income loss, and the second is a large monthly payment. 2nd is with citimortg, and the 1st is held by local credit union.

    • Chris, yes, it’s possible to try for a settlement in this situation, although the BK filing sometimes causes a procedural problem where the creditor is still blocked from discussing the account with you.

  61. We purchased our home in November of 07 for 289900. We have a 30yr fixed @ 6.5, and an arm for the second. I was discharged of chapter 7 in Feb. of 09. So we have continued to pay our payments even though we were discharged from both loans. Three and a half years have passed, and we either want to refinance our home or leave it and buy another house. Bank of America said we could refi our first, but not include the 2nd . Do you think my second could be settled for a lesser amount ? We owe 216 on first and 51 on second. A house just sold in my neighborhood for 235, but it was the smallest one on the street . What do you think?

    • Wes, just based on your comment, it’s difficult to say. It looks like the second mortgage is still partly “in the money,” but you don’t provide estimated market value for your property, which is the most crucial factor in lender decisions on settlements. There are numerous other factors as well, such as the history of the loan (recourse vs. non-recourse), what state you’re in, who the second lender is, and so on. Via my other website, I offer a paid consultation for $150 where I will analyze your situation with you in detail, and then make a recommendation on your best approach. The consultation includes a phone session plus 30 days of follow-up support by email. I’d be happy to review your situation and give you an objective opinion.

  62. I am in escrow for a Short Sale with GMAC. The property also has a Chase HELOC which we have negotiated a settlement on between banks, with a release of lein and no deficiency.

    It is a condo that was a primary residence, turned into a rental 4 years ago (in fact some of the HELOC was a down payment on ‘new’ primary residence.

    Here are my questions: .

    First, the original note with GMAC was purchase money. Should I expect a 1099-C for the outstanding balance between sale price and amount owed? If so, is that still not taxable in CA as a non-recourse loan?

    Second. A significant amount of the soon to be settled HELOC was money used on improvements to the property. The rest is the aforementioned new down payment and misc expenses. Can any of that improvement money be counted as a loss against the tax basis of the condo to offset forgiveness of debt? and, Is any of that money used for purchase price for the new property (and since declined in value) anyting other than unsecured debt subject to insolvency calculations?

    Third, will I need to file seperate form 982s for each loan?

    I am jsut anticipating what I need to do next spring. I appreciate your help on this blog and enjoy reading it.

    • G is SoCal: (1) Yes, you should expect a 1099-C. Recourse vs. non-recourse has nothing to do with tax liability — these are two separate issues entirely. You’re talking about a rental property, not a primary residence (even though it started out as primary), so to avoid taxes on the transaction you will need to rely on the insolvency exemption granted by the IRS, assuming you were insolvent at the time of settlement. (2) The only way improvement money would play into it is if you were claiming exemption from taxes under the Mortgage Debt Forgiveness Act, but that only applies to primary owner-occupied residences, and not to rental/income properties. (3) Generally, you file one Form 982 to address multiple 1099-Cs received for the tax year in question.

  63. My rental in California (previously primary home) was forclosed (non-judicial) by 1st (PNC Mortgage) this week for $205k (owe $198k), Heloc (PNC Bank) $135 now exposed.
    Reading up on non-jud foreclosure law, if is “same entity” on 1st and 2nd, there is no def judment on 2nd. Is that true for my case as they for being PNC Bank and PNC MOrtgage? (not sure because they seem to operate “separately”, at least on day-to-day activities).

    If PNC Bank still has def judment rights, anything proactive action I can take before they sue for def judement?

    • Yana, I can’t answer your question with certainty. It may depend on whether or not PNC Mortgage was the owner of the HELOC or just the servicing entity to an investor who actually is the owner of the note. PNC is not easy to work with, but post-foreclosure, it might be possible to settle the HELOC if you do determine that you are still exposed.

  64. Hi, I live in AZ

    I owned a rental and Citi had the 1st loan of 120k and PNC bank had the HELOC of 23k.

    Citi foreclosed and the property sold at trustee sale last month.

    I got a letter from PNC last week asking me to contact them and I talked to a person in the recovery department today.

    He was not aware that it had sold at trustee sale.

    I asked him if PNC was going to charge off the loan and send me a 1099-C and he said no.

    But he also said that PNC would not pursue me for the balance because of my state law. I told him that this money was not used for purchase money. He told me they would jsut keep it on their books and continue to report it on my credit.

    He told me that I would no longer hear from them since they were not going to pursue me.

    He said that if I decide I want to straighten this out and have them stop reporting this on my credit to contact him to set up payments for the 23k.

    I found it weird that PNC doesn’t plan to charge it off but also did not make attempts to set me up on a payment plan or try to settle the debt.

    Has anyone heard of this happening?

    • David, yes, I’ve heard of this happening. Some banks like PNC just don’t want to settle, period, even when it would make economic sense for them to do so. All you can do is wait out the situation and hope that their policy changes, or they begin selling these accounts to companies motivated to settle, etc. If they aren’t going after you, then it’s mostly a credit related matter now anyway. If you see a third-party agency become involved later on, that would be a good indication that a settlement will be possible at that point.

  65. Hi Charles,
    I would like to get your brief input on our situation, to see whether it is worthwhile to engage your services more formally (for that I will trust your judgment).
    We purchased our home in Florida in 2006 for $235K (80/20 loan). The 1st is a 30yr fixed with GreenTree at 6.5% and the 2nd is a HELOC with BofA, a current balance of $45K and a variable interest rate currently at 5%. Zillow lists our property value at $97K so I think you can see our problem. We are up to date on payments and are not in a hardship scenario. Because of the work I do, I am not able to take a negative hit to my credit history so strategic default or short-sale is not an option. We qualify for a HARP refi on the first loan so are going through that with GreenTree’s designated refi lender Quicken Loans (any thoughts on this, by the way?).

    We would love to sell the house but it’s mathematically impossible knowing we are not willing to default and would have to make up the difference in our loans out of pocket. The only way we could afford to sell the house is if we could offload or settle the HELOC for a much lower amount. I am able to pay $15-$20K in a lump sum, but is this even worth pursuing? In short, do we have any hope of settling the HELOC with BofA without going into a short-sale or foreclosure scenario, and before we attempt to sell our home? Last question- I saw on an earlier post that the Mortgage Debt Forgiveness Act may apply to our HELOC since it was used to purchase our home. Does this open a door for us?

    Thanks again,

    • Zack, in a word, no, there’s no realistic chance of settling the HELOC while in current standing. You can try applying for a short-payoff approval while current, but I have yet to see BOA approve any of these. It’s certainly worth a conversation with them, but they will require a full set of financials, and if you otherwise have the means to continue paying on the HELOC, they are unlikely to take the hit just because the note is upside down.

  66. Charles,
    Please disregard my last question on the MDFA – I have read and understand how it applies now.

  67. Thanks for this very valuable forum!
    I need some advice on my mortgage/HELOC with BOA.

    Bought the house in 2005 for 494K with 10% down.
    First mortgage of 370k- currently owe 357K .

    2nd mortgage HELOC for 70k – was packaged along with first(above) for the home purchase . Later BOA increased the HELOC to 114k based on re-appraisal and I took out the available 44k , thus making what I owe on the HELOC 114k.

    For the last 12 months, I ‘ve been behind on both due to job loss. BOA tried a settlement offer for the HELOC for 35k but I told them I didn’t have the money.
    A couple of months later, yesterday, I received a fedex letter saying that my entire HELOC has been approved for debt forgiveness.

    What does this imply? Does this mean that I only owe the 1st mortgage (357k) now? Would this mean that the lien from the second will be released. I plan to stay in the place and am hoping to get back on paying the first starting next month( based on a new job). Would this mean I’d have a problem because of the 2nd, if I try to sell the place in the future. The property is worth 460k now.

    Please advice. Many many thanks!

    • Jack, if you received a letter from BOA indicating that the entire HELOC balance has been forgiven, then your property qualified for this under the national mortgage settlement, as coordinated by the Department of Justice. So yes, it means you only owe the first mortgage now, and nothing whatsoever on the second. The lien will eventually get released as well, and you should have no problems with selling the home in the future. The only potential downside is the tax liability associated with settlements. Please refer to IRS Pub. 4681 for details. If the mortgage doesn’t qualify under the Mortgage Forgiveness Debt Relief Act, you may still be able to rely on the standard insolvency exemption to avoid paying taxes on the forgiven balance.

  68. Charles,
    My first mortgage with Chase is $520,000.00. My second (HELOC) which was with Bank of America and is now with Green Tree is $70,000.00. My third (line of credit) is with Chase $30,000.00. I have $40,000.00 in credit card debt and combined my household makes $120,000.00 a year. My home just value is $290,330.00. We purchased it for $649,000.00. I was behind on my first but am current now. I am behind on my second and current on my third. I will be late on my credit cards this month. I cannot keep paying everything that I owe it is stretching us too thin. Any advice you have to offer would be greatly appreciated. Thank you in advance.

    • Laura, I would need to know quite a bit more about your situation in order to make a recommendation. Since you are carrying $40k of CC debt in addition to the mortgages being underwater, we should discuss the settlement strategy as compared to the bankruptcy option. Please click on the link above right to request the 20-minute consultation with me, and I will call you to discuss your situation and make a recommendation.

  69. Hello, we just completed a short sale. The first mortgage was covered by the purchase price, but we still owe over 100k on the now unsecured second. We have heard that we can settle for 5-10% of the balance. We contacted the legal team our lender hired to collect (not yet sent to a collection agency) and they refused to submit an offer that low. They say this is a high balance loan, and the lender would never consider anything below 30-40k. They are threatening to sue us. We are wondering how likely they would be to sue, and if they did, what kind of case they would have.. Seems like they have some accountability since the loan they gave was based on a grossly inflated appraisal? Any advise would be greatly appreciated. Thank you!

    • Kerri, a lawsuit is definitely possible for a deficiency balance owing on a second mortgage after short sale. But I also wonder how the short sale was even approved if the second lender did not agree to it and didn’t insist on a promissory note for the difference between what they received after sale and what you owed on the balance. It’s also unclear whether this is a recourse or non-recourse loan, etc. There are numerous factors like these that play into your question, so I would need to spend some time on the phone with you discussing the matter in depth before I could further advise you. If you’d like an analysis and recommendation, please visit me at my SecondMortgageAdvice website and order the $150 consultation package.

  70. Charles,

    My husband is a physician employed in california but travels weekly to our home in az where our family resides. The hospital he has worked for over 10 years is either going into bankruptcy, being turned over to the county or closing. there have been over 50 layoffs in the last year, one was the CEO of the hospital, he hasn’t seen a bonus check in over a year (so our income has been reduced), the hospital owes him 4 months of monies for an admin position he holds with the hospital. he will either loose his job shortly or his salary will be cut substantially. he will find another job, but not paying the kind of money the current employer pays (thats why he was flying back and forth, it was worth it). our primary mortgage is upside down (suntrust, its a jumbo loan @ 6.5%) and we have a HELOC (chase at 140K). do you think we could settle with our heloc and modify our 1st with a lower mortgage. do we have any options? thank you in advance.

    • Liza, I do think you have options on both the first and second mortgage. I would need additional information to make a recommendation though. Please visit me at and order the consultation package. I would be happy to analyze the situation in more depth and discuss potential options with you.

  71. Hi Charles, Great Forum
    Here’s my situation. I live in CA. Bought a home in 2007. 1st for 550k, 2nd for 35k both with Chase,which I believe was a purchase money loan. My home is now underwater. I stopped paying my 2nd in Dec 08. Received many threats but no action taken.I just received a letter saying that their willing to completely wipe out the 2nd if I agree to it. My question is will I take a tax hit or will I be exempted ? Also if I don’t agree won’t this debt be noncollectable in Dec. of thisyear?

    • Patrick, purchase money loans are treated as “qualified indebtedness” under the Mortgage Debt Forgiveness Act, which is valid through 12/31/2012. Confirm this with your tax professional, but my understanding is that you should be able to claim the exemption, provided the second really was used to purchase the property. You’ll still get the 1099-C in January of 2013 for the 2012 tax year. See IRS Pub. 4681 for details. If you are still in the property, then I am assuming the second lien remains in place, and therefore you’re incorrect in assuming the 4-year Statute of Limitations would apply in this situation. That said, purchase money loans are non-recourse in CA anyway, so they would have to foreclose in order to move against you, and they would only do so if there was recoverable equity. But it appears you have a forgiven mortgage and would be able to claim the tax exemption, so no reason not to accept!

  72. Charles,
    I am intrigued with what happened for Jack (Sept 21 post).. but how do we get this to happen if we are current on our interest-only mortgages? The value of our home is likely around $185K? We currently owe about $215K on our 1st with WellsFargo, and $52K on our HELOC with Citibank (yes, we took out equity when values were much higher). We filed bankruptcy in 2008 but our debt is still killing us, with student loans, etc. We are at a loss but would like to either get out of the interest-only loan/s or ?? Thanks for your input.

    • A&S, information on the DOJ settlement is available at Unfortunately, there’s no way to know in advance whether your mortgage will qualify for principle forgiveness. You can call Citibank directly, but they will likely tell you that you would just have to wait to see if they send a letter offering relief under the national settlement. Depending on your overall situation, intentions with the property itself (keep or short-sell, etc.), it might make sense for you to consider the settlement strategy. In order to make a solid recommendation on strategy, I would need to gather additional details in a phone consultation. Please feel free to visit my other site at and order the consultation package.

