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12/10/2014 : michaelgaddis : 2:44 pm : Bank of America DOJ, California Loan Modification Attorney
The Law Offices of Michael Gaddis recently negotiated the forgiveness of a charged off 2nd lien held by Bank of America. The homeowner, a resident of Valley, Center, CA, retained Michael Gaddis to negotiate a settlement and release of lien with Bank of America. The 2nd lien had an outstanding principal balance of $56,277.03 and had only recently been charged off. Bank of America is a VERY difficult servicer and negotiating settlements on 2nd liens can be nearly impossible at times. However, Michael Gaddis knew that once the underlying debt had been charged off that that a window of opportunity had been opened. Utilizing his close relationship with Bank of America Michael Gaddis approached the bank with a settlement offer. The bank reviewed the offer and after a couple of weeks Michael Gaddis was notified that there might be a possibility of getting the entire lien extinguished via the Department of Justice (“DOJ”)settlement provisions pertaining to 2nd liens. Although optimistic, Michael Gaddis continued to push the settlement while continuing to encourage his contacts to get the loan extinguished via the DOJ program. Finally, on December 3, 2014 the borrower received a notice from Bank of America stating that they had received full forgiveness of the 2nd lien. The borrowers were stunned to say the least.
As mentioned in previous posts, borrowers that have outstanding liens on their property need to try and negotiate a settlement on these liens as soon as possible. Many borrowers think that if the loan has been charged off or if they have not heard from their lender in a while that the loan has been forgiven and they are off the hook. The problem is that the lender retains a security interest in the property and most definitely will create problems for the homeowner in the future. Now is the perfect time to negotiate settlements on 2nd liens such as a home equity line of credit (“HELOC”). As the housing market recovers and the value of homes continue to rise the leverage that borrowers have against the lenders will decrease.
If you or someone you know has a lingering junior lien such as a HELOC and you are wondering what your options are please contact Michael Gaddis, Esq. at 760-692-5950 or by email at Michael@LawOfficesofMG.com.
12/03/2014 : michaelgaddis : 2:05 pm : California Loan Modification Attorney
WARNING: Attempt To Settle Unpaid Second Liens Before It Is Too Late! When the housing crisis began in 2008 and house prices began to drop homeowners desperately began trying save their homes by renegotiating the terms of their loans. Homeowners with more than one loan securing their property concentrated their efforts on modifying their 1st loans putting any junior liens on the back burner. Homeowners felt safe neglecting the junior liens because the drastic fall in home values effectively negated the ability of the junior liens from foreclosing on their property. The junior liens still had the power to foreclose, however, due to the foreclosure laws in California foreclosing on the property was not in the best interest of these junior lien holders. Many homeowners modified their first liens and then “forgot” about the junior lien. Over the years these homeowners might have received a threatening letter or two from the junior lien holders but whatever threats were contained in these letters were negated by the reality that their was not a financial gain for these junior lien holders to foreclose. Likewise, homeowners that file Chapter 7 Bankruptcy dismissed the potential threat of junior liens due to the misguided belief that a Chapter 7 discharge released the junior lien holders’ right to foreclose on the property. These homeowners failed to realize that although their personal liability to pay the debt to the junior lien holder was extinguished, the security interest on the property remained.
Now, over 6 years later, homeowners are beginning to realize that their “safety net” is disappearing. The “safety net” was the negative equity position that was preventing the junior lien holders from exercising their rights to foreclose on the property. As values increase the “safety net” shrinks. As these junior lien holders begin to reevaluate their position, the risk to homeowners that have outstanding liens on their property increases.
The best advice is for homeowners to be proactive and try and negotiate a settlement to release these liens before the increasing home values reduce their leverage position. The first problem is figuring out who is servicing the 2nd lien. Sometimes, for numerous reasons, the 2nd lien stops sending paperwork to the homeowner. Homeowners typically feel that if the junior lien holder is no longer contacting them that they have “gone away”. Rest assured that junior lien holders do not “go away”. Many times they investors on these loans will sell off the lien rights to these liens to companies that specialize in enforcing lien holder rights. These companies are able to purchase these rights at substantial discounts. They will patiently wait until: 1) the equity in the home rises enough to press the foreclosure process; 2) they are contacted for release of the lien through a short sale; or 3) they are approached for a settlement offer.
Attempting to negotiate a settlement to release the lien while leverage still exists is the most advisable course of action. As the junior lien holders position increases and the settlement amount will likely follow suit. Some loan servicers are easier to work with than others. Greentree, Real Time Resolutions and Chase will typically entertain settlement offers while Bank of America and Wells Fargo can be more challenging.
The trick is to settle the lien for as little as possible.
If you have an outstanding junior lien and would like to consult with Michael Gaddis about negotiating a settlement to release the lien please contact Michael at 760-692-5950 or by email at Michael@MichaelGaddis.com.