2nd lien holder agree to recieve certain amount,will release the lien and charge off the remaining debit as

Asked by Yousuf Choudhry, Sterling, VA Thu Apr 3, 2008

collectable balance and then their recovery dept will contact with seller to make arrangements on this balance,and report to credit bureaus as charged off and shows the remaining balance as owed to the bank....can they really come after the seller?while they agreed to recive such amount, can anyone please hlp me on this.....thanks

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Raffay Abid, , Hicksville, NY
Fri Apr 4, 2008
If 2nd lien holder agree on certain amount. then it shows on your credit report paid and settled. and remaining amount is charged off and they don't come after seller
Web Reference:  http://onestepuprealty.com
1 vote
Ute Ferdig, Agent, Auburn, CA
Fri Apr 4, 2008
Just a quick note to Cheryl. The Mortgage Debt Relief Act does not prevent the lender from pursuing a deficiency judgment. It only deals with how the forgiven debt is treated for tax purposes on a federal level. Yousuf's scenario deals with the opposite situation (i.e., the lender agrees to the short sale, but does not forgive the debt altogether). If the lender were to forgive the unpaid portion of the loan, then the tax payer may qualify for an exemption under the Mortgage Debt Relief Act. I hope this helps.
1 vote
Ute Ferdig, Agent, Auburn, CA
Fri Apr 4, 2008
Hi Yousuf. Yes, unless the approval letter from the junior lien holder states that their agreement is a release of all claims that the lender may have, they can try to collect the balance later. Agreeing to receive the lesser amount does not necessarily automatically waive the lender's right to collect the whole amount. They just agree to the sale without being paid in full as they may know that may get nothing if the property is foreclosed on by the first. Many lenders offer the seller to pay back the deficiency at a low interest rate over 15-20 years or even at zero interest. The new loan is usually unsecured. I hope this helps.
1 vote
Larry Story, Agent, Greensboro, NC
Fri Apr 4, 2008
Yousuf,
Usually when a financial institution takes a settlement payment for a lessor amount yes they will charge it off on their taxes. Then their customer will receive a 1099 statement for the amount that they charged off which will be treated as income on their taxes.


Larry Story
Coldwell Banker Triad
1 vote
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