  73. Hi Charles,
    Here is my situation. We live in Royal Oak, Michigan. We owe 174,000 on our 1st mortgage with Charter One (loan is not Fannie or Freddie) and a 2nd mortgage of 30,000 with Greentree. We would like to sell our house. The realtor thinks it will appraist at 169,500. Do I have a chance of getting GT to something with that 2nd mortgage? Do I need to wait to approach them until an offer is made on my house? It’s at 11%. My 1st mortgage is 6.5%. We are barely making ends meet b/c our payments total about 2100 a month! We both have excellent credit and not one late strike against us. I feel “funny” about trying to short sale my home and walk away from what we owe. I heard someone who recently got their 2nd mortgage lowered by 20,000 after they had an offer on their home. Thanks so much — need some guidance on how to approach GT. -Jen

    • Jen, yes, you do have a chance to work something out with GreenTree if you are planning to do a short sale on the home. The short sale should be coordinated by a realtor who has experience with this type of transaction, since they will be the one that needs to work out the arrangement between the first and second lenders. Usually what happens is an internal negotiation between the lenders where the first will agree to pay some of the sale amount to the second lender, in order to gain their approval to close the short sale. You need not feel guilty over using the short sale path, since this is actually a preference of many lenders compared to an outright default/walkaway situation.

  74. My 2nd mortgage $52,000 is in charge off, and they are offering me 15% settlement. $7,600. I have a stock account given to me by my grandparents with enough money to pay it off, should i just pay it? to take less than 15% they want me to send in my bank account info, and im afraid that they might then want more than 15%
    should i also plan on having to claim the other 85% as taxable income? that sounds like it would cost me another $5-6K.
    i am in washington state

    • Matt, my view is that 15% is always a good deal, but without knowing all the specific details of your situation, I can’t say for sure whether this is the best possible settlement that could be achieved. Regarding taxes, you will definitely receive a 1099-C for the 85% forgiven amount. If your loan qualifies under the Mortgage Forgiveness Debt Relief Act, then you would be able to claim an exemption and avoid the taxes. If your loan is not eligible, then you would need to rely on the standard insolvency exemption. See IRS Pub. 4681 for details on both of these possible exemptions.

  75. Hi,
    My first mortgage for 300,000 is with CitiMortgage and my second is with Citi Bank for 100,000. My house is valued at 321,000 on We received a chapter 7 discharge 2 years ago. We have a modified first mortgage and directly after that was modified my second (which was maybe 4 months behind – with a payment made roughly 2 months prior) was charged off. I just wanted to know if you have any advice on how to proceed with a second mortgage settlement. It is my understanding that the 2nd probably wouldn’t get much if anything if we sold the home or if it was foreclosed on. Will they work with me since I have a bankruptcy discharge and technically aren’t allowed to contact me? Also a little more info: the septic is failing and my husband and I work for the same company and our income was just cut another 10%. Thank you for your input.

    • Cici, at first glance, it would appear that you have a situation where the settlement strategy would make sense. However, there are other facts I would need to gather from you, and I can’t really explain how to negotiate a mortgage settlement in a short blog reply. The prior bankruptcy filing might indeed interfere with settlement negotiations, but it depends on how the mortgages were handled in the BK filing. As I’ve noted above in the original article (and follow-up replies), I offer a paid consultation and analysis for $150 via my other website: Please consider this, as you would benefit from a detailed analysis and discussion on the pros and cons of the settlement strategy.

  76. I have both 1st and HELOC with Wells Fargo. My 1st is currently in foreclosure but my payment on 2nd is still current. When 1st forecloses what would happen to my 2nd (HELOC)? I heard when same lender ownes 1st and 2nd at the time of sale in CA, both 1st and 2nd will be wiped out. I also heard Wells Fargo might sell my 2nd to collection agencies pennies on the dollar. Is this all true?
    Thank you

    • Tony, assuming this is your primary residence, the first mortgage will be wiped out in the foreclosure. But if the second is a HELOC then the lender would still have recourse against you after foreclosure, unless the foreclosure auction yielded sufficient proceeds to pay off both loan balances. It’s only “purchase money” loans that would be wiped out at time of foreclosure. It’s possible that Wells Fargo might sell the second/HELOC to a debt purchaser. It’s also possible that you could negotiate a settlement on the second with Wells.

  77. 1st loan was modified 9/11 and owe $592,000. Wells just sent a letter forgiving $117 of it which is great. I do have a HELOC for $100,000 with PNC. We have never missed a payment on either and credit is good. I wonder if I should ask PNC for a modification or forgiveness? Do you think you have to behind before they will help you out even though the first was modified.
    According to Zillow the house is worth $390 but realistically it would probably sell for about $425 or so which would make us still under water on the first.

    • Lori, PNC is not participating in the DOJ settlement, so don’t expect a letter from them like the one you got from WF. They are a very difficult creditor to work with, and a modification or forgiveness while current is very unlikely. They also are very slow to do anything at all with these underwater HELOCs. So it can be a frustrating exercise to get any sort of relief from this particular bank. Be aware that a strategic default will have a damaging effect on your credit score, and settlement potentially creates a taxable event on HELOCs as well.

  78. I have a 70/30 purchase mortgage. 1st 89,000 w/NS and 2nd 29,000 with ST. I’m current on both and would like to stay in my home, but would like to rid myself of the 2nd. Value of home is 65k. My state is non-recourse. I would like to settle with the 2nd and am willing to default to do this. Is the 2nd likely to settle? I don’t know when to start talking to them or when they will be likely to negotiate after I default. Would your service help me to figure out what I need to do/say to get them to settle in my favor?

    • Chrissy, I have to tell you that ST is not an easy lender to work with. But based on your figures it should be possible to settle on the second eventually, as there would be nothing for the creditor to recover via foreclosure. Since your second is a purchase money loan that strengthens your position even further. Yes, my program would help you figure out what you need to do/say to obtain a settlement. If you just want some initial guidance, then my consultation package would greatly benefit you. (The cost is $150, and the consultation may be ordered via my other website @ For long-term support, I offer my Premium Program (available via this site’s ordering page) at $792, which includes my training course on negotiating with creditors, and 12 months of coaching via email and telephone, with document review included.

  79. My primary residence in California was foreclosed and sold in August 2012. I know the first is now satisfied. Owed 167,000 on the first. home was valued at apprx 100,000. I have a second outstanding for 95,000. They sent me notice charged off. 75% of the second was used for property improvement and paying off a silent loan that was aquired in California through the type of loan I got for the purchase. If I settle with the second for 5%-10% of the 95,000, will the forgiven debt on the 1099 be considered taxable income, considering I settle before the end of 2012?

    • Rob, page 8 of IRS Pub. 4681 defines “qualified principal residence indebtedness” for the purpose of determining whether a forgiven mortgage balance may be exempt from taxes under the Mortgage Forgiveness Debt Relief Act (valid through 12/31/2012 unless it gets extended for 2013 by Congress). The relevant paragraph reads: “Qualified principal residence indebtedness also includes any debt secured by your main home that you used to refinance a mortgage you took out to buy, build, or substantially improve your main home, but only up to the amount of the old mortgage principal just before the refinancing.” You should confirm with a tax CPA, but the way I read this is that you should qualify for a partial exemption under the Act if some of the $95k second was used for property improvement. Also, you should look at the same publication for the standard insolvency exemption to see if you qualify for a full exemption under that section of the code.

  80. My husband and I are going through this now….We can make the payments,never been late,have spoken with them on 2 occasions to lower our rate from 5% variable,a first as a home equity with on other mortgage. It takes everything we have to pay the mortgage Requested a balloon,modification. They said we did not qualify for a hardship….When the home was purchased I was making twice what I am making today due to a layoff and having to accept a lower paying job..My husband is 68 and I will soon be 65…We both work but my husband fears for his job everyday.If that happens we would be down the tubes…Our credit is good.The home we purchased needed considerable renovations. Hire a contractor who took money with out completing many things to make the house livable.We borrowed, took from our 401K and charged to complete the renovations. That cost us double the expense.My house has been for sale off and on since 2009 without any offers. The house is great but if he should loose his job we would be homeless..We have decided to purchase another home, move from our home, call the bank and offer the house in lieu of foreclosure providing they release us of all libility and income….if not we will let them foreclosure. My fear is we have waited to long and the clock is ticking. We owe $790,000 on our home. We purchased it for $480,000, paid $50,000 did the renovations plus put all our money in it. Zillow shows its’ value at $840,000. We are on a lease lake lot in Georgia..There have been some sells but 500,000 seems to be the magic number or below. Where we would qualify for insolvency I don’t know…Bankrutcy I don’t thnk so…We owe $50,000 in credit card debt, have a boat loan, car loan are we making a mistake?


    Leave a Reply

    • Sandra, sorry to hear about your tough situation. It’s difficult to advise you on the proper strategy when you have such a wide gap on property valuation. With Zillow showing $840k, that means there is potential recoverable equity over and above what you owe the first lender, while a $500k valuation based on recent prior sales yields a totally different analysis!

      Your question focuses on whether it’s wise to buy another home now and then do a deed-in-lieu or allow foreclosure on the existing home — this is a strategy many people have successfully adopted, so I would not say it’s a mistake — not without a lot of additional discussion about the other factors involved in making such a decision. However, this approach may or may not leave you exposed to recourse deficiencies on the HELOC depending on the sale price of the property, the history of the note, rules for your state, and so on.

      Also, you say that you don’t think you qualify for bankruptcy, but please don’t be so hasty. At least have a couple of consultations with BK attorneys in Georgia. You have too much at stake with a looming retirement scenario to simply skip an evaluation of a possible bankruptcy option. At least find out what it would entail in your case before you rule it out.

      If you would like a detailed conversation and my analysis of your situation, then please feel free to visit me at and order the consultation package.

  81. I have business line of credit where i signed for house as collateral. Is it same as second mortgage?

    • Brian, the business LOC may or may not be similar in effect to a second mortgage. It would depend on whether or not the lender recorded a lien against the property, or has a provision for a lien to be quickly recorded in the event of default. Also, the value of the property relative to the existing first mortgage would come into play as well. Lien or not, if there is no recoverable equity over and above what’s owed on the first mortgage balance, then it would be more straightforward to settle vs. a situation where there is equity against the collateral.

  82. I live in MI. My HELOC went into default with BOA at $56k and then sold to Greentree in 2010. I immediately wrote GT and told them not to call me only write. I never heard nothing from GT and had a “paid charged off” by GT on my credit report. I am now being sued by GT thru a MI lawyer for $50k. What should I do? How much do you think GT will settle for with lump sum payment?

    • S Thomas, sorry to hear about your situation. Your case illustrates why I never recommend the use of cease communication notices to block collection phone calls — it can lead to a backlash when the creditor escalates to legal status since they can’t speak with you directly. If you have been sued, then you need to get help from an attorney to answer the lawsuit. Otherwise, they will get a default judgment for the entire balance. There is no guarantee of a settlement in this situation, but it may still be possible to work out a deal. I can’t even guess for how much, since I have no idea of your property value or the background. If you want a deeper analysis, please feel free to order the paid consultation via my other website at

  83. I have a first for $305,000 and a second for $75,000. Total $384,000
    The value of my house is currently now at $220,000 and therefore my house is upside down in value.
    My first is under loan modification. The second mortgage of $75,000 is 8 months in arrears. The bank just notified me that my loan has been written off but the lien will remain on my house. They are offerring to settle with me for $34,000.
    Questions :
    Will I qualify for debt forgiveness on my second?
    If I don’t settle with them can they still have a lien on my house?

    • Anwaar, if you settle before 12/31/2012, *and* your second mortgage was “purchase money” (as opposed to a HELOC or line of credit), then you could claim the exemption under the Mortgage Forgiveness Debt Relief Act. Otherwise, you would need to rely on the insolvency exemption. See IRS Pub. 4681 for details on both exemptions. Yes, if you don’t settle, they will definitely still have a lien against the property, as per the letter the lender already sent you. They won’t remove the lien unless you settle with them.

  84. UPDATE NOVEMBER 26, 2012:

    Gerri Detweiler of recently interviewed me on Talk Credit Radio on the subject of second mortgage and HELOC settlements. This is an in-depth podcast that covers a lot of important information consumers need to know on this topic. If you’d like to learn more about debt settlement as it pertains to mortgages or HELOCs, this is the audio file you’ve been hunting for! Click here to download the full podcast free of charge.

  85. Hello, I hope you can help me with a few questions. My home is located in Michigan. I have not payed on my second loan with BOA (36,000) in 13 months. My first is with Wells Fargo (146,000). Both were discharged in chapter 7 bankrupcy about 4 years ago, neither were reaffirmed I am currently one month behind on the frist. A few weeks ago I recieved by certified mail a letter from BOA of their intent to accelerate and foreclose. I called BOA and spoke to someone to make sure if they knew that they were a second lein and that my house value ( about 80,000 ) was currently far less than what I owe on the first lein. I was told that they have the right to and do intend to foreclose. I was also told that BOA does not accept settlements. I futher inquired about their loan forgiveness program and was told that my loan did not qualify. Now this week I recieved a letter from BOA saying that my loan is in default and will be referred to foreclosure. It also states that the foreclosure will be conducted in the name of Wells Fargo Bank as trustee for the holders of the First Franklin Mortage Loan Trust. My mortgage was a 20/80 loan thru first franklin bank and the 80 portion of the loan went to wells fargo a few months after I brought the house. BOA took over frist franklin bank and they service the 20 portion of the loan. The letter also says that the noteholder directly or thru an agent has possession of the promissory note and it is either made payble to noteholder or has been duly endorsed.
    I really would like to know what all of this mean, and should I be worried. Why would BOA foreclose when they stand to get nothing out of the deal? Should I still attempt a settlement with BOA on a discharged debt?. I just want to be sure that I have a fighting chance with wells fargo involved (my frist lein holder). I would like to stay in my home. Thank you in advance for any information you have on this matter.

