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Permalink Reply by Jeff Payne on October 28, 2011 at 8:34am

Harry, why would that be any different that someone who used the money to purchase the home or do repairs or renovations to the home?  While I am sure that everyone would love to eliminate the second, not everyone has the hardship to be able to do this.  I would never suggest BK unless it is totally necessary and after all other avenues have been exhausted.

I have seen this happen on seconds more than once, it not much different than a loan modification on the second.  Not really much different than the first being made whole and the second taking a short sale.

To the original post, yes it can be done, it is not easy, it just takes getting to the right person at the mortgage company to make it happen.

Who is the bank?

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Permalink Reply by Ray Snook on October 28, 2011 at 9:34am

For a start as far as I am aware you can only strip a 2nd lien in a Chapter 13 bankruptcy - which is a re-organization. You have to keep paying a monthly payment for between 3 and 5 years, and if you default on that then the deal with that creditor is no longer valid. You cannot strip a 2nd mortgage in a Chapter 7 liquidation bankruptcy therefore this doesn't really help the guy because he still needs to make payments.

This is my understanding - though I am not an attorney.

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Permalink Reply by Ray Snook on October 28, 2011 at 9:52am

I think then that they must have filed Chapter 13 and made the mandatory payments for 3-5 years as determined by the Bankruptcy court.

I have personal knowledge of people who have negotiated away the 2nd lien with a settlement, one guy with a 120,000 second paid it off with 30,000 and it did not dramatically affect his credit. He was moving out of state, had no financial hardship, but told the 2nd that he would let it go to foreclosure if they didn't settle. They settled. he stills owns the house and rents it out.

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Permalink Reply by Jeff Payne on October 28, 2011 at 10:19am

Harry, a hardship is a hardship, i really don't care what they spent the money on.  I would have them consult the proper professional, always do but would also fight for them to try to reduce or short payoff the second lien. It is just the same as a loan modification, which is in essense what this would be.

I certainly wouldn't judge them and tell them that they have to seek a BK attorney unless it was needed.

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Permalink Reply by Jeff Payne on October 28, 2011 at 8:36am

Garrett, can you explain further? How do you accomplish a 2nd lien strip?

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Permalink Reply by Ray Snook on October 28, 2011 at 10:06am

SO this is not a lien strip per se. Are you saying Garrett that the lien is removed from the property when the 2nd is charged off?

Informative article on this exact subject which the original poster and others may find interesting:

http://www.ajdigitaledition.com/pdfs/PDF/2011_LA/2011_07_20/2011_LA...

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Permalink Reply by Jeff Payne on October 28, 2011 at 10:22am

It appears to me that they homeowner would most likely be better off approaching the lender and trying to modify their mortgage.  I know of homeowners who have gotten principle reductions and have been able to pay a lump sum that was short in order to satisfy the 2nd lien.  Short sale might be a bad term, loan modification might be the better term.  At any rate, no matter if they went to Italy on the money or bought a boat, it can be done. 

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