SOL on a Mortgage?
Date: Fri, 11/28/2008 - 06:00
1. Would they accept a lump sum payment to get out of this? I'm sure by this time this company paid pennies on the dollar for this loan.
2. Does a SOL apply to mortgages? Or am I reading it wrong, in that after 5 years (I'm in OK), they can't sue me for it, but they could still foreclose, since they have the deed.
This one has been hanging over my head for a while now, and I'd like to figure out how to get it resolved.
Thanks,
Kevin
Secured debts are a little tricky when it comes to BKs. The deb
Secured debts are a little tricky when it comes to BKs. The debt itself was discharged, so they cannot directly sue you for money owed. However, security interests (liens) are not extinguished in a BK. So while they may not be able to sue you for the debt, they do still hold a valid lien against the property until you've fulfilled your original obligations created by virtue of the security agreement. As long as their lien remains, they can enforce it by ultimately attempting to foreclose on the property.
HOWEVER, they are a 2nd position lienholder. Your first mortgage has priority and rights to the property before the 2nd. In other words, the 2nd mortgage cannot foreclose while the 1st's lien is in place. (Otherwise they would have done it already).
They do have the option of buying out your first mortgage. They could payoff your first mortgage in order to release that lien; then they would become a first-position lienholder and could foreclose at that point. The odds of them doing that are unlikely, unless you have a lot of equity in the house.
State law varies, but generally liens are not affected by SOL. Liens can remain forever until released. (That is part of the reason you buy title insurance when you buy a house -- because there could be a lien from the 1800s that is still valid). That being said, they will generally sit on the lien until 1 of 2 events: 1) If you ever try to sell the house or refinance the first mortgage, the 2nd's lien would have to be paid first; or 2) If you ever payoff the first mortgage, then they will be able to foreclose. All the while, the account is accruing interest. So it will be better to take care of it sooner rather than later; because it won't go away and the balance will only go up over time.
As to them settling, it really is up to their policies. Maybe, maybe not. Keep in mind, they are a secured creditor and they know that you can't ever get the deed until they're paid. In that sense, they have the upper hand. So they may not accept a settlement for that reason, or if they do it probably won't be one of these 50% deals.
All in all, you can take solice in that they won't be foreclosing anytime soon (until the 1st lien is out of the way). However, it will have to be satisfied eventually before you can ever get the deed.
Your attorney should have explained the ramifications of a mortgage/lien at the time he filed BK for you ...