    • Kim, the situation you are describing is uncommon, at least compared to the majority of people that I’ve been hearing from. Normally, the junior lien holder will not participate in a foreclosure unless there is recoverable equity after costs. But from what you are describing, BOA is purposely incurring foreclosure costs to recover — nothing. It literally makes no sense. Since you have received formal foreclosure notices, I strongly recommend that you seek assistance from a foreclosure defense attorney. It may be that there are irregularities in the original paperwork that could be used to slow down the process and delay the sale date. You can attempt a settlement, but time is of the essence, and you should first determine what legal remedies are available to you. I’m not an attorney myself, so I can’t advise you from here, but you can start by talking with a MI attorney in NACA (

  86. Thank you Charles for your response. At this time I don’t believe BOA has put the home in foreclosure. In the notice to accelerate I have until December 9, 2012 to bring the loan current. I have not recieved a notice of default, only the letter that says the property will be referred to foreclosure and will be conducted in the name of wells fargo as trustee for frist franklin. that is the part of the letter I don’t understand. This letter also gives me a run down of my account status listing thing like: amount to bring loan current,last date payment recieved on account and the interest rate and how to get help to avoid foreclosure. The same letter list my responsibility as the home owner to maintain the property and an address to request copies of payment history,promissory note or name of the investor that holds the loan. I have never seen a letter like this recieved in any foreclosure process. Is It possible thru the DOJ settlement agreement that these two banks can now work together to foreclose? I will contact NACA for more help. Thank you again for any more light you can shine on this matter.

    • Kim, it doesn’t make much sense to me either. There is no logic whatsoever to BOA being the foreclosing lien holder on behalf of the first lender when there is nothing for them to recover. In fact, the whole thing could even be a bluff. I’ve seen situations where creditors send the acceleration warning and notice of intent to foreclose, and then nothing ever happened because the second was fully underwater. However, I’m never comfortable in assuming a bluff when someone’s home is at stake! Regarding the DOJ settlement, I’m not aware of any aspect of it that would explain this scenario.

  87. Hi, I foreclosed on my home in December of 2009 and now am trying to purchase a new home. I am a Veteran so I am eligible to use my VA loan since it has been 3 years from the foreclosure date. However, there was a home equity line also on the foreclosure which is showing up on my credit report as unpaid. Is there anyway that this can be written off the report and not affect me in purchasing a new home? The home was only foreclosed on due to a divorce. Can I settle for a payment or something like that so I can get another mortgage? Please let me know.

    • Brittney, despite what “credit repair” ads may state, it’s not usually possible to have negative items removed from your credit report — unless there is a valid dispute about the accuracy of the entry. It may, however, be possible to settle the HELOC, depending on the lender involved. Once it’s been settled, it will no longer be counted against you in the debt-to-income ratio calculation, and you should be able to move forward with a VA home loan. If you would like a more detailed analysis and consultation, please visit my other site at and order the consultation package.

  88. Hi Charles,

    I had refinanced my first (417k for 3.5% 5-1 ARM) under FHA plan with Bank of America and Freddie Mac is the owner of your mortgage and it was acquired on January 2011. At that time, the communication was second loan would not be touched and remains as is at 5.5% FOR 90k. I had been late to react and now reading on 2MP (second loan modification program), looks like I have an option to refinance. I am one of those lucky or unlucky ones who has not missed a single payment even though my property is under water more than 30% for over 7 years now. Can you please what are my options now with both loans with BOA?

    • Sunny, what I suggest is that you get in touch with a local HUD agency counselor to discuss loan modification options that might be available to you under one of the government programs. I would certainly follow up and explore a possible mod under the 2MP program. Since you are current on the note, I would not consider the settlement strategy unless the home is worth less than $417k AND you are prepared to incur serious damage to your credit.

  89. We are so worried
    State is PA
    Home purchased in 1997
    First mort balance is 126k with BOA @6.75%
    Second was National city for 117k
    Interest only loan
    National was sold to PNC
    After major layoffs filed for chapter 7 in 2007
    Payments of second became impossible we had to stop paying PNC in 2008
    PNC charged off the second about early 2010
    Never a call or letter from PNC ever until now.
    First mort has always been current, we are trying to refinance it with the current mortgage company BOA at 2.75%
    BOA title company revealed Liens on deed as BOA 1st and National City and two state agencies for 10k
    Suddenly I have received the first letter ever from PNC stating loan was sold to SMS FINANCIAL of Phoenix AZ.
    Sms web site states:
    SMS Financial is an industry leader specializing in the acquisition, recovery and servicing of distressed assets.
    The final part of the puzzle is the appraisal value of the home which is about 235 -260. Can you tell me if we are candidates to try to settle on this second. While there seems to be equity available in this property cost of foreclosure and liens will not cover the second mortgage. We would like to try to make a offer to settle it is it possible? Thank so so much

    • Larry, this is the first I have heard of PNC selling a second or HELOC to a purchasing firm. It may actually be good news, since they have been notoriously difficult to work with in the past few years — not aggressive, but also apparently never taking action, so numerous people are in a long-term waiting game with this creditor and you are not alone. I cannot say for sure how a settlement will play out, but I would definitely aim for settlement since SMS probably bought the paper for pennies on the dollar. If you would like a detailed discussion on how to approach a settlement strategy, please visit my other site at and order the consultation package. The 30 days of included email support might be sufficient for you to get this handled.

  90. We have a 1st with BOA (balance of $107K, monthly payment of $973) and an interest only maxed out 2nd HELOC with Wells Fargo (The line limit is $235K but we actually owe $240K, monthly payment averages $850). The home is worth about $245. We are current and have never been late but trying to keep up with both mortgages is leaving us short with no money left literally at all and we cannot continue doing this. We’ve have used our HELOC at times to make up for the shortage but now it is maxed out. At one point, our goal was to eventually rent out our home, in hopes of one day of getting a 2nd home, however, we need about $12K worth of repairs that we simply cannot afford as we have no money left over to try to save for the repairs or even a down payment. We are stuck in our home with no equity and no money to do anything. We are trying to determine what our best options are as we might not be able to make one of our mortgage payments next month. Thanks for any advice that you give us!

    • Nadine, I would not recommend the settlement strategy in your situation. If the home is worth $245k, and you owe $107k on the first mortgage, then on paper there is $138k equity over and above what you owe on the first. So the HELOC is “in the money,” and not fully underwater, with well over half the note value still secured by the lien against your property. If you were to attempt a strategic default in order to position for a settlement, the risk of foreclosure is unacceptably high. WF could foreclose and recover around half of the HELOC balance via sale, after paying BOA in full on the first. If you don’t want to pursue a short sale, then you should talk with a HUD agency counselor to see if you qualify for relief under any of the existing government mortgage programs.

  91. 1st mortgage had foreclosire started, we were able to successfully modify and save home, have been perfect on 1st for 2 years with Chase. 2nd was sold off several times, had heard nothing from anyone for 20 months and could not figure out who even owned it, was marked “charge off” on credit report over four years ago. Just receved letter stating intent to FC, garnish wages, etc from company called “Colgate Capitol, LLC” claiming they own second and have spoken to us, that we agreed to a lower payment and paid twice (never happened), what to do? Received voice mail from them today as well requesting an inspection. Do I contact them and try to settle at 10-15% with payments? I don’t have enough to pay lump sum. Home worth less than 1st mortgage, 1st at 556k, value at 460k second for 126k.

    • Jen, we haven’t yet seen a lot of purchasing activity in the second mortgage market, but I’ve been predicting for about two years that this was going to pick up in 2013-2014 as the banks work through this old inventory of notes. It sounds like you’re dealing with an aggressive purchaser who is trying to rattle you into resuming payments. While they certainly would have the right to foreclose on the basis of the lien on your property, if the home is worth $96k less than you owe on the first, is is highly unlikely they would actually proceed against the property. The strategy to use will depend in part on the history of this mortgage (recourse vs. non-recourse) and where you live. I don’t have enough information from your post to advise you. Please visit my other site and order the mortgage consultation package if you would like a detailed analysis and recommendation on strategy.

  92. Short sold a home in NV due to job relocation out of state. Settled with the first, done deal. Second has been after me to pay balance of 52K. Made a settlement offer of 5K and they came back with 42K. Would be willing to pay more than 5K but cant afford the 42K they countered. Foreclosure is not an issue as I mentioned, the home sold almost 2 years ago. Want to avoid potential garnishments and put the home purchase behind me. Appreciate any guidence you can provide.

    • JW, there is a 6-year SOL in NV, so this is definitely something you should continue trying to resolve. One of the key sticking points in negotiating mortgage settlements is that the other side usually wants detailed financial disclosures from you. If that would work in your favor, then it might break the logjam and help you negotiate a much better settlement. If not, then it’s strictly a waiting game. If you would like a detailed analysis and recommendation on strategy, please visit my other site and order the mortgage consultation package

  93. Hello, what is the average waiting period to reapply for a mortgage after a short sale in FL when 2 mortgages were involved? First was resolved with short sale, 2nd mortgage was settled 6 months later. Does the time start with the short sale date or the 2nd mortgage settlement date! Thank you for the help.

    • Giovanni, most lenders are looking for a 3-year period of financial stability following a foreclosure or short sale before considering a loan application from you, although this isn’t set in stone as an “official” period. The 3 years would usually be from the last activity associated with the property, so probably from the date the second got settled. But you can always talk with individual lenders to see if an exception is possible.

  94. We bought our home 5.5 years ago in California and like many others the home is now underwater. We’d like to stay in the home but we believe the only way is to get rid of the 2nd.

    We have 80/20 loans both with PNC. The 1st is a Fannie Mae loan serviced by PNC, current balance is $325k at 6.5% and is a 40 year loan. Our 2nd is owned by PNC, current balance is $61k at 10% and is a 15 year with a $52k balloon payment due in 2022.

    Per Zillow, our home’s value is $247k. We think it may be closer to $275-300k based on other homes that have sold nearby.

    We are current on both loans and have never been late (past 30.) We also have good credit.

    What is the probability that we could get a settlement on the 2nd? We’ll have funds to pay up to maybe 40% in February. And if they settled, what’s the probability we could then refi the 1st into a current interest rate (appears to be around 4%)and 30 years fixed?

  95. Oh, a follow-up to my comment. The loans are both purchase money loans. 100% funds of both loans were used to purchase the home, no refi or equity out.

    • Michelle, to reach a settlement on an underwater second, it’s almost always necessary to be in a default situation. So you do need to take into consideration credit impact, as well as taxation. (However, purchase money loans that are partially forgiven are covered under the Mortgage Forgiveness Act, which just got extended through 2013.) The risk of foreclosure is very low in the situation you’ve described, although the risk is never zero even in underwater situations. The main problem is that this particular lender is very difficult to work with. What I suggest is that you talk with a HUD representative to determine whether the first can be modified now, under HARP 2.0 terms. If you get the first handled up front, then that would give you a more flexible range of options for dealing with the second later.

  96. We live in Arizona and our current first mortgage is with Chase at 5.87%.,owing approximately $242,000. Zillow now estimated it’s worth at approximately $211,000.(currently awaiting decision on a modification from Chase on our first mortgage) Our E/L is or was with Wells Fargo at 7.99% until we recently learned that it was transferred to the Wells Fargo Recovery Department. This E/L balance is approximately $95,000. A caller from the Recovery Department just offered us a settlement of $57,000. Would you recommend negotiating a better settlement?

    • George, this initial offer is very high at 60%, considering that there is virtually no equity covering the note. So yes, I would certainly aim to improve this figure and drive it down below 20%, possibly as low as 10-15%. If you would like some personalized coaching on negotiating a HELOC settlement, as well as a discussion on the pros and cons, please feel free to visit my other website ( and order the consultation package.

  97. Charles, I was foreclosed on a rental property back in 2009. There was a HELOC hold by discovery that was charged off. Discovery has then transferred the servicing of the loan to a third party who has reported the loan to credit report agency. The new loan servicing company is now sending me monthly statements and even charging me for property inspection (the property that I do not own anymore! Is it to my benefit to come to a settlement this loan to wipe it out from my credit? How low a settlement do you recommend?

    • Chaz, settlements on seconds or HELOCs after foreclosure are typically coming in at 10-15% of the balance. However, there are a number of factors that play into the outcome — recourse vs. non-recourse, statute of limitations, state of residence, whether the debt has been sold or merely assigned, whether they think they can recover more by attacking, and so on. If you would like a full analysis with strategy recommendations, please visit my other site at and order the consultation package.

  98. Help on negotiating a settlement on a 2nd mortgage HELOC. My first mortgage has a balance of $189,000, and my 2nd is $50,000. Home is currently valued at about $232,000 – $260,000. I received a chapter 7 discharge 2 years ago, neither loan was reaffirmed, as my lawyer stated it would not make sense.

    What is the best way of going about negotiating a payoff amount for my HELOC???

    • Albert, if your home is worth $232k to $260k, then the second mortgage is not underwater and may even be fully “in the money.” I would not recommend the settlement strategy in that situation — the risk of foreclosure would be too high. I suggest you talk with a HUD agency counselor to see if you are eligible for any of the government refinancing programs.

  99. My primary residence (in Michigan) was foreclosed in November of 2011. 1st mortgage (with Wells) was at $237k, the FMV was $245k. I have a HELOC (also with Wells) with a $83k balance. I received a 1099A for the 2011 tax year for the HELOC. I have continued to make payments on the HELOC up to this point. What are my options to negotiate a settlement?

