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Would it Make Sense to Try and Negotiate With Wells Fargo on My Home Equity Line of Credit? – Jessy

Written by Steve Rhode

“Dear Steve,

I have a newly refinanced mortgage of $330,300.00 at 4.125%; It was previously with GMAC and now with a company I’ve never heard of before – OCWEN (for about a month it was with Green Tree – I guess both OCWEN and Green Tree took over from bankrupted GMAC).

I have a second Mortgage – Home Line of Credit with Wells Fargo with current balance of $79,596. Rate is at prime minus 1/8th with floor of 4.24% – which is what I have been paying.
I had a bankruptcy in 2010 (your advice helped a lot through the process – thank you very much) and the Wells Fargo line of credit was reaffirmed. (I also declared I wanted to reaffirm the first mortgage with GMAC but they provided no documents to sign off on).

On the Wells Fargo line of credit (which has been frozen since the bankruptcy) I have been paying interest only for the longest time since I couldn’t absolutely afford any more; it has been +/- $285.00/month.

My house market value is +/-$335,000.00, maybe just slightly above 1st mortgage.

I want to see if it would make sense to try to negotiate a settlement with Wells Fargo’s 2nd mortgage (line of credit); I’m struggling to just make the interest payments and making no dents whatsoever in that debt. I can’t see when I will ever be able to start paying any more and it seems just like a black hopeless hole…

I read some questions on the site from people with similar situation but, then again, each situation is different. I was hoping you could please advise how I should proceed; does it make sense to contact Wells Fargo and what the best approach to try and give myself a best chance to reach a settlement with them.

Thank you for your help,

Best regards,

Jessy”

footstep narrow

Dear Jessy,

Ocwen is a big lender and loan servicer so no surprises there. It’s not clear if they own your loan or are just managing it. Either way, they’ve be around for years.

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Wells Fargo might negotiate a settlement considering they are exposed on the loan with no underlying collateral to really support it.

Here is some advice Chales Phelan gave in Why It Makes Sense to Consider Debt Settlement for Second Mortgages and HELOCs.

Let me inject some very important caveats. I am NOT suggesting that consumers start purposely defaulting on their second mortgages simply because they are out to save some money or get better loan contracts. Settlement of second liens is a strategy that definitely applies in many distressed property situations, but it’s certainly not applicable in all cases. Also, very importantly, not all second mortgages and HELOCs are created equal. Some creditors are much more stubborn about settlement, depending on the type of loan, whether it was packaged for sale to investors, and so on.

In closing, the best general advice I can offer is to step back from the emotions associated with any property that you own. Look at the raw numbers and let the math do the talking. Check the current value of your property and assess where you stand in terms of the second mortgage. If your analysis indicates the second mortgage or HELOC is uncovered by 100% or more, then other factors aside, this fact alone points toward further consideration of the settlement strategy. Consult with a professional financial advisor knowledgeable in this area, but be wary of anyone promising a quick fix for mortgage problems. Settlement of any large contractual obligation like a mortgage or note requires patience, commitment, and determination. – Source

If the loan had not be reaffirmed and instead discharged you’d probably have an easier chance of settling it.

Bottom line, it might be possible but do you even have $40,000 or so on hand to make a settlement payment now if they did agree?

Please post your responses and follow-up messages to me on this in the comments section below.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

1 Comment

  • Thank you very much Steve.
    Btw – the mortgage – as I was told – is still a Fannie Mae mortgage that’s being serviced by Ocwen.
    Also, I didn’t get the part in the (above) first response to the post regarding US aliens..
    You’re very helpful, as always, and one of the best resources for financial advice out there (if not the best)! Thank you

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