[litka]

We have managed to catch on our first lien, the lender was holding both 1st and 2nd liens, but ended up selling the 2nd lien to a third party, we are 23 months behind on the 2nd trust, we are willing to make payments as long as the 2nd lien holder agrees to modify the loan, but do 2nd lien holders usually force to foreclose? What is the best way to negotiate with the 2nd lien holder? Would they ever offer a one time settlement? If so, what would be reasonable? 40cents to a dollare?

[George_1950]

In one sense, you may as well be asking for a definition of "beauty". I believe the analysis begins with the value of the collateral (reasonable minds can disagree about valuation). Then, add the first mortgage debt, plus the second mortgage debt. If total indebtedness is greater than the value of the collateral, you may get some discount (settlement) from the second lien holder. The amount of discount may depend upon how much the current holder paid for it.

[litka]

1st is $764k, second is $191k plus $40k in past due so about $230K, property value is $875k-$900k, I am willing to settle it for $80-$100k, one time payment... Based on this, do you think they will take the offer? My concern is that I am supposed to pay $30k by next week to bring my 1st current and I am ready to do it, but what I am worried is me paying this and then still having the 2nd lien holder (probably some collection agency) forcing a foreclose the house.

[George_1950]

Looks like the 2nd is about 59% secured: ($900k - $764k = $136k) / $230k = 59%. $230k x 59% = $135.7k. This is the approximate amount the 2nd might realize in a foreclosure, if the foreclosure sale brought 100% value, which it most likely will not do, right? Why not offer 40% of the secured portion of the debt owed to the 2nd (40% x $135.7k = $54k)?

[litka]

Great answer, this is the exactly what I was trying to figure out... Thanks.

[litka]

George, you were right on, they accepted a $50k settlement.