    • Tim, with the property foreclosed, the HELOC is essentially an unsecured debt now, although they still have recourse against you on a HELOC. It’s unlikely you would be able to negotiate a settlement while continuing the regular payments on the account, but it makes sense to try anyway. Calculate how much they received from the sale, deduct from the $83k, then offer around 5% of that to start and see how they counter, etc. In many cases, 10-15% results are possible, especially if you are willing to provide financial documentation backing up the hardship explanation.

  100. Charles, I have an 80/20 with different lenders. BOA with 1st and SPS with 2nd mortgage. I’m currently 3 yrs. behind on my 2nd mortgage. I received a settlement offer for 15% of Initial loan if paid by March 13. Amount was $30k on 2nd mortgage & $150k on the 1st. I was 9 months behind on the 1st mortgage but now I’m paid current. I can afford the 1st mortgage, but not the 2nd too. Should I take the settlement offer? I’m in P.A. It almost sounds too good to be true.

    • Phyllis, while 15% is great, why not attempt to improve it with some haggling? It can’t hurt to try, since you already have an offer valid through March 13. Try offering half what they offered, and see how they counter. You can always just accept the 15% if you don’t get a better quote. One important caveat: This will create a potentially taxable event, and you will receive a 1099-C in January 2014 for the 2013 tax year. See IRS Publication 4681 to see if you qualify for an exemption. FYI, if this is an original purchase money loan, then you should have an exemption under the Mortgage Forgiveness Debt Relief Act, which has been extended through 12/31/2013.

    • Hi Phyllis. Did you ever settle with Select Portfolio? Just last week I got a letter stating that my bank had sold my second mortage to them. Now they have my first and second mortage. So I am in the same boat.

      Had been negotiating and dealing with the previous bank for about a year and had haggled them down to 15%, and was hoping to settle come January 2015. No such luck now as SPS took the loan on Dec 4. Let me know as I feel your pain.

  101. Charles, I have a 1st mortgage at $175k(Chase) and a second at 60k(PNC). In 2008 work just about stopped. We were able to modified the 1st and we had to stop making payments on the second in October of 09. My house is currently worth $135 to $145k. Last year PNC finally sent a letter wanting to settle at 15%. We are just getting by and could not pay that amount. My questions, is there a SOL on HELOC in FL, and do they have to take me to court to put a lien on my house.

    • Bob, if you have a HELOC with PNC, then they already have a lien on your property. The lien was recorded back when you opened up the HELOC. The SOL would not apply in this situation since the lien is already in place. A settlement, if handled correctly, would result in the lien being removed in exchange for the agreed payment.

  102. Hi Charles, I am interested in finding a solution to a 2nd mortgage problem. I purchased a home in NV and it was foreclosed on in January of 2009. I purchased the home with an 80/20 loan. Ocwen was the servicer on the second which totaled $37,000. They have not made any attempts to collect the debt but continue to report the debt as unpaid 120-180 days and update the new balance every month on my credit reports. Can they do this? I have read many posts that refer to anti-deficiency statutes but I didn’t see any thing pertaining to post foreclosure issues. The debt is scheduled to be removed from my credit file in July of 2015 (which also seems incorrect) should I offer a settlement? I would like to purchase a new home and this is really hurting me.

    • Christine, if the home is foreclosed and you have not paid on the Ocwen second since then, it should be reported as a charge-off on your credit report, not continually at 120-180 late. If you are blocked from buying a new home because the debt is still considered part of your debt-to-income ratio by prospective lenders, then it would make sense to settle it to get the credit report updated. If you would like some guidance, please order the coaching package via and we can discuss the situation in depth by phone.

  103. Charles, I have a 2nd loan (refinance) for $80K on my house in CA. I have not paid this loan since Nov 2009. I did receive a loan mod on my 1st loan and I am current. I want to settle the 2nd loan so that I can remove this lien before the home value exceeds the two loans. Right now, the home is underwater about $120K when comparing the value of the home and the 1st and 2nd loans. Now, I just received a 1099-C from the bank on the 2nd.

    1) Is it correct that since the bank cancelled the debt means they are releasing me from liability and thus removing the lien?

    2) Is there a way to dispute the lien with a title company to get the lien removed.

    Thanks in advance

    • George, the issuance of the 1099-C does not equate to the lien being released. If this was a forgiveness of debt under the DOJ settlement, then it would include lien removal, but you would have received a letter to that effect, not just a 1099 form. You cannot dispute a lien with a title company to get it removed unless you have a reason to dispute it. I would need to review the situation in depth in order to recommend strategy. Please feel free to take advantage of my $150 consultation package for second mortgages at

  104. Charles, I completed a short-sale last year for a rental property in FL.90/10 purchase money loan with BOA holding 1st, CCO holding 2nd (heloc). Both issued settlement letter w/o Deficiency rights. BOA sent 1099-c, but CCO has not sent 1099c for the heloc. My husband does not want to claim it on our taxes. I do not want to take the chance, and have heard they have 3 yrs. the 1099-c? What is your advice please?

    • Kathy, I don’t see how you could include it on your taxes if you haven’t even received a 1099-C yet. If you are claiming insolvency, then the total on Form 982 should match the total amount forgiven as reported on the 1099-C.

  105. Hello. My husband received a 1099-c for our second mortgage (home equity) I’m not on it because I had a bankruptcy in 2010. Not sure why we received it. We were going to short sell our house in 2011 but then for a number of reasons did not. We worked with our mortgage company Wells Fargo to “modify” our first mortgage (as we’ve been told we have to do each mortgage separately). That was all taken care of and we started making our payments on the first mortgage in March of 2012. We haven’t heard from Wells Fargo regarding our second mortgage. No communication at all and then we get the 1099-C. Does this mean they’ve written it off and will not try to collect? Or should we try communicating with them before we file our taxes? help please! Thanks!

    • Vikki, I do recommend that you call Wells Fargo for clarification. Technically speaking, issuance of a 1099-C does not relieve you of the legal liability associated with the debt. However, in practical terms, it’s quite rare to see collection activity after a 1099-C has been issued for a debt. It may be that WF has simply written off this balance under the national mortgage settlement.

  106. Hello,
    I am 4 months behind with my 2nd mortgage, the servicer is BOA and investor BONY. I am current with my 1st mortgage; the servicer is BOA & investor Fannie Mae. Both loans were refinanced through Country Wide 8/2006. I achieved a successful Mod about a year ago on my 1st, making it a little comfortable to pay. The property is worth about 219K and the balance on the 1st is 229K and the 2nd is 54k. I plan to keep the property and settle on the 2nd couples years down the road. However, I received intent to foreclose from BOA by being behind on the 2nd a month ago, which I have ignored. I also checked my county records and noticed that the there was no deed filed on the 2nd mortgage, is there a statue of limitation on when you can file the deed in Maryland? Does non filing of deed help my case in settlement with BOA?

    • John, I don’t know if there is an applicable SOL for filing a deed in MD. I recommend you talk with a real estate attorney in MD to pin this down accurately. The non-filing might help in terms of a settlement negotiation, but it’s a bit of a Catch-22, since pointing it out might prompt them to record the lien (assuming there is no SOL preventing it). Given the figures, it’s unlikely the creditor would rely on the lien anyway though, so the error probably won’t have that much effect on the end outcome.

  107. Hello, I already filed chapter 7 almost 2 years ago on both my first and second. At that time the first was $165,000 and a HELOC that was at $84500. The house at the time was worth about $135,000. Everything was discharged in 04/11. However, now I am being told that the chapter 7 only eliminated the debt and not the lien from the HELOC. The house is currently vallued at around 160,000 and the first is just under 159,000. Is it possible to get the lien removed or should I try to offer a settlement even though the debt was discharged by the chapter 7. I trying to refi the first so that I can try and keep the house. But, if I am unable to get this lien off the property I will have no choice but to give the house back to the bank that holds the fisrt. It would do me no good to keep paying the first if at some point the property value goes up and the HELOC forcloses. What can I do? First is BoA and HELOC is CCO Mortgage.

    • JohnyQuad, a Chapter 7 bankruptcy will discharge any personal liability associated with the debt obligation, but the lien against the property could only have been removed under a Chapter 13 bankruptcy. If you are planning to keep the property, then a negotiated settlement to remove the lien would make sense. If you want help, please order the consultation package via and we can discuss your situation in depth.

  108. Hi there -We just settled with Green Tree Servicing 2 months ago (finally) and we are already 3 years + post foreclosure. We want to buy again but I’m getting conflicting information on whether we have to wait 3 years past the date of the 2nd mortgage settlement in order to qualify for a loan. I realize different loans have different requirements but there seemse to be some dispute about whether the 3 year clock starts at the time of foreclosure or at the time of resolving the 2nd mortgage – which was sold to a debt servicer and was not referred to as a “mortgage” in any of the written documents from Green Tree. Thanks.

    • Libby, the “three year rule” pertains to FHA underwriting guidelines stating that you have to wait three years after a foreclosure before getting a new FHA loan, and this is measured from the sale date of the property. Otherwise, I’m not aware of any specific rules or regulations that pertain to this. It’s really up to the individual lender to determine risk policy. If you are talking to a loan officer that is saying it’s 3 years from the date of settlement on the GT second, then I suggest you go find a better loan officer. 🙂

  109. Hi, we just filed a Chapter 7 where our house was saved because we had no equity. We filed it with a Homestead Act. The Chapter 7 closed in DEC. Now we want to get our mortgage down, 1st is $265,000 with BofA, 2nd is $55,000 with Wells Fargo. We didn’t realize that the 2nd reaches majority in June and they want the full amount which of course we don’t have. We are also trying to get a modification on the first.
    We ideally would like to refinance but no one will do that since we closed on Chapter 7 just a few months ago.
    Any advice on our options? Thanks.

    • Andrea, I would need to know a lot more about your situation to advise you. The market value of the property, history of the loans, where you live, etc., all come into play when looking at potential options. If you would like some help figuring out what to do, then please visit my other site at and order the consultation package, thank you.

  110. We have a 2nd with BoA. We already modified our first with Nationstar (previously Aurora). We had to move on a temporay job placement and have month-to-month renters in the home. From reading your previous posts it looks like we are going to have to stop paying on our 2nd in order to get their attention? We can no longer afford the payments and quite frankly we have paid $60,000 of the $130,000 and it has all gone to interest so we still owe $130,000. Will they talk to us if we had to move temporarily? We are trying to do the right thing and keep the home for when we come back. Thanks for your help.

    • Trene, I don’t know enough about your situation to give definite advice, but I can tell you that I’ve never seen BOA grant modified terms or settle on a current-standing account. Also, most lenders would not view a temporary job-related move as constituting a serious financial hardship.

  111. Hi, I have the first and second with WFB on a house which is jointly owned with my ex-husband. My ex-husband filed bankruptcy and WFB discharged the second. First loan was modified a couple of,years ago and is current as of now. WFB issued 1099-C under my SSN for the second loan discharged but the lien has not been removed. Can the lien be removed for the 2nd?

    • Michelle, if the second is fully underwater then the lien could possibly be removed, but most likely it would require a settlement in the form of a lump-sum payment.

  112. We live in a condo. We owe $72,000 on first & $50,000 on second with GREENTREE. Condos in our building are now selling for about $50,000 and some are getting foreclosed on as people are just walking away. On top of that, there is a construction flaw that has called leaks, mold but the association is going building by building and doing repairs. Our plan was to sell & move back in to a small home but do not see that happening now. I feel like I am just throwing money down the drain these days as the neighborhood has also been going slowly downhill due to the lower cost to buy in here. Is it ever wise to walk away or let yourself go in to foreclosure? I thought we should try & find a nice home to rent & then try a short sale? Any advice is greatly appreciated.

    • Vicky, yes, *sometimes* it is wise to do a strategic default on a property. Short-sale, deed in lieu of foreclosure, or a walkaway are all options people have considered in the type of situation you are facing. But there are pros and cons to be considered, and every situation is different. What I suggest is that you visit my other site at and order the $150 consultation package. That way I can spend enough time on the phone with you to assess the situation and make a clear recommendation on strategies.

  113. i received a modified loan of my first for 290,00 and have a 2nd for a principle balance of 72896.74. i have not been able to pay on my second for several years due to divorce and loss of income. i just received a letter from SLS (current servicer of loan that they have been authorized to offer a discount payoff of $21869.02 as payment in full if i do this by 3/29/2013. it says it is agreed that your note will be considered paid in full and the loan will be reported as paid in full to the 4 major credit reporting agencies. the next pages says the current unpaid balance does not represent you full payoff amount . does this relieve me of any other amount due since i am sure there was late charges etc. i am not sure if there is any kind of lein. i modified my first loan approx 3 yrs ago

    • Darrin, an offer of settlement would normally relieve you of any further liability for the debt. This is actually the purpose of a settlement transaction to begin with. But I would need to review the actual letter in order to be certain it has the necessary language. If you are still in this property, then there must be a lien recorded for the second, and the language should include reference to removing said lien on payment of the settlement. Also, don’t assume this is the best you can do — it may be possible to negotiate a lower figure depending on the property’s value, etc. If you would like a detailed analysis and review, please consider my consultation package, available via

  114. OK…I’ve read plenty on this. I short sold in 2010 1st & 2nd both with Chase. 2nd a non-purchase HELOC. Nothing was disclosed to me about debt deficiency…it was my understanding Chase settled both. I have a new collection company calling me now so I opened the file back up. Interesting thing I found is that the HELOC Renconveyed 4 months after the close of escrow. Then I pull the property profile on Realist and the 2nd reflects a NOD in 8/10 and Release of lis pendens 9/10….I sold the property 5/10.

    I guess I’m looking for a “smoking gun” to bring up to Chase to fight against $70k deficiency they are trying to collect.

