80/20 Loans

[jose06]

It was suggested that I ask this question in this section.

In NY My house went into forclosure last month in. Had one of those 100% financed mortagages. One loan was over 400K and the other about 100K. The smaller loan has me in collections and calling me steady,trying to collect. Is this normal and is there any thing that I can do since the house forclosed on me and and I'm finished financially ?

[Anonymous]

I assume that your first mortgage holder (the $400k loan) foreclosed and the 2nd mortgage holder probably didn't get a dime.  In this case about the only thing I can see you doing is offering the 2nd mortgage holder a lump sum of money to settle the debt.  I doubt this is an option though because if you had a large sum of cash just lying around your house probably wouldn't have been foreclosed on.  Another option for you is to just ignore it.  This is not an option that I would reccomend as it is possible that the 2nd mortgage holder can get a judgement against you and possibly garnish your wages or attach the judgement to some other asset that you have.  A third and about the only other option that I can think of is to file for bankruptcy.  By going through the bankruptcy process it is highly likely that all of your unsecured debts will be wiped out.  Unfortunately unless you have some cash handy or can get some quickly, I can't think of any "good" options for you.  If the foreclosure didn't payoff the 1st mortgage holder there's also the possibility that the 1st mortgage holder will come after you for some more money as well.

[Anonymous]

I thought of one more favorable option.  Talk to the OC or CA and see if you can work out some sort of a payment plan with them.  If you can pay them a couple hundred bucks a month they may be willing to accept that.

[Junejer]

Let me preface myself by saying that I am speaking from my experiences as a commercial lender only. Typically, when you are foreclosed upon, and there are two mortgages, one will "buy out" the other or join in on the fun. If there is a shortfall, then you are 1099'd for the difference and it will be reported as income, unless you have an arrangement with the bank that they will forgive any shortfall. I don't see how the 2nd lien holder has a leg to stand on. IMO, tell them to get it from the entity who owns the property (ie, first lien holder).

This is why seconds are risky--they are nearly last on the pecking order (Lawyer, municipality (if any taxes owed), 1st lien holder, second lien holder, former owner).

[Anonymous]

I think they did away with the whole 1099 thing for now.   The difference will not be counted as income.

Now, if the house went through foreclosure, both mortgages should have recieved portions of the loan from the foreclosure sale.  That is the reason that alot of second lenders will not agree to short sales because in short sales, the sales money is applied to any lien and the first mortgage prior to the second.  At a foreclosure auction/sale, the money is split between the lenders on a percentage basis after any liens are paid.  So, the second lender will get mor emoney typically in a foreclosure than in a short sale.

[Anonymous]

I would suggest you reading up on your state statutes regarding foreclosures and what can be sued on.

This is going to be your best resource, short of speaking with an attorney.

See the link titled "State Resources" in my signature.

[MattH]

---

@jose06 wrote:

It was suggested that I ask this question in this section.

In NY My house went into forclosure last month in. Had one of those 100% financed mortagages. One loan was over 400K and the other about 100K. The smaller loan has me in collections and calling me steady,trying to collect. Is this normal and is there any thing that I can do since the house forclosed on me and and I'm finished financially ?

---

You absolutely must call a lawyer first thing Monday morning, every day of delay in doing so could have major negative consequences for you.  Unless the holder of the second mortgage note can be persuaded to reach some kind of agreement with you, they are highly likely to take legal action very soon, which means a clock is ticking.  Assuming you don't have the cash to pay them off, unless you can reach some kind of deal with them bankruptcy may be your best option.  If you attempt to negotiate with the lender without the help of a lawyer you risk saying something the constrains your options down the road.

So spend the weekend calling everybody you trust for the names of lawyers to call at 9AM on Monday.