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Will the second pay off the first?

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sprovost

Member
What is the name of your state (only U.S. law)? Maine
I went through a bankrupcy in 2005. First mortgage was discharged @$25,000 with GMAC. 2nd was a Home equity @$125,000 I reaffirmed. I have tried a loan modification with both companies to no avail. My Home equity (2nd) also included a ARM which kicked in in January. Raised my mortgage payment by $500.00 a month. I have stopped payment on the first (GMAC) and I'm current with second. My question is this: If GMAC starts to foreclose, what do you think the chances would be that the second lien holder will pay off the first to stop foreclosure. Thank you for your time and service
 


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tranquility

Senior Member
A secured loan is not going to go away in BK without the security being taken--unless it is reaffirmed. While confusing, I suspect the OP reaffirmed both loans.
 
S

sprovost

Member
sprovost said:
What is the name of your state (only U.S. law)? Maine
I went through a bankruptcy in 2005. First mortgage was discharged @$25,000 with GMAC. 2nd was a Home equity @$125,000 I reaffirmed. I have tried a loan modification with both companies to no avail. My Home equity (2nd) also included a ARM which kicked in in January. Raised my mortgage payment by $500.00 a month. I have stopped payment on the first (GMAC) and I'm current with second. My question is this: If GMAC starts to foreclose, what do you think the chances would be that the second lien holder will pay off the first to stop foreclosure. Thank you for your time and service
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For tax purposes house is valued at 142,000. My credit report states that the first was paid off with GMAC. I've really tried to find an answer to this question. I've even asked 2nd lien holder for help with this. They won't work with me at all. I work for the USPS and my hours have been cut drastically and if Saturday delivery is eliminated I will have to find another job. At 54 I'm not excited to to go into the job market and try to find work for half the pay. I'll do what it takes but neither lien holder is very cooperative.
 
S

sprovost

Member
tranquility said:
If the house is worth 142, there is no reason for the second to not foreclose.
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The second is a home equity @125,000. I'm current on this loan but 2 months behind on first with GMAC @25,000. If I default on 1st do you think the second will pay off the first? Dosent seem to me they would let gmac forclose if I stop making payments. I've tried to work with them but no go with both lien holders.
 
I

Ivory Ghost

Junior Member
If you no longer meet the 2nd mortgage holders credit criteria they may not be willing to refinance and pay off the first for you. GMAC will eventually start foreclosure when they are not paid. The second mortgage holder will then have to make a decision. If they still don’t feel your credit is strong enough what they will probably do is pay off the first at sheriff’s sale and accelerate their note with you. The best solution may be for you to try to locate a lender where you do qualify to pay off both notes. The worst thing to do is wait for GMAC to begin foreclosure. Good luck.
 
C

CameronNewport

Member
This thread is a disaster. Although it's a bit stale, I'll chime in just in case the OP returns.

First, what is the value of the house? The tax appraisal is probably not very accurate. Go to Zillow.com for a more accurate estimate.

But let's assume that the house is worth $142k. If the first forecloses, it'll probably sell for $110k at auction. The first will get it's $25k, plus attorneys fees, foreclosure fees, etc. ... let's say $35k total. That leaves $75k for the second.

So, the question is, will the second go through the trouble of paying the first, thereby investing an extra $25k into an already bad deal, in order to protect the possibility of getting an extra $50k in the future? In my opinion, the answer is probably no. It would probably prefer to have $75k now (meaning, at foreclosure), and then cut ties with you. And that assumes that the house is only worth $142k. If the house is worth more (again, look at Zillow), then it becomes even less likely that the second will pay off the first.

Ignore all of the other posters with regard to the bankruptcy. They don't get it. Clearly, the first can be discharged, and clearly the first can still foreclose. You already seem to understand that.
 
T

tranquility

Senior Member
CameronNewport said:
This thread is a disaster. Although it's a bit stale, I'll chime in just in case the OP returns.

First, what is the value of the house? The tax appraisal is probably not very accurate. Go to Zillow.com for a more accurate estimate.

But let's assume that the house is worth $142k. If the first forecloses, it'll probably sell for $110k at auction. The first will get it's $25k, plus attorneys fees, foreclosure fees, etc. ... let's say $35k total. That leaves $75k for the second.

So, the question is, will the second go through the trouble of paying the first, thereby investing an extra $25k into an already bad deal, in order to protect the possibility of getting an extra $50k in the future? In my opinion, the answer is probably no. It would probably prefer to have $75k now (meaning, at foreclosure), and then cut ties with you. And that assumes that the house is only worth $142k. If the house is worth more (again, look at Zillow), then it becomes even less likely that the second will pay off the first.

Ignore all of the other posters with regard to the bankruptcy. They don't get it. Clearly, the first can be discharged, and clearly the first can still foreclose. You already seem to understand that.
Click to expand...

So, what you're saying is:
If the house is worth 142, there is no reason for the second to not foreclose.
Click to expand...
 
T

tranquility

Senior Member
I don't think you understand the question. Is the second going to pay the first?

When would that be the question? Then, at that point, will the second pay off the first to continue the mortgage contract? No. The money issues requires they get what they can now.
 
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CameronNewport

Member
tranquility said:
I don't think you understand the question. Is the second going to pay the first?

When would that be the question? Then, at that point, will the second pay off the first to continue the mortgage contract? No. The money issues requires they get what they can now.
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Actually, I understand the question quite well. Sometimes junior lienholders pay off senior liens to protect their junior liens from being wiped out at foreclosure. The OP wants to know if that is likely to happen in his case. I answered that question.

What you suggested is highly unlikely to happen in my opinion. Why would the second foreclose?
 
T

tranquility

Senior Member
I agree that if a foreclosure is begun, the second is not going to pay off the first to stop it with the numbers the OP is showing. But, what do we call it if the second does not pay off the first after the first begins foreclosure? Are they not joined to the suit? If either initiated foreclosure, the result is the same.
 
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CameronNewport

Member
tranquility said:
I agree that if a foreclosure is begun, the second is not going to pay off the first to stop it with the numbers the OP is showing. But, what do we call it if the second does not pay off the first after the first begins foreclosure? Are they not joined to the suit? If either initiated foreclosure, the result is the same.
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You've lost me. I don't see how any of this is relevant to the OP's question ("Will the second pay off the first?").

Moreover, the result is not necessarily the same if the second forecloses. While the OP may lose the house in either scenario, one scenario may also have other ramifications.
 
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