Foreclosure costs 2nd mortgage (Post Chapter 7)

[Anonymous]

I'm hoping somebody can answer my question regarding foreclosure costs after chapter 7 discharge.

My situation is this I have a 2nd mortgage ($40K) from GreenTree and a 1st mortgage that I have kept current. Now I'm wondering once I've paid off the 1st mortgage, can GreenTree include the foreclosure costs if they foreclose on the property since they still have a lien? I know that foreclosure cost can range anywhere between $50-$80K but if they can't recoup their foreclosure costs, since the loan has been wiped out in Ch 7, then I can continue making payments on the 1st mortgage.  

GreenTree is not willing to settle the 2nd mortgage for 10% of the balance (they want $34K; not going to happen!!) so I'm debatting if I should let the property go into foreclosure (and burn GT; yes I hate them!!) now or keep paying the 1st mortgage but only if GreenTree can't recoup their foreclosure cost if they ever decide to foreclose on the property.

Thank you in advance.

[DaveInAZ]

Well, any mortgage holder - 1st or 2nd - can foreclose at any time if you are in default, more than 30 days late on payments. But, most 2nd mortgage holders won't foreclose unless they think there is enough equity in the property to repay most or all of their loan. Once you have paid off the 1st mortgage there almost certainly would be adequate equity for them to recovert the amount of the loan + cost & fees.

What's more important is what is the current situation? Is the value of your home currently more than the combined balance of the 1st + 2nd mortgages? If so, GT might foreclose at any time. Are you currently in default on the 2nd mortgage, or have you been keeping the payments current? If not will they accept a reasonable amount to bring it current (not too padded with fees)? If it were me I wouldn't take the chance on losing my home and equity, and keep both mortgages current.And if you keep the 2nd mortgage current to prevent them from taking any foreclosure action GT might become more reasonable on a settlement amount as time goes by - with the loan discharged in BK it is a "non-performing asset" on their books, they can't sell it or borrow against it.

[redbeard]

You need to do a lien strip, effectively getting rid of the second. This happens in chapter 13, but not in chapter 7 so much.

Google chapter 20 bankruptcy and see if that will work for you. I didn't know this was possible, but apparently, you can file a 13 after a 7 for the purpose of lien stripping. Doesn't seem to work everywhere.

Probably have to talk to your bankruptcy lawyer again.

Dan

[jim44]

Good idea Dan.  I think you can strip a 2nd mortgage in CH7 but again only your BK attorney knows for sure.  It's worth checking out OP!  Best of luck!

[Anonymous]

Thanks for the reply.

I'm not current on the 2nd mortgage only first. There is no equity in the house, it's worth about the same as the balance of the first mortgage.

I don't want to keep the 2nd mortgage current the interest rate is way too high. I'm interested in a settlement for 10% of the amount.

[Anonymous]

Thanks for the advice but I'm not interested in Ch 13 - too long and dangerous. I rather walk away and start over.

[Anonymous]

Does anybody know if the foreclosure fees are recoverable after the mortgage has been discharged? I'm interested from a legal standpoint. Does the lien include the language to recover foreclosure costs or is it part of the debt (which has been extinguished in bankruptcy, hence void)? I'm looking for a definitive answer.

Thanks.