Underwater homeowners are now facing yet another financial threat: lenders and debt collectors are beginning to freeze bank accounts and garnish pay checks for clients who have second mortgages and who are already in default on their first. Whereas foreclosure is a process run by the first mortgage holder, the new tactic allows second lien holders to “jump the line” by recouping whatever money they can and making it more difficult for already-troubled homeowners to obtain loan modifications in order to avoid foreclosure. In Staten Island, stories abound of homeowners who received no notice that debt collectors would be taking such actions against them, and only found out when they went to their banks to try to take out money. Those targeted are often already worst-off. “The backdrop to that is there are real fundamental problems in the debt buyer industry,” said Josh Zinner, who works with the Neighborhood Economic Development Advocacy Project in Manhattan. “The combination of the second mortgage problem with all the abuses in the debt collection industry is toxic, and could really create havoc for homeowners who are trying to avoid foreclosure on their primary mortgage.”
Second lien holders begin freezing bank accounts, garnishing paychecks for underwater homeowners
New York /
Dec.December 07, 2009
09:30 AM
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