Dealing with 2nd mortgage and how it is reported to credit after foreclosure

[Anonymous]

I went through a foreclosure about 2 years ago and this wiped out my first mortgage but my second mortgage is now considered an unsecured debt.  I have not heard from this lender since the foreclosure happened but they have continued to report me as 120 days late consistently for the past 11 months.  This debt is way beyond 120 days late and should actually be considered a collection debt as it is no longer revolving.  I was hoping to save up enough money to eventually settle this debt, but it is a $30,000 loan and will take some time for me to save up a lump sum so that I have the money to negotiate with the lender.

When the lender reported my mortgage as delinquent, my credit score immediately dropped from 780 down to 520 all in one shot.  I have never made a single late payment on any of my other debts (I have student loans and 1 small credit card balance).  I was hoping that if I continued to pay all of my other bills on time that I could bounce back from this unfortunate event that happend nearly 2 years ago. I recently checked my credit score and it is still in the 500s and my credit report lists one of the major factors hurting my score is a recent late payment last month because of the way the 2nd mortgage lender is reporting this.

It is my understanding that the most recent 2 years of time has the greatest impact on your credit score.  The older a collection debt is, the less weight it carries when it comes to impacting your credit score. The way that this debt is being reported gives the impression that it is still a revolving debt that I am consistently late on every single month.  This is extremely frustrating for me because the foreclosure happened nearly 2 years ago.  It feels like I am getting kicked over and over again when I am already down. Does anyone know if there is a way to recover from this or dispute the way this debt is being reported?  The reality is that it is not 120 days past due.  It is actually over 900 days past due and continues to report as a fresh negative every single month.

Any advice would be greatly appreciated!

[Booner72]

Hi there.  I'm sorry to hear of the trouble you are having.  I believe that installment loans (mortgage, student loan, car payments) can be reported as 120 days late like revolving debt can (revolving being credit cards, HELOC, etc).  So I'm not sure that the installment vs. revolving is the issue here.  Revolving accounts usually end up going to "charged off/bad debt" status after 4 months.

Have you talked to the lender to see about different options?  Would they take payments or are you required to come up with the 30 g's at once? (or whatever amount you settle on) ?

  My guess is that they are reporting accurately, and until you can get this caught up, it will continue to be, unfortunately, reported late.  I definitely see your point and it is sad that it continues to ding you even though it was two years ago.

[Anonymous]

Thank you for your response.  I have not heard from the lender since 2008.  They called me once when it first started to fall behind, and I told them that I was in the process of trying to do a short sale that would settle both the 1st and 2nd mortgage. 

Unfortunately, I had the house on the market for almost 2 years and could not get the 1st mortgage lender to agree to any of the offers.  I had an offer for 115k from a potential buyer but the lender wanted 125k (I bought the home in 2006 for 235k).  The next offer was for 105k and then the lender said they would accept 115k.  Nice eh?  The buyer that had offered 115k in the first place was long gone and my home ended up foreclosing.  I found out later that the lender ended up selling it for 109k after it foreclosed.

I am now dealing with unpaid association dues and they have already sued me twice and with fees I owe over $7,000 to them.  I spoke to the attorney but he refuses to settle for less than the full amount owed.  I am trying to pay this one first because they already have a judgment against me and I want to avoid garnishment.

I am really surprised that the 2nd mortgage lender (Bank of America) has yet to contact me to attempt to collect on the balance owed to them.  Maybe they lost the paperwork?  Wouldn't that be nice.  A friend of mine just went through a foreclosure and in an attempt to be proactive he called their 2nd mortgage lender (also Bank of America) to try and settle it with them and it ended up opening a huge can of worms.  They are now hounding him and refusing to settle for 8k on a 25k balance.  They are demanding that he cash in his retirement and pay them 15k or they will pursue a judgment.  The redemption period just started and he is still living in the home. I almost think it would have been better if my friend had not tried to contact them at all.