Second Mortgage Debt Settlement Lawyers in Phoenix | McCarthy Law PLC
October 23, 2014

Second Mortgage Debt Settlement Lawyers in Phoenix

Settling 2nd & 3rd Mortgages, HELOC and Equity Lines of Credit for a Fractional Amount

We negotiate for large reductions in mortgage debt, including second & third mortgages, HELOC, and equity lines of credit without the need for bankruptcy.  An attorney negotiated debt settlement can help you move on with your life without the debt and without filing bankruptcy.

Arizona was one of the states hit hardest by the housing crisis. This year, the median asking price for houses in the Phoenix area is 40 percent lower than when prices peaked in 2006. Fortunately, the state has seen an upturn in the housing market, though not nearly enough to make up for the loss. In the Phoenix area, the median housing price rose 20 percent from 2011 to 2012. Arizona as a whole may welcome the turnaround, but for many individual homeowners who fell victim to the housing bubble and questionable lending practices, this does not make their past misfortunes undone.

When the housing bubble was at its fullest, many residents found themselves more than able to take out second mortgages and home equity lines of credit (HELOC) to have some extra cash for other expenditures. Many homeowners refinanced their house to pay for the constantly rising costs of education and medical bills or to pay off credit cards.

But when the bubble burst, many of these homeowners found themselves in the most trouble. Arizona saw peak foreclosure rates from 2008 to 2010. In 2011 the housing market in Arizona was at its rock bottom and the unemployment rate plummeted along with it. Thousands of homeowners in Arizona were unable to make their monthly mortgage payments and were soon foreclosed upon.

How are Your Debts Handled in Foreclosure?

It is important to understand there is a hierarchy of repayment when your home is foreclosed upon. Most of the money goes to your primary lender, the owner of your first mortgage. If there is money left over after they have been repaid in full, this money is applied to your second mortgage or home equity line, and then the third mortgage if there is one, and then finally to you (which almost never happens).

Unfortunately for most homeowners, when the bubble burst the value of their home took a dive, leaving their mortgage worth more than their home. When these homes were foreclosed upon not only was the primary lender not paid in full, but the secondary mortgages were left with nothing as well.

What Protection Do Borrowers Have in Arizona?

Arizona is one state that does afford protection for borrowers against foreclosure deficiency judgments, but it is limited. Arizona’s Anti-Deficiency Statue prohibits lenders from going after you for certain loans after a foreclosure sale yields insufficient proceeds.

In regards to your first mortgage, if it was used to purchase the property, less than 2 ½ acres in size, with either a single one-family or two- family residence sitting on it, and utilized as a dwelling, you are most likely to be protected from deficiency liability.

Where most Arizona homeowners who have been forced to foreclose run into possible deficiency trouble are with the second mortgages and home equity lines of credit taken out on the property. This is because Arizona’s anti-deficiency laws generally only protect mortgages taken out to purchase, refinance or improve a home. If a second mortgage or HELOC was taken out against the home and the money used for some other purpose like paying off credit cards, you may not be protected from a foreclosure deficiency lawsuit.

When your house is foreclosed upon, secondary loans taken out for other expenses essentially become unsecured debts that your lenders can sue you to collect on.

How Can A Second Mortgage Negotiated Debt Settlement Help?

A foreclosure is a devastating event that should not have to be followed by a bankruptcy filing. Fortunately, lingering mortgage debt can be settled much like credit card debt. In a mortgage debt settlement, an attorney will contact your lenders and negotiate a settlement on your behalf. Often these negotiations yield a settlement amount that is a fraction of what the lender said you owed. We help our clients settle mortgage debt without the need for bankruptcy.

This is by no means a full description of the law and it is important to get all the facts. An attorney experienced in mortgage debt defense can evaluate your mortgage debts and help you make an informed decision.

Contact McCarthy Law PLC today to find out if an attorney negotiated mortgage debt settlement is the best option for you. We offer a FREE consultation with an attorney.

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