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vagentlemanroa · Nov 11, 2008, 12:45 PM

My question is about my old house. It was foreclosed on in July 2008.

On the information sent to me from the law firm representing the mortgage company, they want $136,000 out of the home. I had a second mortgage for $36,000. Now the second mortgage did not wait for them to sell the house. They wrote off the loan and sold it to one of these collection firms.

But after three months, two weeks ago the house was sold for $158,000. So the mortgage company got an extra $22,000 out of the house.

Someone told my wife from the mortgage company that they are going to jam me up on our taxes because they will send a 1099 to us.

I am confused. They sold the house and made the profit. I did not get anything. I know that the extra money was to go to pay the second mortgage but they backed off and split.

What happens to the $22,000 they made on the house? Why send me a 1099? I was told if they did not write off the bad loan that they could do that but the mortgage company got the house and the profit.

Do I get what is left? Someone explain this to me.

Fr_Chuck · Nov 11, 2008, 12:58 PM

Well actually the mortgage company can not make a profit, if they actually sell it for more than costs and debt, they have to pay the 2nd mortgage holder.

Now if at the time you had a loan for 136,000, then did you consider the legal fees, the cost of the sale, the cost of the closing fees and more, If the actual loan due as 136,000 I would be surprised that at the day of the foreclosure sale the amount was not closer to 160,00 or more.

But you can ask for an accounting of all of the money.

vagentlemanroa · Nov 11, 2008, 01:05 PM

There is no second mortgage holder anymore. They wrote it off. I know that the fee were not $22,000

lauren6318 · Nov 11, 2008, 01:37 PM

About the 1099 I don't know, but if the 2nd mortgage wrote it off as a loss and no longer hold a lien, they can't recoup the $$. The mortgage co makes the $$, not you, and if you got NO money, you don't need a 1099. Confirm with your accountant.

ScottGem · Nov 11, 2008, 01:40 PM

First of all you have a misunderstanding of what a write off is. That does not remove the lien or the obligation to pay. Its simply a way to reduce their taxes. If they sold the loan, then they had to apply 100% of what they received as income.

And yes, $22K is not unusual for fees.

As for the 1009. That would only be the case if they were forgiving you part of the balance you owe.

vagentlemanroa · Nov 11, 2008, 01:48 PM

They sold the loan to a collection house. They write if off on my credit report. I know that they do not have the loan. From talking to the mortgage company just now-the second mortgage does not exist. I know the law firm and foreclosure when we went through the steps a year ago cost about $3,000. I just saw that they wanted $135,200 and sold the house at $157,800. That is $22,700. I understand that they will get back 100% of the amount owed them. I know that if they give any to me after fees and expenses. I know that they did not do anything to the house. The house was in 100% working condition when I left.

ScottGem · Nov 11, 2008, 04:52 PM

As Chuck said, you can certainly ask for an accounting. But its not just atty fees. The balance increases though each month. With $135K it would have been almost $137K at 7%.

Fr_Chuck · Nov 11, 2008, 06:10 PM

And yes, charge off is just an accountig term, and it not being on the creidt report does ot mean it is not owed. If they sold the debt to someone, then they are the ones that will get all of the extra money

lauren6318 · Nov 12, 2008, 09:12 AM

I stand corrected. This Q&A may also be informative re: charge off & 1099

Second mortgage charge off – Do I still need to pay?