    Also…it’s been 3 years. SOL is 4 years in Calif. Should I just lay low and let things go?

    If I knew all of this, I would have NEVER short sold and let fight Chase through the whole foreclosure process.

    Appreciate any advice you have…

    • M in OC, if you had closed this short sale after July 2011, the newer anti-deficiency rules for short sales in CA would have prevented any pursuit of the deficiency balance for the recourse HELOC. I can’t be certain just from what you have indicated here, but I’m guessing this is a pretty low risk situation for legal action. If you don’t otherwise have any urgent need for credit or financing, waiting out the 4-year SOL is probably your best bet. However, I would need to do a more detailed analysis to make that a firm recommendation.

  115. I had a 100K first on a rental property which was forcloded on by Wells Fargo and sold for 22K in 2011. Wells Fargo sent me a 1099A which I included in my 2011 tax return. I had a 2nd for 60K on the same property with National City which was bought by PNC. PNC charged off 60K in 2011 and is sending me letters to arrange acceptable payments to pay off the 60K. Also PNC sent me a 1099A in 2012 on this debt. I have a primary residence with PNC and have over 100K equity in it. Both properties are in PA. Can PNC send me a 1099A and still collect the 60K second? If so, what is the least amount I can settle for? I am worried that they can come after my residential property. Thanks.

    • Essie, receipt of a 1099-A is informational only, and does not touch the obligation itself. So yes, the lender could still try to recover the $60k owed on the second. I don’t know what the least amount you could settle for would be — that would require a detailed analysis of your situation. If you want help, go to and order the $150 consultation package.

  116. Hi, we have a modified 1st and in process of re-modifying second. previous was 750 to 275 which was great. Our first mortgage was mod from 2400 to 1300 so we were doing fine until mortgage spikes to 1700 and HELOC spike back to 750. so made us fall behind again. we are trying to remod 2nd and they came back to us with 650 a month which is crazy. we did the counseling. this from what I can tell was not done through fannie mae. Is there anything we can do im not signing anything. they also said we hadto come up with 2000 if we had that we wouldn’t be behind in the first place.

    • Dana, I’m going to tell you the same thing I have already told numerous folks above. I cannot provide detailed advice about a mortgage situation without knowing all the facts behind the scenario. You’ve given me just a small fraction of the information I would need to gather in order to properly advise you. If you want help, order the consultation package at!

  117. Hello here is my situation: Bought my home in 2004 in Florida with an 80/20. Countrywide picked up the loan, now BOA has the first and HSBC has the second. I will start with BOA. I have been fighting them for years and to make a long story short, finally started trial payments under the DOJ agreement which will reduce the principal etc… My biggest question is regarding the second mortgage with HSBC. They filed for foreclosure originally in 2009 and were awarded final summary judgment of foreclosure in 2010. I filed bankruptcy a week before the sale, so it was postponed. Apparently, HSBC later filed a motion to vacate the final judgment and dismiss the lawsuit. This was in 2010, however it was just filed with the clerk of the court in January of this year. I do know there are all sorts of issues with robo- signing and HSBC did the assignment well after filing the foreclosure. I have not heard from them in years, and I know they told me they wrote off the account and sent it to collections. I have not heard anything since, from them or any collections company. Any idea what I might expect in this situation? I don’t want to call HSBC and stir things but don’t want to get surprised by a new lawsuit. Is a settlement possible? I did receive a postcard that I will be receiving compensation for both BOA and HSBC for the recent Ind. Foreclosure Review. Forgot to mention the bankruptcy plays no other role in this as it was thrown out by the court.

    • Brian, if the second lien holder has dismissed their lawsuit against you, then I would interpret that as a good sign that a settlement may be possible. It will depend a great deal on the current market value of the property relative to the new modified principle balance on the first. If you would like a detailed analysis and discussion, please feel free to order the consultation package I’m offering via my other website:

  118. 80/20 mortgage on home. Chapter 7 bankruptcy in 2009 – 80 (1st) reaffirmed 20 (2nd) discharged. Current with 1st and 2nd still paying 2nd because of lien. Offered settlement of 10% and than another at 12% both offers declined by Wells Fargo. House underwater valued at 155k by wells fargo appraisal as they put me through modification process before they would look at my offer (declined for modification say income ratio at 31% needs to be at 37% to be a hardship) 1st owe $164 – 2nd owe 40k (Ttl – 204k) balloon due in 2015 on 2nd. (2nd was predatory loan borrowed 40k @ 7% payback 78k between 10 years of payment and ballon payment). Have no more funds than 12% to offer. Sent comps from zillow, hardship letter reflects lost of income from when original loan was taken…Wells Fargo still not budging. Didn’t make payment last month..not sure how to proceed. Point of contact rep indicates Wells Fargo normally doesn’t take less than 80% as settlement. We don’t have that kind of money – not sure why they don’t want to negotiate their lien is currently unsecured.

    • Louise, the problem is simply that you have been trying to settle a loan while it’s in current standing. It will have to be much farther behind than one payment for the creditor to give any serious consideration to a settlement proposal. If you would like coaching assistance, please order the consultation package from

  119. Hi Charles,

    We just recently settled our 2nd mortgage. We paid $15K to settle $45K. The 2nd mortgage was taken out a few years ago NOT for the purpose of improving the property. In this case, the settled amount will be taxable, correct ? Thanks! Also Charles, when they send 1099C to me and IRS, what should be the cancelled debt amount? Is it $45K minus $15K which is $30K ? Or can they add the interest accumulated for these years as we have not made payment for 2nd mortgage for several years ? Please advise. Thanks!

    • Winnie, yes, it’s taxable unless you can show insolvency at time of settlement. See IRS Publication 4681 for detailed instructions on how to calculate insolvency. The 1099-C should be for the difference between the latest claimed balance on the account, less what you paid for the settlement. If you were working off a very old balance figure, then it’s possible the 1099-C will be for higher than $30k due to added interest.

  120. Hello Charles,
    Financial hardship resulted in missing payments on my 1st($571K), 2nd ($136K) starting last May 2012 & 3rd (17K) since last Aug 2012. My good news: 2nd was forgiven last Sept & 1st loan mod was approved last month (with help fm a law firm) – currently making Trial Payments under HAMP. Property is 100% underwater (worth $303K). Question is on my HELOC for $17K w/BofA. It was CHARGED OFF & referred to the Recovery Dept. Actually shows closed on my Credit Report but noted as “KD”. Just got letter yesterday from them stating I need to pay in full w/in 10 days or “they will use any collection means available to obtain payment in full”. Do I have a good chance of settling this HELOC for 5-10% of amount? I’ve been told I could try to apply for HELOC modification since I was approved for a loan mod on my 1st already. I’ve been really hesitant just calling the bank to simply offer a settlement. Should I just wait until I get the final terms of my approved 1st Loan Mod in July after making my 3rd trial payment? Will an approved loan mod improved my chances for settling my $17K HELOC? Thanks!

    • Romy, there shouldn’t be any direct connection between the first mortgage loan modification status and the 3rd HELOC. It will already be quite clear to the lender that you are staying in the home, so the fact you modified the first (and had the second wiped out) shouldn’t affect a settlement negotiation on the HELOC. BOA is not easy to settle with on mortgage accounts, but it is possible. The key question will be whether they have alternate recourse via a lawsuit based on breach of contract for the promissory note, but so far we haven’t been seeing any pattern of litigation by this creditor on such claims. Since it’s already past charge-off, I see no reason you should hold off on floating a settlement offer.

  121. Seeking 2nd Mortgage settlement. I just closed on my primary home current mortgage under the HARP program in March 2013 and I have a 2nd mortgage HELOC thru SunTrust bank. The second mortgage is 100% under water. I have never made a late payment and in December 2012 I sent 7 payments (7 months January thru July) to SunTrust 2nd mortgage. Now the SunTrust collections department has started to contact me for being late for March 2013 because they took two payments for January, February, and deposit the remaining into the principal. The original principal balance was about 25k and it stills reads the same after a 1100 dollars was deposit into the principal. I was advise to stop paying and to seek a settlement.

    • Andy, you say that you “have never made a late payment,” yet in December 2012 you send “7 payments” to SunTrust? I’m not at all sure what you mean here. Settlements on underwater second mortgages are often possible, but very rarely when you are actively paying on the account. If you would like a detailed analysis and consultation, please go to and order the consultation package. Thank you.

  122. Hi there,
    My home is in FL, I am trying to have my Citi Heloc extinguished after the HARP rejected me because citi heloc could not subordinate to my 1st with Chase; my Citi heloc ($185K) was charged-off Feb/2013, and it is now with “Real Time Resolutions” collections. I expressed my desire to settle, bu no body is calling me to settle yet.

    I do not want to miss applying to the the HAMP and try to have my citi heloc extinguished or settle through this 2MP program.

    Couple of questions;
    1- Should I wait for citi to call me and settle or Should I apply to the HAMP?
    2-Home prices have increased, now my home is worth $285K – (1st $160) – (REO $50K) = ($75K) left for citi heloc.
    Would Citi FC on me trying to get the $75?

    I am getting very nervous, can not sleep.

    • Mark, if Citi has assigned to RTR for collections, then Citi won’t be calling you to settle. You’ll have to haggle with RTR instead of Citi directly. My advice is to go ahead and apply for HAMP rather than waiting first for a resolution by settlement. If you can qualify under HAMP, then a modification to the second under 2MP may be possible as well. Also, by actively pursuing a modification under HAMP, it will often slow down any pending foreclosure action. $75k is a borderline amount to pursue recovery against via foreclosure. Yes, there is risk of this happening, but you’re in a judicial-only state, which translates to a longer and more costly foreclosure process than in non-judicial states. Citi would probably not have assigned the file to RTR if this was their intention. If you would like further discussion and perhaps a better night of sleep than the above comments will provide, it will cost you $150. 🙂 You’re welcome to order my second mortgage consultation package via

  123. Just finished talking to Collections Recovery personnel for PNC HELOC on a property that foreclosed back in march of 2011. She stated,” based on new California Law there will be no more collection efforts on this loan(second lien on the foreclosed property).” Sounds to good to be true, any insight as to what is going on here?

    • David, I would need to know more about the history of the loan to be certain, but it sounds like the creditor is applying CA Senate Bill 1069 to this loan. SB 1069 precludes any pursuit of deficiency balances post-foreclosure, which expands the anti-deficiency rules that had already been associated with short sales in CA. However, my understanding of SB 1069 is that it will only apply to mortgages issued after January 1st, 2013. So I’m not entirely clear on why PNC has taken this position, but I would not interpret it as a trick or a “too good to be true” scenario. Be aware that this will yield a 1099-C for the write-off amount, so take a look at IRS Pub. 4681 to determine whether you have an exemption on the resulting tax liability.

  124. Hello,

    I have a 1st and 2nd on my primary residence. The 2nd is a non purchase money loan. I live in CA. The balance on the 1st is 150K and the 2nd is for 305K. We used the 2nd primarily to invest in RE a few years back. Many of the properties were new construction and the builders went out of business or they were built and could not be rented for an extended period. We spent thousands on down payments and principal reductions trying to float negative rental income for too long and in the end lost quite a bit. Both loans are current. Value of home is about what we owe on the combined debt. Given the scenario, any chance we could get the 2nd to settle? It is with Citi Mortgage. Thank you.

    • AB, if the property is worth what you owe on the first and second combined, then the second is not underwater and the lender would typically not be willing to settle under those conditions. I do not recommend the settlement approach unless the risk of foreclosure is minimal — not the case when there is plenty of equity to be recovered via foreclosure, far more than you would be offering in a settlement.

  125. HI Charles,

    I heard the ” mortgage forgiveness debt relief act ” has been extended for another year till the end of 2013, is it true ?


    • Heather, yes, it’s true, the Mortgage Forgiveness Debt Relief Act has been extended through 12/31/2013. However, not all mortgages are covered under the act, so be sure to read IRS Publication 4681 for the definition of qualified debt under this exemption.

  126. I have a heloc with US Bank in my ex-husbands and my name. We were supposed to refi and split it but couldn’t due to financial problems post divorce. The heloc is on his house, home worth about $400,000. His mortgage is about $275,000. We stopped paying on heloc over 1 year ago. We were in negotiations with them but couldn’t come to an agreement. It has been charged off.
    I want to get out of this loan with my ex! What to do??

    • Cindy, you don’t indicate the balance owed on the HELOC, but if the home is worth $400k and the first is $275k, then there is $125k of paper equity against whatever is owed on the second HELOC. This is not a good situation for a settlement negotiation, since the lender will want at least what they could have recovered through a sale of the property. I recommend you consult with an attorney about your situation.

  127. I have a 1st and 2nd on my primary residence, in which the first is more than $60,000 underwater. I received a settlement letter from Real Time Resolutions that has full settlement on it “with no recourse by either you or RTR.” We would like to accept this offer, but it doesn’t say anything about waiving the deficiency. Is the wording they used sufficient to protect us against further collection attempts and deficiency judgments?

    • Karen, “full settlement” normally means that it is a closing transaction, and “no recourse” supports that interpretation. There does not necessarily have to be a specific reference to the deficiency being waived if the language is otherwise appropriate, but I would need to see the actual letter itself to be certain. If you want help, I do offer a document review service for $100, where I check letter copies for people who want that extra level of assurance that the letter is adequate for protection against future collection activity. Here is the link where you can order the document review service.

