Q: In CT, If my second mortgage was written off as a bad debt in 2013, can the mortgage company continue charging interest?
I recently tried refinancing with another mortgage company. This company was prepared to pay off my first and second mortgage but needed a letter from my current mortgage provider stating that the second mortgage was closed off as a bad debt... which it is. When the request was made, my mortgage provider refused to supply such a letter. In addition, they're asking for the amount when the debt was closed in 2013 - around $62,000 - plus all interest since then. In total, they're asking for over $100,000.00 in principal and interest payment on the 2nd loan. Can they do that?
Thanks for your help
A: Unfortunately for you yes. Charge off is a credit reporting action, but does not affect your underlying liability under the note and mortgage you signed with the creditor. A charge off combined with the release of your second mortgage would have provided you the ability to avoid the payoff of the second mortgage. In situations like this it is difficult refinance your mortgage debt since despite the charge off Bank's usually do not discount debts for refinances you can try to negotiate, but you may not be successful.
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