Settlement Of Mortgages

I have 2 mortgages that if the lenders would settle for 50%? 75%? would consider paying off. The loans are not in arrears and never have been. Both amount to around $100,000 each so have an encentive to pay off. Is this possible?

Hi matamerojo,

As far as I know, no one will settle on a secured loan.

chrys

thank you chrys.

they would foreclose and take the home, just like if it was a car loan they would repo the car.

I own a mortgage company and provide clients with loan modifications. There is a possibility to do a "short sale" in which the lender takes less than owed. If you are planning on staying in the home they will not settle for less.

I've put a lot of thought into this scenario, will a mortgage lender settle on a home rather than foreclose? Conventional wisdom is that they will not. But this is not an environment for conventional wisdom. And while I think a very strong argument could me made, in certain cases, that settling rather than foreclosing is a better option for a lender... the problem will be to find a decision maker with authority who will pull the trigger on such a transaction. And very few bankers will stick their head out to support a non conventional tactics to deal with these "bad" mortgage loans.

But consider this situation: $200k mortgage, FMV of home now $100k. Probably 4-6 months to foreclose (i.e. loss of cost of funds approx $7k). Bank must pay back property taxes before they can sell it ($2k). Commission to brokers at 6% ($6k). Assume on the market for about 4 months (another cost of funds loss $4k). That's like $19k in costs to the bank, on a $100k sale, they net about $80k on their $200k loan. So you can make a case, that any settlement offer at $100k or higher, would be more beneficial to the bank than a foreclosure. But it doesn't mean they will consider such an offer.

Although somewhat of a different situation, a HELOC lender will definately consider settlement, particularly if the first mortgage is well under water. My Wells Fargo HELOC contact gave me a fax number where I could just fax in a settlement offer for their consideration. But that was back in November, so I'm not sure if they are considering these at this time or not.

Hello-
Can you post that Wells Fargo HELOC fax # per your message above? I have heloc with Wells.
Thanks!

The fax number provided to me (again, back in November 200: 866-593-3579

Actually, I logged on today to post that I had sent in my first settlement offer on my WF Heloc, literally minutes ago. Will be interesting to see what the response is.

Have you taken any steps to show hardship, like not paying on the Heloc? If so for how long have you not been paying? I am trying to build a stategy for modification for my WF heloc.
Thanks

Yes and No. I am now four months delinquent (Dec, Jan, Feb, & March). Granted, dollar wise it's not a huge amount even with the $10/month late payment fee they keep charging... something like $500 overdue.

The thing is, you don't really have to prove any kind of hardship, in most cases the facts are enough. In my case, there are extenuating circumstances that have cause the non-payment. But even with out it, the first mortgage is $200k and the market comps show that a sale price of $120-140k is likely (not including agent commissions, foreclosure expense, etc). The HELOC of $25k has no chance at recouping funds in a foreclosure sale. The thing with my house is also that it has a substantial water problem with the master bedroom flooding when it rains, which cannot be fixed on my property. I'm currently in litigation with the neighbor over this issue, as the source of the groundwater is their property. Litigation has been going on for 2+ years. Some real estate agents that I trust indicate that in the current impaired condition, the property is really only worth the value of the land... about $40k. But neither the first mortgage or the HELOC have cared much about my story regarding the flooding and water problem. And the first mortgage holder has sent the case to their lawyer to start foreclosure proceedings, per their most recent letter.

Anyway you slice this, the HELOC is toast in a foreclosure. But I want them out of the way, so I offered an insultingly low figure to settle. If I can get a settlement from them, the door is then open for me to sue the first mortgage holder to stop the foreclosure process (temporarily).

FYI - In terms of modification of the HELOC, if that is your goal, have you talked to their collections people yet? Man, every time I do, they try to force me into a modification process. They keep asking about my income, expenses, for copies of my tax return and pay stubs. After I decline to provide that information, they say something like "we're taking note that you are declining modification assistance". Then I tell them that isn't true, I'm just declining to provide personal information. What kind of HELOC modification are you looking for? When I asked them what kind of changes a modification would make, it seemed like it was mostly a very small interest rate decrease and pushing the maturity of the line out a year or two. Nothing that seemd to help me much.

Here's how alot of banks view modifications. They don't have to do them.

I have yet to hear of a successful mortgage settlement. I only hear of loan mods being successfull. They are kinda viewed as a second chance to get back on your feet. Most banks will want to know, how did you get 4 months behind? What has changed now?

You get the idea.

Also, if you look at your Wells HELOC loan agreement, there should be an address listed for settlements. My agreement includes this in Section 13: My Promise to Pay.

That is because very few people who are in the situation of not being able to pay their bills/mortgage, have access to $100k or more to settle a mortgage. Because if you have access to that kind of money, you are probably still paying your mortgage.... But mtsims and I are really talking more about settling on the HELOC, which isn't quite the same. Secured yes. However, in my case, they are certain to come away empty handed if they don't settle.

That is true. Let me know if you guys have any success with this. I always love passing on success storys when people are going through tuff times.

i work in foreclosures and have seen successful settlements, though most people do short sales and end up moving.
these days the houses are not even selling at the auctions and to be honest, the banks really do not even want the house as they already have too many that they cannot sell.
what state are you in? i know in NJ the governor set a program that pretty much forces the bank to show up in court and meet with the deft and a mediator to try to work out options.

I am in California. We are a non-judicial state, so the lender can ask the trustee to foreclose on a property without ever going to court. And the whole thing can close in roughly 90-120 days I believe.

I expect that if/when they move to foreclose, I will probably have to sue Wells Fargo to drag out the process. It's the only way you can get in front of a court in a foreclosure here. That will give me the best leverage to work a modification. The longer the process can be delayed, the more willing they should be to modify the loan.