Help needed here. My 1st mortgage is willing to modify (thanks to the gov't), however, my 2nd is a "securitized" loan (different lender) and they say they are unable to modify. The woman at the bank said if I modify my 1st, in order to keep my loans, my 2nd payment would actually increase to pay back missed payments. Or, I could let the 2nd go to charge off state and be sold to a collections agency. The collections agency would then try to settle the debt. I am seriously considering this, as my credit is already damaged. What could I expect in terms of settling with the collections agency?

Since it is secured by property, most likely payment in full plus late charges, attorney fees. This is not like unsecured credit cards, they are secured by a lien on the property and have less need to settle for less