  128. My husband and I needed to move to another state, but our first priority was to sell a family home with a second mortgage. Thanks to Charles Phelan, we were we able to get closure on the sale of this property with tremendous peace of mind. Prior to enlisting his help, we didn’t know what to do; then through an online search, I found this site. The $150 we spent for the personal consultation with Charles, was the best money we’d spent in years. By the time we hung up the phone he had not only given us solid information about the intricacies of dealing with our home sale — he had also given us information that gave us surprising solutions for resolving other outstanding debts. It’s an awesome feeling. We are grateful we found his services and would highly recommend him to anyone. Cindy B.

  129. Hi Charles, I am just over 2 years after a Chapter 7 and just got a California Attorney Generals settlement on my Wells Fargo first mortgage of $336,000, lowering the interest rate to 4.25 fixed which I am happy about, the value of my home is around $290,000 so the 1st is definitely under water. I have a HELOC of $66,000 from Chase that I didn’t reaffirm in the Chapter 7 and would like to stop paying payments on it in hopes of a settlement being offered. What are my chances of this happening? Thank You! John.

    • John, based on this limited information, I’d say your chances are good of reaching a settlement on the underwater second. If you would like a detailed analysis and strategy recommendations, please order the consultation package via

  130. Faced with being underwater both on our 1st and 2nd mortgage, coupled with the downturn in the economy, we were really feeling the pressure financially. We found Charles through doing Internet research on settling 2nd mortgages. Although you hear that you shouldn’t pay anyone upfront for help, this is more about helping the consumer make good choices for their situation.

    The initial 150-dollar consultation was money well spent. In the initial consultation, we systematically went through every scenario (short-sale, foreclosure, bankruptcy, settlement, etc.) and determined that the best approach given our situation and goals was to negotiate a settlement on our 2nd mortgage with the lender. We then chose to enlist his service, which includes his very comprehensive debt settlement seminar and free phone support for 1 year while we went through the settlement process. Dealing with the mortgage lender can be pretty scary and intimidating, but not when you have someone that knows the ropes, can tell you what to expect and advise you accordingly. Also, the debt settlement seminar is very good at exposing the truth that creditors do not want you to know, as well as educating about debt in general.

    It took nearly 11 months to resolve the 2nd mortgage. Even when the settlement offer came, Charles did another analysis to determine pros/cons in trying to negotiate further, or accepting the bank’s offer. We were able to settle our 2nd mortgage for 15% of the original balance and we now have peace of mind knowing that we no longer have the 2nd mortgage hanging over our heads.

    As for Charles, he is professional, knowledgeable and very prompt in responding to emails etc. We are grateful for his help in the settlement process and highly recommend him to anyone that needs help with his or her debt. Diane M.

    • Diane, thank you so much for your kind comments! For the benefit of others with a second mortgage dilemma, the purpose of the $150 consultation is to help you determine whether or not the settlement strategy is right for your situation, or a different approach would make more sense. In Diane’s case, settlement did make a great deal of sense, and the outcome was a 15% settlement of her second mortgage in less than 12 months from the point of default. For others, short sale, loan modification, bankruptcy, or simply doing nothing (yet) could be the correct solution. The problem for consumers is that there is no shortage of individuals and companies claiming they can settle a second mortgage, with fees of $3,500 or more upfront being common, whether or not it is the type of mortgage that can be settled. My goal in providing the initial consultation is NOT to convince someone they should pursue settlement, but rather to review ALL of the potential options and “run the numbers” so that consumers can make an INFORMED choice about which strategy to adopt.

  131. Hi Charles,

    I reside in California. I have my 1st mortgage with BofA at $670K and a HELOC of $150K. House is now worth $500K. I was able to modify the 1st mortgage through the HAMP program to which i am now current with. THe HELOC however, i have stopped making payments on since OCT 2012. I had just been notified that it has been charged off. The value of the home is really underwater just with the 1st mortgage alone. I would like to know if the chances of settling with the 2nd would be good, if i choose to keep the house? Or is foreclosure a better option and just start fresh?
    Thank you, would really appreciate your input.

    • Diana, as I’ve noted above in replies to comments & questions from others, I can’t make a recommendation without first having an extensive conversation with you by phone. If you would like help, please order the consultation package at

  132. Through HAMP, I recently modified my loan with BOA. Balance was 514k and they lowered my balance to $340k. This is a done deal. BUT they sold assigned my HELOC to Green Tree. Balance $64k. When we bought our home CtyWide packaged us into a 1st and 2nd. Anyway – while our modification was in progress, BOA sent our loan to Green Tree. GT has threatened me to “force foreclosure” several times. How can I settle with them? I do not want to lose my home after so many nightmares trying to modify and all the family hardhips my family went through during the market crash and loss of jobs. Please advise. Would love to settle for 10% and get my peace of mind back.

    • Maggie, you may or may not be able to settle depending on a variety of factors. I can’t provide detailed instructions via a blog reply, sorry. If you want help, please go to and order the consultation package. Then we can get on the phone and discuss the situation at length, review options, and determine the best strategy for your situation.

  133. Just a quick question: our house foreclosed back in 2008 for less than the first mtg’s amount, so obviously the HELOC company didn’t receive any money. My credit states a Charge Off back in 2009. They are just NOW trying to get a hold of me about this debt. Do you think your services would help or should I try to contact them to figure out what is going on?


    • Jenny, what is going on is that the lender is pursuing recovery of the deficiency balance, or they have sold the loan to some debt purchaser who is now trying to make a profit on the deal. This is because the foreclosure action itself did nothing to resolve the liability associated with the HELOC. Via my website at, I offer a paid consultation for $150. The purpose in your case will be to analyze the situation and determine whether it’s been sold, and to coach you how to go about approaching the creditor or debt purchaser to negotiate a settlement. There is also the matter of the Statute of Limitations to consider, which may or may not be applicable in your situation depending on where you live, as well as potential taxation impact. It certainly makes sense to review the pros and cons of a settlement before you proceed.

  134. I am in the middle of a divorce. I should be getting the house in my name only soon.
    I am trying to not go into foreclosure and every month I just make it. I have a mortgage for 146000. I also have a HELOC for 61700. My house is only worth around 191,000. I make approximately 44,000 and get $6000 in child support.
    Do i qualify for HAMP? I heard there was a Fannie Mae program that will take your mortgage and spread it out 40 years. Do you know of this? Problem is, they wont let me combine the two. Its killing me. My child was sick this year and I have spent over $700 on medical just this summer.
    Help and thank you

    • Leah, I can’t say for sure whether or not you would qualify for a HAMP modification, but you should definitely check into this. HAMP will only apply to the first mortgage, but if you get approved for HAMP, there is another program called 2MP (second lien modification program) that might apply to your HELOC. I recommend that you call a local HUD agency counselor to review your situation. They should be able to help you confirm eligibility before you approach the lender for a modification.

  135. I have a HELOC with Wells Fargo. Loan amount=27K. House is under water ~ 120K vs. what’s owed. Advice?

  136. I live in CA. Husband lost job in 2010. 1st mortgage ($308,000)with Wells Fargo foreclosed 9/10. Got 2nd mortgage in 2008 with Greentree for $80,000. Property sold in 7/11 for $265,000. Do I need to worry about being sued by either company for the remaining balances? I have not received any letters from Greentree since 3/12. I’m so afraid I will start getting letters from them stating they will sue us. Thank you for your time.

    • Angie, if the property went to foreclosure, then the first mortgage with WFB is resolved and there should be no deficiency they could pursue. You should have already received a 1099-A for the first mortgage. The second, however, is another story. Most seconds can be pursued post-foreclosure if the property was sold short of the amount needed to clear the second lien. You may want to consider attempting to settle with GT before they do get around to seeking a deficiency judgment.

  137. Hi Charles! I have a second mortgage w BOA that Green Tree is servicing. I forclosed on the home in Dec 2011. I am trying to negotiate a $12k loan with them and am getting nowhere. I would like to know what a reasonable offer is and why they won’t negotiate at all. They are asking for my financials, which I refused. But I did offer 20% of the loan, and then 50%, neither offer was accepted. Since I no longer have the home, I would like to settle for a reasonable amount. Can you offer any advice?

    • John, I can tell you that this lender-servicer combination of BOA/GT is always difficult to settle with. It should help that the property has already been foreclosed, since there is no further potential for price appreciation. A reasonable result would be 25-30% on a $12k balance. I can’t say for sure why they are unwilling to negotiate at all, but it probably has to do with the size of the loan. Most mortgage settlements are against much higher figures, so they are probably assuming you’re good for it in terms of monthly payments. The resistance may have to do with how you appear to them on paper when they look at your credit report, etc. If you want a more detailed analysis, please order my consultation package ($150) via

  138. Hi Charles,
    I had a house where the first was significantly under water and they settled for a short sale. I had worked out a flat, interest free payment for the second mortgage ($100 per month on a $30k debt). When I realized paying this would not improve my credit I offered to pay down the debt but the bank never gave me a reasonable offer. I have quit paying and now I am wondering what action a creditor has against me or if they should be willing to settle for a small amount. The house is sold and they are still showing my credit as late so I don’t know what reason I have to keep making payments. Thanks!

    • Jeff, most second mortgages are “recourse” loans, meaning that the lender can still pursue recovery even after a short sale. So you are still exposed to a potential lawsuit by the creditor to recover the deficiency balance. If you would like a detailed analysis and recommendation on whether the settlement strategy would be a good fit for your situation, please go to and order the consultation package.

  139. Situation is strange. Bought or home in 2002 at 175k. Due to a lawsuit settlement paid it off in 2005. I was involved in a workplace accident resulting in a permanent injury. In 2006 our home was valued over 200k. Took out a HELOC for 150k with a max line of 180k for a business venture. I refinanced that with another bank which paid off the balance to 0 without closing it out. When I noticed it months later I called the bank to inquire and they told me the account was still active and could be used. Needing the capital for a business venture, the original HELOC paid down now has a 156k balance (still retains first status as it was never closed) and the second is 180k. Business failed, our home is worth 140k or under. Both loans are tied to prime rate and adjust, both are current as we are only paying the interest on both. Can the second be settled while negotiating the first to a fixed rate and longer term (we only have until 2026 to pay it off)? Would chapter 13 be more beneficial?

    • Mike, I can’t say whether Chapter 13 would be more beneficial in your situation, as it would depend on a variety of factors. I do recommend that you have a consultation with a couple of local BK attorneys to review the option for stripping the second lien and handling it that way. It’s definitely unusual to see two HELOCs attached to the same property, but if the home is worth less than the balance on the first, then in theory a settlement may be do-able. It will depend on the creditors, where you live, your financial situation on paper, and so on. Go ahead with your attorney review, and then if you would like a deeper analysis, please order the consultation package via

  140. I received a 1099-C (HELOC debt cancelled by Wells Fargo) in Dec 2011.
    However, I have been unable to get them to release the lien on the property (1st is still underwater).

    Their claim to the DOJ and states Attorney Generals that they forgave millions of dollars in HELOC debt from 2007 thru 2011 probably helped achieve a favorable settlement in 2012 – but it sure seems fraudulent now.

    • Chuck, you don’t seem to have an actual question here. I think we all agree that the banks have done some pretty shady things in the past decade or more. But that said, most of the situations I’ve seen where a lender forgave a mortgage as part of the DOJ settlement did include a lien release. So I’m guessing your situation wasn’t part of the DOJ deal. You could try offering a settlement for release of the lien and see how they counter.

  141. I was referred to Charles by a friend who had second mortgage issues, but my issue was I’m getting divorced and have to dispose of two income properties that were underwater. Charles laid out three possible scenarios for me regarding the disposition of the properties, carefully explaining the pros and cons of each one. This allowed me to clearly see for myself which option best suited my situation and, better yet, with a clarity that enabled me to explain it concisely and persuasively to my wife and our attorneys. Much appreciated, Charles, and the price was affordable and good value. I’ll be happy to recommend your services.

  142. Charles
    I could sure use some advice
    Hers our situation
    Back in 2005 we purchased our home for 425k
    First mortgage was for 325k and second was for 125k
    We have not paid either mortgage since 2011 as we were extremely underwater with our latest property valued at 165k

    Just recently we received a deficiency lawsuit from the second mortgage and need advice on how to settle if possible

    Any advice would be greatly appreciated

  143. Business had hard time, Major Renovation for Property and 4 Patents had response actions that all happened at the same time. We saw in the coming months we would be in a financial bind. Proactive we contacted Wells Fargo Mtg. holder and they said they would modify loan. Wells Fargo in the process of qualifying our loan modification and the time came as we anticipated that we were coming up short. We also had an equity line with Chase. Chase handed the equity line off to a Debt collection company who we agreed to pay new agreed amount. MEANWHILE Wells Fargo keeps us going for 8 and a half months working with us on loan modification. When we came up short paying the MTG. Wells Fargo said all has been documented and we would be receiving foreclosure letters etc… Ignore them as they were on top of it. Then on May 29, 2012 a letter came in regular mail from Wells Fargo saying that we were declined for the Loan Modification. In reading the letter they stated the loan modification that they had been working on was a HAMP Loan and the reason we did not qualify was we were $30,000 over the limit for qualifying. I googled HAMP Loan modification and found under Wikipedia description of this kind of loan a list of qualifications needed to qualify . There was the answer which was the same as the reason that took Wells Fargo 8 and a half months to tell us that we disqualified.

    Wells Fargo foreclosed and in 8 days sold to US BANK.

