I participate in forums in my field and often provide great feedback and advice in my area of expertise. Now, I'm reaching out to this forum, because I need some guidance from you RE experts. Here is the situation:

Bought home in AZ in 07' for 450k ($380k & 67k loans), now worth $240k.

Both loans are money purchase loans, severely underwater, and AZ is an Anti-defiency state. We were prepared to strategically default.

But, B of A ended up permanently modifying the FNM 1st loan 3 months ago (40 yr / 5% / and $100k was put in forebearance a/c). fully escrowed Payment is $1550/mo which is less than comparable rental rates, we love our home, it made sense to stay.

I then asked B of A to move forward on analyzing and modifying the second Heloc 2nd mortgage, also a money pruchase loan. I find out today, that B of A has sold off the second loan to Greentree who is now telling me that B of A charged off the loan, and they are collecting on the debt since I'm 1 year past due on payments.

Is there any laws stating that B of A has to make a good faith effort on modifying the second loan?

Should I consider myself fortunate that I have a chance to settle with them for 35 cents on the dollar? or is that too high?

Can they garnish my wages considering I still live in the home?

Can or will they foreclose?

Would it be a mistake to hand over my financial records, and then for them to come back with an unreasonable settlement, and they now have the financials that MAY justify coming after legally with wage garnishment?

Thanks in advance for your professional and personal opinions

I'm not a big fan of BOA, but you bought the home for $450k. Since you are calling this a "strategically default" I am assuming you can make the payments. You signed and gave your word that you would pay $450k plus interest for the property. That means you are morally obligated to pay for it. Just because things did not go in your favor doesn't negate that obligation.

If you can't make the payments and have done everything in your power to meet your obligation then that is a different story.

We are barely getting by, and hanging by the edge. That's why we qualified for the modification. Things are not going in the right direction. I realize the debt is owed, not looking for moral judgement, just insight into my options without shelling out $ for a lawyer. I feel that B of A did not make a good faith effort to modify the second. Now, the debt collector changes the landscape by us accepting the modification on the first.

Regarding the deficiency. Does the non deficiency apply to HELOCs? That's a question for counsel.
Regarding BofA making a good faith attempt. If you lost money in the stock market, no one bails you out. You and they had a contract. Which side violated the terms of said contract?

Is there any laws stating that B of A has to make a good faith effort on modifying the second loan?

A: Probably not, and if there are, they're above them anyways. If you think they did something illegal, then you can hire an attorney and get into protracted litigation with them and maybe win some money back in 5yrs.

Should I consider myself fortunate that I have a chance to settle with them for 35 cents on the dollar? or is that too high?

A: You love the house and said its cheaper than rent, so that sounds like a good deal to me.

Can they garnish my wages considering I still live in the home?

A: I don't know. If they try, then you can go to court and see if talking to a judge might help.

Can or will they foreclose?

A: Now I'm not following you - you're trying to get rid of the HELOC, yes? and you're worried that they'll foreclose over a HELOC loan that got sold to a debt collector?

Money purchase HELOCS [u]are[/u] protected under AZ anti deficiency laws.

I was under the impression that the modification process involved a two step process. The 1st loan, and then the 2nd loan. Isn't there something under these new federal waterfall guidelines that the second must be taken up after the first is modified?

If not, I have 2 choices:

1. Settle the debt for 10-35cents on the dollar
2. Make them foreclose (doubt it with severe underwater status) or let them bring a lawsuit to garnish my wages.

You should be consulting with a skilled Real Estate Attorney in Arizona who is knowledgeable of the Laws in your own jurisdiction.

This Thread is mis-titled. You have two(2) separate loans. BofA is no longer involved with the 2nd. You now have to deal with the likes of Greentree . . . . they own the 2nd.

What could happen, or whatever rights you might have elsewhere, doesn't matter. Secure local Counsel.

I don't know how they can modify a loan that they sold, even if the law tells them to modify it - it's not theirs anymore.

Are you living paycheck-to-paycheck like the most of us?

Laws vary by state.

You have to understand BOFA might be the owner of the loan or they might just service it.

The government programs DO NOT make the banks do things only suggests to them.It's a bunch of crap.If you read the short sale streamline process from the government it says the government will not be held responsible if the second lien holder comes after you.

Even though a note owner or a servicer holds both loans they are not looked at the same.The loans are worked out differently.The first has senior position and will recover some value from foreclosing.By doing a workout they hope to in the future recover more of the loan when the market bounces back rather than taking a big loss now.

The second doesn't want to foreclose as they get nothing as the first has to get paid in full before they get any proceeds.Also if you are in a judicial state it might cost the second a bunch of time and money to foreclose and once they do the values could have dropped even further.

So the second in this case charged off some of the debt for tax savings and sold off the loan to a debt collector.I would not give the debt collector your financials.It has no bearing on what they will settle for.

If your credit is trashed already then credit isn't an issue.They can only come after who is on the loan and not who is on title for the property.

If they are calling you all the time harassing you get a "cease and desist letter" and they will have to stop and can only snail mail you.

No legal advice

Your best bet is to attempt to negotiate a modification with Greentree. They can foreclose but it is unlikely that they will since you are underwater. The proceeds from the foreclosure sale will first be used to satisfy the first mortgage. They only get paid if there is anything left, which is unlikely. They most likely cannot garnish your wages unless they get a judgment, they cannot get a judgement unless they foreclose and obtain a deficiency judgement. If Bank of America sold the second, which is within their rights to do so, they have no obligation to you in regard to the second. In most cases in any loan modification there has to be a separate modfication process with each mortgage holder. It works the same way when it comes to short sales. Attempt to get the most affordable workout with Greentree you can. If you can't then it's time to give up on your dream of holding onto the house and move on to a short sale. If you can't afford the payments, you don't need to be living there.