How to Settle Second Mortgage with Citimortgage

[String]

I had a BK in 2008 and then later did a loan modification/reafirm on my first mortgage of my house. The second mortgage is with Citi and was discharged and I never heard from them again. However, their is still obviously a lien on my house.

 

Back in 2008 my house was about $80k in upside down, but now it is getting back to the value I bought it at.

I'm getting concerned that if the value flips to positive, that Citi could foreclose. What is the best way to go about settling with them? Should I call and offer to settle?

[Kuuner]

Good question. Both your first and second were discharged by the way. Usually (I say usually) the Citi 2nd just sits in a charge off queue on someone's computer and doesn't get looked at. If it's been this long, I personally wouldn't worry about them coming after you and foreclosing. It's possible. Not probable (Please note this is just my opinion, not legal advice) that they would but again, after what, nine years they've said nothing? It's not like we set up our queues to wait until some magical counter pops up with an increase in value that warrants a look. It's there and we CAN look at it but if it was charged off and included in bankruptcy, we usually wait for a borrower to contact us offering a settlement before we do anything. We let YOU do the work to bring the loan back to our attention. Starting to get my point here?

 

Are you trying to sell the property? If so, yeah, I can see how this would be important. Are you trying to sleep better at night trying to make sure the next phone call or letter or door knock isn't the 2nd saying they are gonna foreclose? Well, yeah, I can see that being important to you as well. Interesting with City though is that they are part of the national servicing settlement for predatory practices in the past and many of the bad junior liens that they charged off long ago were reconveyed back to the borrower without any consideration from the borrower. While you might not be that lucky, I think it would be worth checking into it before you do anything. you can order a prelim (Not as easy as picking up a phone and requesting but not difficult to get a preliminary title report. Might cost you but it's worth it) and see what liens show as outstanding. Try the recorders office?

 

If the lien is still there and you have to have this settled, make contact and ask them if settling is an option. They will more than likely immediately order an appraisal and put your loan back on their radar screen. Be prepared to be disappointed if you have equity above and beyond total debt and be prepared to be offered a modification instead of a settlement if your financials (That they will no doubt require) show you have the ability to service the debt. are you prepared to start repaying the loan and getting back on current status to avoid the possibility of foreclosure? If not and you are hell bent on settling, you should come up with an amount that you can support and document. Don't just say, "I'll give you five grand" unless your debt is five grand or, unless you can help them see the light on why the five grand is better to take now.

 

They have no incentive to settle based on what you have posted. The lien survives. It's not costing them anything. YOU are the one with the motivation so, you'll have to sell them on why its in both of your best interests to settle if you won't do a loan mod.

[String]

I don't absolutely have to have this settled now. I'm not planning on selling any time soon. However, I've gotten my finances back on track and I'm paying off the first mortgage, so ultimately I don't want to lose the money I'm paying against this place. At some point, I'd like to sell it and yeah I do worry at times about getting a foreclosure notice out of nowhere. I should have probably addressed this sooner than now, but that's water under the bridge now.

 

Right now the house is worth about $340k and I owe about $350k with the second added into it, so it is pretty close to a wash. It will probably be even money by end of this year.

 

I'm just wondering what my best option is here.

Edited June 15, 2017 by String

[Kuuner]

What is the balance on the first and who is the lender (servicer) on it? Balance on the second? What state is the property in?

[String]

What is the balance on the first and who is the lender (servicer) on it? Balance on the second? What state is the property in?

 

State is Oregon.

 

Balance on 1st = $273k through Arvest Central Mortgage (original Aegis and then sold during the housing market crash)

Balance on 2nd = $78k

[lojaq]

I had a somewhat similar issue during my divorce and bankruptcy. My ex-wife had the primary home but stopped making the mortgage payments before she eventually left the country. I reclaimed the house and had the lender add any arrears to the backend of the loan. Citi Mortgage held the second note but wrote it off during the BK. However, before getting approval to modify the 1st mortgage, I had to either have Citi agree to become a subordinate to the modified first note or I had to payoff the second note since it had already been written off.

 

Citi advised me that I could settle with an automatic approval if I pay 25% of the unpaid amount. I countered by offering them 15% in one lump sum and requested the removal of any negative entries on my credit reports. They finally accepted after 3-4 weeks. It took a few weeks because all requests sit in a queue awaiting a manager's approval. They were also willing to the accept payments.

