You may have been one of those to receive an “offer letter” to settle your second mortgage recently. These typically go out to homeowners when they are substantially behind on payments (over 6 months). Alternatively, you may just be curious to know if your second mortgage can be settled for a lump sum, as so many have been recently.
Why Do Lenders Settle Second Mortgages?
For most homeowners, their second mortgage is not attached to any real equity. This common situation results when the value of the property has declined in value. The common scenario is that the home value is equal to or less than the amount of the first mortgage. This leaves the second just “swinging in the wind” with no equity (or actual value) to hold on to. From the lender’s perspective, this second mortgage has very little value. It would make no sense for the second mortgage to foreclose because they’d have to pay off the first….which would result in a loss, not a benefit to them. Under these circumstances, most second mortgages can be settled for pennies on the dollar!
What is the Procedure to Settle a Second Mortgage?
Settling a second mortgage takes time. It’s not a fast process. Typically the loan needs to be a “non-performing” loan for an extended period of time before the lender will consider a favorable settlement. The longer the loan has not been paid, the better the settlement offer often gets. Often times the lender will send the homeowner an unsolicited offer letter to settle. Keep in mind, this is their opening offer, and the initial number can often be negotiated down substantially. Alternatively, the homeowner can type up an offer letter and send it off to the lender to begin the negotiation process. Once the lines of communication is open, and all parties agree they want to settle the second mortgage, it’s just a matter of coming to a number.
Working with a Second Mortgage Professional in OC or LA
Although the general overview of the process to settle a second mortgage is straightforward, there are a number of complications that can derail negotiations or worse. If possible, it is best to work with a qualified real estate attorney who handles these types of matter to review settlement contracts and control what personal information gets sent to the lender along the way. The last thing you want to do is give the lender all the information they need to sue and collect.
McFarlin LLP handles just these types of matters. We settle second mortgages and have secured some amazing results for our clients. If you are considering a settlement on your second mortgage call our office anytime to discuss your options. Qualified real estate lawyer Jarrod Nakano is available to offer you a free consultation at our Irvine office and explain the process at (888) 728-0044. If you have any more questions