Foreclosure: Have You Stopped Making Payments Your Second Mortgage?

If you’re a homeowner who stopped making payments to your 2nd mortgage…

You may be at risk of

Dear Home Owner,

If you have (or had) a 2nd mortgage on your home, please read this letter carefully.

1. Did you have a 2nd Mortgage?
   • 80/20, 90/10? 2nd Mortgages are often acquired at the time of purchase
   • Home Equity Lines of Credit (HELOC) are 2nd Mortgages
2. Did you stop making payments on the 2nd Mortgage?
3. Do you know what happened to the 2nd Mortgage

Millions of homeowners stopped paying their 2nd mortgages after the 2008 Great Recession. Contributing factors were plummeting home values, loss of income, Chapter 7 Bankruptcy filing and Loan Modifications on 1st mortgages. Some 2nd mortgages simply stopped sending monthly statements and homeowners believed their 2nd mortgages were “dead.”

Today home values have appreciated above their highs of 2007 and 2nd mortgages are “awakening.” Not only are they “awakening,” they are being sold to extremely aggressive servicing companies who aim to collect ALL past due payments, or simply FORECLOSURE.

THE SMITH FAMILY

In 2011, the Smith family was in financial distress due to the Great Recession. Their home value was plummeting, their income was cut in half, they were behind on bills and hadn’t made a mortgage payment to their 1st or 2nd mortgage in months. A relative suggested filing for Chapter 7 Bankruptcy for debt relief, so that’s what they did. Not only did Chapter 7 eliminate their unpaid stack of bills, but it also brought their 1st mortgage to the negotiating table and they were able to work out an affordable monthly mortgage payment using a Loan Modification. In a few short months, the Smiths went from drowning in debt to debt-free with a mortgage payment they could afford. Happy Ending, correct? Unfortunately, NO!

Fast forward to 2019, and the Smiths, who had not heard from their 2nd mortgage company since their 2011 Bankruptcy filing, suddenly received a foreclosure notice in the mail. How could this be? They assumed it was a mistake, but it was not. The 2nd mortgage had gone dormant for 8 years, all the while, collecting interest on unpaid payments. By the time the Smiths contacted Sternberg Law Group, the 2nd mortgage was demanding all past due payments (8 years or 84 monthly payments, plus penalties and interest) or foreclosure was imminent.

What did the Smiths do wrong? Simple, they assumed their 2nd mortgage was gone. The purpose of this letter is to make sure you are not making the same mistake the Smith family made. 

AGAIN, ASK YOURSELF 

Did I have a 2nd mortgage? Do I know for certain what happened to my 2nd mortgage? If you’re in any way unsure of the answer to these questions, please call Sternberg Law Group now for a free consultation. 

FAQ

• How do I know if I have or had a 2nd Mortgage?
  • It was common practice for people to buy new homes with both a 1stt and 2nd mortgage. These types of purchases were commonly referred to as 80/20 or 90/10 purchases.
• What if I didn’t have a 2nd mortgage but I did have a Home Equity Line of Credit (HELOC)? 
  • A HELOC, though not a mortgage, is still a 2nd Lien on your home and has the right to foreclose
• What about the statute of limitations? It has been 10 years?
  • The statute of limitations does not apply to mortgage liens
• Does my loan modification combine my 1st and 2nd mortgage?
  • In most cases the answer is NO
• What if I filed for Bankruptcy?
  • Chapter 7 Bankruptcy does not remove mortgage liens from your home– Chapter 13 Bankruptcy does allow you to remove mortgage liens from your home, however, you must have been granted a “Lien Strip” Order by the Court and received a discharge
• Can I file Chapter 13 Bankruptcy now? 
  • Yes, Chapter 13 remains a viable option for some homeowners to strip their 2nd lien. However, there are many variables at play such as home value, the amount owed on the 1st mortgage, and other debts you may have.

WHAT SHOULD I DO NOW?

We’re happy to walk you through a free consultation to determine if your home is at risk of foreclosure from a “Dead 2nd Mortgage.” Sternberg Law Group is dedicated to educating and helping homeowners make the best and safest choice for their future. If you or someone you know has any doubts about the status of a 2nd mortgage, give us a call. We are here to help!

Sincerely,

The Sternberg Law Group

JOSHUA STERNBERG, ESQ.