    We were in total disbelief and shock. We were never given a chance to look for other mortgage help, consider a short sale or to think or try to come up with any other solution or qualify for any extension or loan? Nothing. We were lead to believe that Wells Fargo was modifying the loan and we would be set. It was an unbelievable blow. We were in the middle of just investing an additional $300,000 interior and exterior improvements. We have hired an attorney and asked Wells Fargo to reconsider working with us and Wells Fargo Attorney said Wells Fargo refuses to work with us and with NO REASON. Our Attorneys office is in the same building as Wells Fargo Attorney and they all are scratching their head not understanding why Wells Fargo has taken this position. Of course we moved out before the Sheriff came to drag us out. The $150,000 brand new landscaping has all but burnt up in the Summer Heat. Deer have made their home in the landscaping. Eating and pooping all over everything. Inside has been disassembled. Roof has developed leek and no one to fix it. Utilities shut off so the extreme heat is effecting all the hardwood floors and cabinets. Winter is approaching and with -20 temperatures the pipes are going to start to break. All is going to hell. We worked on this property for 13 years. Had invested all monies into this property. 12,000 sq ft. Sweat Equity is beyond what anyone could imagine. Example- Brought raw wood from East Coast, designed and hand built and milled all the cabinets on site from the antique wood. Can this really happen? Did Wells Fargo have that kind of power and right to act in this manner? My husband is a physician and worked part time. He had the ability to earn more monies if that was what we needed to do. By the time that WElls Fargo responded it was to late for us to do anything if we could or wanted to!

    • Flower, I’m sorry to hear about this nightmare. I’m not an attorney myself, so I can’t comment on whether WFB did anything inappropriate in terms of the rules. Yes, the banks have that kind of power, but consumers do have rights and it’s very important to fully investigate to make sure your rights were not violated during the foreclosure process. The Consumer Financial Protection Bureau did pass some new rules prohibiting “dual tracking,” where a lender pursues foreclosure at the same time you are working with them on a loan modification. Those rules go into effect next January. It certainly sounds like this was a dual tracking situation, so I would explore that angle with your attorney to see if there are any potential grounds for a counter action. You may also want to consider taking your case to a media troubleshooter, and you should certainly also bring this to the attention of the Attorney General office for your state.

  144. Impressive replies here! We currently have a first mortgage, no second and are current on payments. Owe $250k and current market value is between $169k-189k. We want to relocate closer to family but cannot do $60k plus a move from the midwest to east coast, paying closing and down on a new home. Ideally we would like to sell the home and have underwater balance forgiven, but we know this probably is not an option, or is it? If not can we negotiate with Wells Fargo to convert underwater balance to unsecured note on sale and have they release the lein?

    • Kris, if you have no second mortgage, then it should be relatively straightforward to do a short sale with Wells Fargo’s approval. Short sales are common and quite routine, and normally do entail forgiveness of any shortfall associated with the first mortgage. That’s precisely why they are called “short” sales! I recommend that you speak with a couple of local realtors to get opinions. Find someone who specializes in doing short sales in your area and review the pros and cons of that option.

  145. I purchased a condo in 2005 for $141k. First mortgage $110k, 2nd mortgage HELOC $31k. By 2010, the condo was worth ~$40k ($100k underwater), so I made the decision to walk away from it. The first mortage was foreclosed, and I finally received the 1099-C from the lender this past tax year and was able to write it off under the Mortgage Forgiveness Act. My question is what to do about the 2nd mortage, which had a balance of ~$25k when I stopped paying it in 2010. The bank (First Tennessee) calls me every couple of weeks, but nothing more than that so far. I’ve heard that they can take my tax return to pay off the debt. I would also like to have the weight off my mind after all these years, so I wonder if I should just contact them and work out a settlement?

    • Jodi, the lender would first need to sue you and obtain a court judgment before they could force you to pay. I’m not aware of any provision that would entitle them to your tax refunds. That can definitely happen with IRS debt or Federal student loan debt, but mortgage lenders don’t have a direct path to seizing IRS refunds. However, it does still make sense to settle it, in order to resolve the deficiency, put to bed any further risk of litigation, and also to get the balance reported as zero on your credit file. If you would like some coaching on how to go about it, please visit my other website and order the $150 consultation package.

  146. I do plan on gettin your $150 consultation package to help us hopefully get out of our underwater condo. One question before I invest in this package. Income wise, we can afford our payments but just hate throwing money in to something so underwater. Can we do a short sale even if our income is sufficient? I read somewhere that a short sale could only be done if we could prove a hardship in making those payments.

    • Vicky, every short sale is unique unto itself, but generally speaking, lenders are looking for evidence of financial hardship before agreeing to a short sale. Without being able to prove hardship, the lender is likely to require that you agree to pay the difference post-sale.

  147. Charles,

    I bought a home in Nevada in 2007 for 290K using conventional loan, 80% with GMAC and 20% with USAA. My home was foreclosed in 2011. I was forgiven with the first loan but the second loan now with collection agency (CA). CA wanted to settle for over a year but I sent them a ceased and desist letter. I have not heard from them ever since i sent the letter but I am curious how it will end. What options do I have? Should I try to settle with CA or creditor? I greatly appreciate any advice you may provide.

    • Jo, it will end one of three ways — (a) settlement, (b) a lawsuit against you (if permissible in your state for this type of loan), or (c) continued credit damage through 2018 if it remains unresolved meanwhile. You can probably settle it with some guidance, but I would need to know more about the situation to advise you properly. If you want further assistance, please visit my other website at and order the consultation package.

  148. Charles,

    filed ch 7 last year which went through fine. also stoped paying second same time 12 mo ago. 1st is 315K with ocwen, and second is GreenTree for 155K. house appraised at 375K two weeks ago. SO my second is about 100K under and not fully under. looking for suggestions on how to settle with them when I have some equity in house

    • Phil, I’ve seen “in the money” settlements, where the second was partly covered with equity. Obviously, it’s a trickier situation to deal with compared to one where the note is fully underwater. I really can’t provide detailed advice via the blog, sorry. It would require an extensive phone conversation to lay out the road map for you. If you want help, you know what to do. Order the $150 consultation package via and we can discuss the matter in depth.

  149. I have recently negotiated out a settlement on my second for 10%. Currently the second is charged off with a lien on my property. Lender says they will “take all steps necessary to release the lien on my property, my account will be reported to the credit bureau as settled in full and they will issue a satisfaction of the lien on my property”, I am concerned that the lender will still come after me for the remainder of the balance and or I will be subject to taxes on the unpaid balance….What do I need to ask the lender for as far as documentation goes or is there some forms I need to use for this? Or is the fax I received with the for mentioned info sufficient moving forward? Thank you in advance for your help.

    • Mike, you are raising two totally separate concerns: future collection activity and taxation on any forgiven balance. The lender has zero control over the taxation issue, but as long as the letter provides proper documentation for a settlement there should be no further funny business with regard to post-settlement collections. To me, the more important issue is taxation impact. Don’t make the assumption that the Mortgage Forgiveness Debt Relief Act will provide an exemption, as it does not apply to many second mortgage situations. If you want help, I’m currently offering DOCUMENT REVIEW SERVICE for only $100 per document. That includes my review of your letter, and a phone call to discuss my findings.

  150. Charles, just wanted to thank you for your advice from the consultation I had with you back in April. After 6 months of negotiation and stalemate, I was finally able to settle my 60k HELOC with GreenTree this week for 15k while remaining in the house. It took so long because the former account manager seemed unwilling to negotiate, so I waited until a new one contacted me, and the new one seemed more competent and willing to work with me. Although the house is still underwater on the primary mortgage, now I feel like there’s more “breathing room” and I can put greater focus on getting rid of my student loans. I don’t feel like a natural negotiator since I had historically associated “negotiation” with “misleading” people, but I felt empowered by the specific advice you gave and grateful that I could negotiate based on facts without trying to mislead GreenTree. Without your advice, this would have continued to be an annoyance for the next couple of decades. Thanks again for the service you provided!

    • Ruben, thanks for the kudos, and I’m glad to hear that the consultation package was helpful for you in achieving the outcome you needed!

  151. 30 year fixed with Wells Fargo at 370k
    HELOC at 70k with Chase and the Home Loan is underwater by about $25k. Can I settle the HELOC on 15-20% with Chase as I stopped being able to make payments 3 months ago. Charge-off while still living there for the HELOC? Thanks.

    • JJ, if the first mortgage alone is underwater, then yes, you can probably reach a settlement on the HELOC. To give you a better feel for how it would play out though, I’d need to analyze the situation in much more depth, since the outcome would depend on a number of other factors. There are also significant pros and cons to be discussed about taking this approach. I offer the paid consultation for mortgages, $150, via my other website.

  152. Charles, We moved out of our home 4 years ago after a BK7 and let them home go back. We found out this past March, after trying to purchase another home, that BOA (now transferred to GreenTree), never did anything with the property….we still own it. After talking with GreenTree, we decided to move back into the home and go through a modification….we were denied for all of them. I asked about a settlement and they said to send them a letter stating what I would offer, but it had to be at least 35% of principle to make it into a review. This is our 1st mortgage not our 2nd. Counting the amounts we haven’t paid while not living there for almost 3-1/2 years, we currently owe $254,000. The appraisal that GreenTree had done for the modification came back at $187,000. What would be a realistic number I should offer them to settle to avoid a trustee sale? The home has extensive issues due to vandalism and neglect where it sat empty for so long. I believe if I had an appraisal done, it would actually come back around the $140,000 range. My 2nd is around $69K, I figured I can settle with them pretty easily if I can get this squared away with the 1st.

    Thank you so much!

    • Scott, you have an unusual situation there. My first thought is that you may be better off trying to settle on the second before the first is fully resolved, but I can’t say for sure without having more details. As to what to do on the first, I can’t just state a number based on the info you’ve provided. There are a number of other points I would need to discuss with you before I could recommend an offer strategy. If you want help, go to and order the consultation package for $150. We can then discuss by phone and develop a game plan.

  153. Hello Charles, I have been reading posts all morning and here is my situation. We filed chapter 7 in 2009 and did reaffirm 1st and 2nd then got a 1st modification loan last yr and haven’t herd from the bank on 2nd mortgage since filing in 09. Last March we got a assignment of deed of trust saying our 2nd was now with HSBC but haven’t herd a word from them either. Our 1st is 84K and 2nd of 19500 Recently a very simular house as ours in the area just sold for 90K. Housing prices in the small this small town continue to decline and we have now moved across the state. We are 2mths behind on the 1st and have not made any payments on the 2nd since 2009. I would like to sell but know the realtor fees are 7K and closing costs of 1500 along with 2K of upgrades that need done. I would assume if I just allow a foreclosure the sell price would be under 90K and most likely closer to 80k. Do you think my 2nd is a possible settlement option at this point.

    • Kennyray, since the balance on your second is fairly low compared to most, and well under the cost to a lender to foreclose on the average property, a settlement is a possibility here. That said, however, it will depend on a number of other factors — your financial situation, how you look on paper to the creditor, where the property is located, what state you live in, and so on. If you want a detailed analysis and discussion on strategy, please order the second mortgage consultation.

  154. Hi,

    I am being sued by Wells Fargo, the trustee on my underwater 2nd Mortgage. The claimed amount owed is $46,000. They refuse to settle for anything less that 50% and I do not have access to those funds. I went as high as 12,000 at one point. I did speak to an attorney and they have been zero help and continually tell me that the 50% is a good offer. My 1st mortgage is current and I am underwater by $100K on that loan alone. I am meeting with a different attorney tomorrow to discuss the possibility of filing a Chapter 13 BK and attempting to strip the 2nd lien. I also filed an answer and special defense in order to avoid them being awarded a default judgement. They are really playing hardball. Since I filed my answer in October, nothing has happened with my case and I’ve made no additional settlement offers. Any thoughts?

    • Rob, I can’t provide legal active post-lawsuit, sorry. You apparently live in a state where the lender has the option of foreclosing or instead suing on the basis of breach of contract. A lien strip may be possible, so do follow through on that consultation. It may be that the confirmed threat of filing will bring them back to the table with a lower figure than 50%.

  155. Great Article. Much needed information.

    My house in Florida will be foreclosing soon. The house is worth approximately 120K and the amount owed on the first mortgage is 110K. There is a 150K HELOC with Regions. It’s been a little over 3 years since the last payment was made against the HELOC. I’ve been told that the SOL in Florida is 5 years. To your knowledge, has Regions been pursuing judgments in a situation like this?

    On the other hand, if I choose to settle, what would be a good settlement number? And would I have to pay taxes on the difference?

    For example, if I settle for 25K, will I have to pay taxes on 125K of income?

    If I hit 5 years and the SOL has been reached, what happens? Will I still owe taxes on the loan amount?


    • JL, let’s first make sure you understand that there is no SOL when they still have a lien on the property. Assuming you allow the foreclosure to go through and the lien gets extinguished at sale, then you would have a SOL situation. Without knowing a lot more about the situation, I’m just guessing at settlement figures, but we aim for 10-15% until convinced it has to go higher to resolve. Regions doesn’t have a clear pattern of aggressively litigating these claims, but they do not make it easy to settle either. A lot depends on how well you can document and prove financial hardship, etc.

      On the tax question, yes, the $125k is ordinary taxable income, unless you are eligible for the insolvency exemption per IRS Publication 4681. See my blog post on insolvency for further details on this exemption.

  156. My ex-husband and I purchased an “investment” property in Fl around 2004. The property went into default, we had a short sale that fell through due to the 2nd mortgage. (The 1st agreed to the short sale, the 2nd did not) The home was foreclosed and the 2nd mortgage was sold to Real Time Resolutions. The amount still owed is 58,000. I have since divorced and although according to my credit report, I have zero debt other than this second mortgage, I cannot get a mortgage in my name. The home I live in is in my sister and brother in law’s name. I pay 100% of it. My car is paid off and I have no credit card debt. This second mortgage is the only thing holding me back from being able to put my house in my name and get the tax benefits. I would be willing to settle for under 10% of the amount owed just to clear my credit report but in all that I’ve read about Real Time Resolutions tells me that they are very difficult to deal with. I have disconnected my home phone and they do not have my cell phone so they no longer contact me. Any advice you can give as to the best way to proceed so that I can clear this would be greatly appreciated!

