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Terry L.
Terry L., Lawyer
Category: Consumer Protection Law
Satisfied Customers: 2501
Experience:  Better Business Bureau, 13 Years bankruptcy and debt experience
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In Sept 2010, we went through Chapter 7 in Oregon. We have

Resolved Question:

In Sept 2010, we went through Chapter 7 in Oregon. We have 2 mortgages, neither were reaffirmed. We still pay on the 1st, haven't paid on the 2nd with Chase in 2 1/2 years. Chase turned collection of our 2nd over to Five Lakes. The 1st is at $170k the 2nd at $160k and the house is worth maybe $260k. Five Lakes wants $80k but we have no money and can't afford a monthly payment. Can we go back to Chase and try to settle with them directly? Can we try to refi and offer Chase what equity we would have? Will a lender even work numbers for us without considering the amt due on the 2nd? We need a lien release.
Submitted: 12 months ago.
Category: Consumer Protection Law
Expert:  Terry L. replied 12 months ago.

Terry L :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L :

Since both loans were not reaffirmed, the debts were discharged in the bankruptcy case.

Terry L :

Both liens will remain on the property though, until they are paid, or until the house is sold, or foreclosed upon.

Terry L :

So, if you are working with the lenders to resolve the matter, it sounds like you have taken the right first steps.

Terry L :

It would be up to the lender on whether they wish to settle the debt with you.

Terry L :

Settle, in order to release their lien.

Terry L :

Any refinance would take the 2nd mortgage into consideration, as they are not required to release their lien until paid in full or they agree to settle for less to do so.

Terry L :

You can talk to the bank to see if they are willing to work with you, but they don't have to play ball if they don't want to, if they wish to hang back, in case the market ever gets better.

Terry L :

They cannot collect from you, nor are they likely to foreclose if there isn't enough value there to pay off the first and pay them a significant dividend on their loan balance.

Terry L :

But, it wouldn't hurt to talk to them to see if they would be willing to take a chunk to call it even, if you can get the funds on a refi. Every lender is different, so it would be worth a few phone calls.

Terry L :

Talk to your tax advisor though, as any savings could be taxable as income to you come tax time.

Terry L :

let me know if you have any further questions.
Thanks and good luck.

Terry L :

Terry

Customer:

We were given advice at one point to send Five Lakes a "cease and desist" letter to maybe prod them into settlement talks. Do you think that is appropriate or effective?

Terry L :

They cannot collect on the debt because of your bankruptcy

Terry L :

But, absent that, I don't know if that will make them more amenable to conversation on settlements.

Customer:

Well, this is not any new info - we're stuck in limbo wondering which is the best road to take for our family.

Terry L :

You can try to reach out to chase or five lakes to negotiate the settlement

Terry L :

So, it sounds like they are offering 50% discount to clear title.

Terry L :

If you show them an appraisal and the balance on the first, that can be the start of negotiations.

Terry L :

Although, you would need to find out if you can refinance to settle with them, as the first may not be willing to extend that much more credit.

Terry L :

I would look into that first to see where you can get the funds, and how much you are able to get

Terry L :

The most you would get is $90k so, you may be able to refinance to pay $80k if the first mortgage is willing to do that

Terry L :

and you can use the proceeds to pay the 2nd to clear title.

Terry L :

You may want to talk to a real estate attorney to negotiate.

Customer:

We can try. Obviously we have credit issues because of the BK so our rate probably wouldn't be that good and we can't afford a larger monthly mortgage payment.

Terry L :

you can always revisit this in a few years as well.

Terry L :

As I stated, it's unlikely M2 would do anything at this point to foreclose, since they wouldn't even get 1/2 of the balance owed. Especially after attorneys fees and court costs to foreclose.

Terry L :

So, they'll just likely sit in the wings until the values significantly rebound

Terry L :

But talk to prospective lenders about possibly refinancing, you never know what you can get.

Terry L :

Any further questions?

Customer:

Are you familiar with Five Lakes? We wonder if they have authority to promise a lien release if a settlement amt is reached. If they put that in writing, do we have recourse?

Terry L :

Have them verify authorization to settle from Chase

Customer:

Is it really a good idea to show your financial hand - balance on the first and an appraisal?

Customer:

I guess we're done...?

Terry L :

well, that is your call to make, i would only show it if it was to your advantage, but here, it would not be, since there's an extra 10k

Customer:

thank you

Terry L :

You are welcome. Please click accept to close out the question.

Terry L :

thanks

Terry L :

Terry

Terry L., Lawyer
Satisfied Customers: 2501
Experience: Better Business Bureau, 13 Years bankruptcy and debt experience
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