Settling Second Mortgage Without Foreclosure
Even with the recent partial recovery in Arizona home values, many homeowners find themselves with mortgages that exceed the value of their home. Specifically, second mortgages that are beyond the equity in their home. Here’s an example:
1st Mortgage = $250,000
2nd Mortgage = $75,000
Home Value = $200,000
If you are in a situation like this and you are already behind or in default on your second mortgage, it may be possible to stay in your home and negotiate a settlement or release of the second mortgage.
HELOC & Second Mortgages that are Essentially Unsecured
If you have a HELOC or second mortgage that is essentially “unsecured” because there is not enough equity beyond the first mortgage to protect the second mortgage, then we may be able to negotiate a settlement.
The ability to negotiate a settlement of second mortgage debt in this scenario depends on several factors, including:
Was the Second Mortgage “Purchase Money”?
Can the Second Mortgage Sue You?
How Long Have You Been in Default on the Second Mortgage?
Are There Other Defenses to the Second Mortgage Debt?
Do You Have a Hardship?
You may not need all of these factors to be in your favor, but we will do a complete analysis of your situation to determine if a second mortgage settlement is appropriate for you.
Mortgage Debt Statute of Limitations = 6 Years
Under Arizona law, a mortgage lender has 6 years to initiate a foreclosure or sue you (if they’re allowed), once you default on a loan. Depending on where you are in the process and how much equity your home has or doesn’t have, will affect the strategy we recommend and whether you can settle your second mortgage.
How to Settle a Second Mortgage: You Must Act Quickly
If you’ve continued to pay your first mortgage, but are already in default on your second mortgage, and there is no equity to secure the second mortgage, it may be possible for us to negotiate a settlement and release of the second mortgage.
But you must act quickly because Arizona property values are rising. If the equity in your home increases, settling a second mortgage may not be possible.
It should be noted that we are not suggesting you stop paying your mortgage if you are current. This article simply addresses the options that may be available to those already in default on a second mortgage because they could not afford it. Anytime you stop paying a mortgage, there is a risk of foreclosure. But the specifics of your situation may make that risk very high or very low, depending on several factors.
We offer a free consultation to help you determine if settling a second mortgage may be possible for you and what your options are.