    • Anne, settlement of second mortgage deficiencies is a complicated project compared to settlement of credit card accounts and most unsecured debts. I can’t possibly provide the right advice in a short blog response. If you want a detailed analysis and full discussion, then please go to and order the consultation package. The most common feedback I get after doing one of these mortgage sessions is, “That was the best $150 I’ve ever spent.” 🙂

  157. Hi Charles, I have a 180k 2nd balloon loan due within the next 2 years. I had purchased the house in 2006 for 650k and is now worth 630k. I was looking to settle my second loan because I will not be able to afford 180k by 2016. My question is, do you think I would be able to settle my second loan for 10-15 percent or would I at all be able to settle with Bank of America? Also, my first loan is 400k 30 yrs fixed. Any advice would be great!

    Thank you

    • Markar, your house is in the money, fully covering first plus second. This is not a 10-15% settlement scenario, sorry. If you want a full discussion, please order the mortgage consultation package for $150 via Thank you.

      • What do you mean by “your house is in the money, fully covering first plus second.” I am sorry If I dont understand. Any advice would be great!

        • Markar, you owe $400,000 on the first mortgage, plus $180,000 on the second, for a total of $580,000. Yet you’re saying the home is still worth $630,000 on the market, so “in the money” means there is enough value in the property to cover what is owed on the first plus second mortgage. If the house was worth, say, only $350,000, then the second would be “out of the money,” meaning no equity coverage, in which case a settlement might be possible. In your case, the second lien holder would simply foreclose and recover the whole amount, so why should they settle for 10-15%?

  158. This is seriously the best site ever! I have learned so much! I have my settlement letter from the mortgage company and everything looks perfect. I am now ready to make my payment, but I am really nervous & want to make sure I have my bases covered. The payment is due in two days. They said they can accept payment over the phone using Western Union. My question is should I go with that, a mailed check, or a money order? I want to make sure I have a paper trail of some sort. Thank you!

    • Erin, glad the site content has been helpful to you, thanks. The payment method is not crucial as long as you coordinate it with the creditor. For the larger amounts typically involved with mortgage-related settlements, a safe method is cashier’s check via traceable overnight delivery via FedEx, UPS, the Post Office, etc. Western Union is ok as well. However, that usually entails bringing cash to the WU office, so cashier’s check or money order is safer for you. For settlement amounts exceeding $25,000, I usually recommend a direct wire transfer, but you would need their wire instructions to do it that way.

  159. Charles… Much appreciate all the info on your site. Am in final settlement discussions on a HELOC in the money. Can you provide recommended language to include in settlement letter to ensure status is changed only to “Paid” and exclusion on any reference to on debt to collection agency or settled for less than balance. Regret creditor unwilling to delete on credit reports.

    • SoCal Al, thanks for your question. There is no recommended language I can provide you with, sorry. The reason is because no creditor will agree to what you are asking. Settlements always get reported as settlements, period, end of story. Yes, I know many people claim it’s possible to settle and simultaneously avoid a hit to the credit, but I’ve been at this game of debt settlement for 18 years and never once seen it happen.

  160. I had a mortgage and a HELOC with bank of America in CA. The house was in short sale process but the BoA decided to auction it (100K less than short sale price) and therefor it was foreclosed in 2011. Most of the HELOC was paid and the deficiency of 66K was forgiven and the HELOC was settled. At least that what I thought until I pulled my Credit Report and it shows $5388 open balance until 2018. I called BofA and they are saying this amount is the fees and interest and since I am in CA they can’t come after money so they only can show it in my Credit Report as consequences of not paying the whole deficiency. I explained both loans were from BoA and if they waited for short Sale to go through instead of Auction, the HELOC would have fully recovered the full amount. They do not want to hear the whole story and they not care. They are doing this to just get back at me for not paying the deficiency amount. What can I do to settle this?

    • Ali, what you are describing is more of a credit reporting dispute than a settlement scenario. There would not be much point in trying to get BOA to “settle” that $5,388 for a lesser figure and then show the balance as zero, especially if they are not pursuing the claim. What you can do is try writing dispute letters to the three major bureaus to challenge the accuracy of that entry.

  161. Charles, as soon as I saw this, I asked the credit bureaus to fix it in my credit reporting. But I thought since the BoA has this balance lingering on my account the credit bureaus may become difficult. I hope they look at the facts and see how Banks are not really serving their customers. The BoA customer service told me that this is how they get back at people who do not pay their debt. No regards for the fact that I got laid off in 2009/10 and was not able to get a job for a year as all companies were laying off and not hiring, then BoA told me no problem they will work with me until I get a job. But after a year they demanded the full behind payments plus late fees, story is long like many other folks, but BoA was worse bank I ever dealt with. Lies, manipulation, zero communication between their dept and on on…
    Sorry for venting off here and thanks for your comments/help.

    • Ali, the credit bureaus don’t care and neither do the banks, too many millions of hardship stories in the past few years (not that they cared to begin with!). They will just forward your dispute to BOA, who may or may not get around to verifying in time. You could also hire an attorney to pursue the matter, but I’m not sure it’s worth the hassle since they are not pursuing the claim itself. Anyway, I won’t disagree with anything you’ve said about this bank!

  162. I have a HELOC from US Bank that has reported even as recently as April of this year. The 1st mtg. was foreclosed upon in early 2011. I have the sheriff’s deeds, etc. I didn’t file bk afterwards and now the debt is still reporting. They have not attempted to collect on the debt. Their reporting shows “charge off – profit and loss write off”. I need this rectified (I have no intentions of paying US Bank the debt) and the credit company I’m working with needs something from US Bank in writing that they are not attempting to collect on this debt and the credit reporting agency will note it in their remarks which will satisfy my new lender (I’m purchasing). How and what do I need to do to obtain the letter from US Bank? Thanks!

    • Amy, most HELOC loans are recourse debts, which means the lender can continue to attempt collection until the Statute of Limitations has expired (based on the rules for your state). I seriously doubt that US Bank is going to send you a letter saying they won’t pursue this matter. Even if they don’t actually intend to pursue it, it’s still possible they might sell the note to a debt purchaser who will pursue the claim. You can certainly request this in writing from them, but you need to understand that just because it says “charge off” that does not mean you are no longer obligated for the balance.

  163. Question – I had a HELOC with Banco Popular that I stopped paying. It was charged off and sold. I settled with the purchaser of the note and it’s reflected and recorded in the deed. Banco still shows that I owe them the entire balance on my credit report after 5 years. Any advice?

    • Michael, if you settled with a purchaser of the note, that wouldn’t necessarily affect the entry recorded by Banco Popular, as they would have no knowledge of your settlement. Try writing dispute letters to the three major bureaus, on the basis that the balance should be zero, and include a copy of your settlement letter as proof.

  164. I filed for Chapter 7 BK and was discharged in March of 2011 after negotiating my own modification agreement with my first mortgage. I owed $350K on the first and could not afford it. Without asking me to reaffirm the debt, they offered me a forbearance of $97K and had me paying on only $253K at 2% for the first five years, 3% on the 6th year, 4% on the 7th year and 4.85% for years 8-30. In the meantime, a balloon payment on my HELOC with Wells Fargo is coming due in the amount of $63,5K. I did reaffirm this debt. However, I’m unable to pay the $63.5K due. I’m now in contact with their modification department and my loan is under review. If they can’t modify the loan, they say they’ll refer me to the department that deals with balloon payment problems. If THEY” can’t help me, they’ll refer me to the department that deals with settlements.

    I now owe $330K on the first. Minus the forbearance, I’m only paying on $233.5K principle. According to Zillow, my home is worth around $330K. According to Wells Fargo (my second mortgage lender) it was appraised at around $312K. Therefore, my first mortgage barely breaks even with my home value and the 2nd mortgage puts me underwater by approximately $64k.

    My questions are these:

    1) Does Wells Fargo still hold second lien status if a) I didn’t reaffirm the first mortgage and b) they weren’t asked to sign any agreements regarding the modification on the first? Since it wasn’t a re-fi and the first merely modified the original terms of the loan, I’m hoping Wells Fargo will see they have very little skin in the game and do their best to negotiate with me.

    2) If WF is second in line, can they still foreclose on my property and would they want to, knowing that they would not likely make anything from the sale of the home?

    3) If we can’t agree upon a reasonable modification, the “balloon payment problem” department can’t help and I end up discussing a settlement, will I still be able to retain my home? Also, generally speaking, what percentage of pennies on the dollar would be a reasonable settlement?

    My home is in California. I’m current on my first mortgage and was current on all payments for the second. In 3-5 years, it’s very likely that I would be at a break even point for both loans but that nasty balloon payment has got me in a crunch. Any insight or advice would be greatly appreciated!

    • Staci, yes, Wells Fargo would still hold second lien status. There shouldn’t have been anything about the modification on the first mortgage that would have affected that position. Yes, they can still foreclose even though they are in the second position, but they would have to fully satisfy the first mortgage balance before receiving anything, and they would also have to absorb the costs of the foreclosure action. Some of your questions I’m not able to answer without spending more time reviewing the situation, and there are also tax consequences to be understood before you adopt a settlement strategy. One thing I would recommend right away is that you have a counseling session with a HUD agency representative, who can review your numbers, look up the loans, and help determine if any of the government modification programs (such as 2MP) might apply to your situation. If you would like a full discussion with me, then please order the $150 consultation via

    • Staci:
      Who was your lender and how were you able to negotiate such a fabulous modification? I am in a similar situation and curious to know as my modification has been dragging on for over 1.5 years with no end in site and no real indication from the lender that they will offer ANYTHING in the way of a mod. Please advise. Thanks!

      • “In a Jam,” the modification that Staci described sounded like one granted via the Home Affordable Mortgage Program (HAMP). If you’ve been at it 1.5 years, that’s probably because you’re trying for an in-house modification with no government backing. Modifications are granted or denied on the basis of the lender’s analysis of your financial ratios.

  165. wondering if you can help. I have a first mortgage that is current. I have a second mortgage that is current. I am having a very hard time paying the second mortgage and all my bills. Between the two I am underwater by about 50k. What would happen if I stopped paying the 2nd mortgage. I know a few people who have gotten letters from there lenders forgiving the 2nd mortgage. I’m not so lucky. Can you help. I live in New York

    • Gail, I would need to spend up to an hour on the phone with you to gather all the information I would need to advise you. So I’m not able to provide direct assistance via short blog posts, sorry. If you want a thorough discussion and analysis, please order the $150 consultation package via

  166. Last comment very old, be surprised if anyone is looking here.
    Purchased in 2005 height of bubble. With a first and a second to avoid mortgage insurance.

    I defaulted on second years ago when I had back injury and went to disability.

    I was planning for years on a Chapter 13 to remove the 2nd as the home was DEEPLY underwater. Just last month,
    received offer from Chase owe around $20K offer is for $1645. “Will notify credit reporting agencies debt has been settled”

    I just have to worry about taxes, not too terrible, I have 4 children and collect SSDI disability.

    Should I take it? or is it a set up?

    • Hi Heather, I’m still here. 🙂 The settlement offers I’ve seen from Chase have been legitimate. I advise people to settle old defaulted second mortgages when they are able to, because conditions might change later and a good deal no longer available.

  167. Hoping you are still here! I refinanced in 2005 to remove another person from my loan, I ended up with a terrible 1st/ 2nd combo but made it work for a long time, then the ARM came due on my first mortgage, I was able to get the lender to modify that loan and get back on track, the mod was still crappy, I/O for 10 years, but was at least a fixed from an ARM. . Then during the economic crash in 08/09, I had lost my job, just after having my daughter, money was tight and i stopped paying the 2nd. It is in charge off status, and has been for quite some time, I have actually gone through a HARP modification in 2013 on my first, and was able to get my mortgage back to paying principal with a payment i could afford. I have not dealt with the 2nd mortgage as it has been charged off, and i didnt have the xtra cash flow until recently to do anything. The issue I have is that I DO have equity, and a decent amount of it due to the market changes in Colorado. I want to settle this debt ans get the lien released, it is the only thing still haunting my credit… i have a 735 scredit score, and can only get credit cards or high interest personal loans… no auto financing of any sort. I want to finish getting my credit back in shape, and adult again. I have made on time mortgage payments on my first for over 6 years (probably closer to 8). What are my options? Will they consider a settlement for lower, or because I have equity, am i stuck paying the whole thing?

    • Colorado,
      Yes, I’m still here, but I don’t offer the paid consultations on second mortgage situations anymore. Briefly, I’ll say that I do still see second mortgage settlements coming through from time to time, and the older the default the more likely it can be settled. A very important factor is whether the original lender still owns the note or has sold it to an investment firm. Post-sale it can be more difficult to settle out. If it’s with the original lender, then it also depends on which one. The equity is definitely going to be an impediment, but if you haven’t paid the second since before 2010 there is probably still a path to settlement. I’m not understanding why there is any impact on credit if it’s that old. After 7.5 years the default shouldn’t appear on your report anymore.

Leave A Comment

ZipDebt = Fast Relief

Debt settlement is just as much about managing risk as negotiating savings. The 36-48 month programs offered by most debt companies have high risk for collection lawsuits. It's far more effective to "fast track" debt settlement in 12-18 months.

ZipDebt = Affordable Help

Instead of paying fees as high as 20-30% of your TOTAL DEBT, it’s far more affordable to work with a professional consultant who only charges 15% of the SAVINGS achieved via the negotiations. This approach saves you money and creates a win-win scenario.

Contact Us