 

Hope this helps.

[Kuuner]

 

What is the balance on the first and who is the lender (servicer) on it? Balance on the second? What state is the property in?

 

State is Oregon.

 

Balance on 1st = $273k through Arvest Central Mortgage (original Aegis and then sold during the housing market crash)

Balance on 2nd = $78k

 

The figures aren't attractive enough to foreclose by the junior so, from that standpoint at least, time is on your side. For Citi to initiate any foreclosure, they would have to pay the senior lien off and they just aren't going to stroke a check for $275M to collect something significantly short of their balance. They would have to take the property in foreclosure, pay off the senior, evict you, rehab the property, market it, sell it, and pay commission and closing costs to do it. They have a hard money cost and then the cost of time going against them. That would be part of your negotiation with the second lienholder.

 

Based on my calculations, after rehab, selling and holding costs, you have an effective market value of about $300M. You have a first lien balance of approx. $275M. If I were in your shoes (This is just an opinion), I'd offer them the difference to settle. Again, with the spelling out of how this would go down in a foreclosure sale. If it went to sale, they would maybe collect $25M after all the dust has settled. $25M against $78M. That's almost a 33% recovery on a charged off loan. That's a win for them. The unknown is...do you have that discretionary cash laying around? More than likely they will require you to show them your financials and will want to modify your loan, capitalize delinquent interest and get you paying again. This scenario is also a win for you assuming you have the cash to do it. If not, offer less?

[String]

I had a somewhat similar issue during my divorce and bankruptcy. My ex-wife had the primary home but stopped making the mortgage payments before she eventually left the country. I reclaimed the house and had the lender add any arrears to the backend of the loan. Citi Mortgage held the second note but wrote it off during the BK. However, before getting approval to modify the 1st mortgage, I had to either have Citi agree to become a subordinate to the modified first note or I had to payoff the second note since it had already been written off.

 

Citi advised me that I could settle with an automatic approval if I pay 25% of the unpaid amount. I countered by offering them 15% in one lump sum and requested the removal of any negative entries on my credit reports. They finally accepted after 3-4 weeks. It took a few weeks because all requests sit in a queue awaiting a manager's approval. They were also willing to the accept payments.

 

Hope this helps.

 

lojaq, thank you for the comments. When did you do this?

[String]

The figures aren't attractive enough to foreclose by the junior so, from that standpoint at least, time is on your side. For Citi to initiate any foreclosure, they would have to pay the senior lien off and they just aren't going to stroke a check for $275M to collect something significantly short of their balance. They would have to take the property in foreclosure, pay off the senior, evict you, rehab the property, market it, sell it, and pay commission and closing costs to do it. They have a hard money cost and then the cost of time going against them. That would be part of your negotiation with the second lienholder.

 

 

 

 

Based on my calculations, after rehab, selling and holding costs, you have an effective market value of about $300M. You have a first lien balance of approx. $275M. If I were in your shoes (This is just an opinion), I'd offer them the difference to settle. Again, with the spelling out of how this would go down in a foreclosure sale. If it went to sale, they would maybe collect $25M after all the dust has settled. $25M against $78M. That's almost a 33% recovery on a charged off loan. That's a win for them. The unknown is...do you have that discretionary cash laying around? More than likely they will require you to show them your financials and will want to modify your loan, capitalize delinquent interest and get you paying again. This scenario is also a win for you assuming you have the cash to do it. If not, offer less?

 

 

 

Thanks alot Kunner. You have been very helpful. I will look into the settlement and if this fails a loan modification. Capitalizing interest over the past 7-8 years would look ugly.

[Kuuner]

 

 

Thanks alot Kunner. You have been very helpful. I will look into the settlement and if this fails a loan modification. Capitalizing interest over the past 7-8 years would look ugly.

 

Agreed...that's another negotiating chip for you though. Good luck.

[lojaq]

String, I settled in July or August of 2016.

[String]

Thanks so much you guys. I can't tell you how much I appreciate your help and advice

[String]

String, I settled in July or August of 2016.

 

By chance, do you recall what department you spoke to at Citi? I suspect it is the recovery department.

[lojaq]

It probably was but here is the phone number that I used to contact them (Citi Mortgage - 800.395.8897). They will redirect if needed once they check the status of the loan.