but I do have the option to just stiff them, quit paying and effectively, they have no recourse. either they will settle with me or they will just sell my note to a collections dept and I will get hounded by them.[/quote]
Your list of USAA alternatives is incomplete. USAA has the third alternative of continuing your loan unaltered.
If the loan is sold, the new owner of the loan gains more than just the right to pester you with phone calls.
In either case, your debt will continue to grow with accrued unpaid interest. You will be unable to sell the house without dealing with the owner of the second. If you stay a long time and pay down the first, the second will remain in force, and will no longer be worthless.
While it is common to escape a second via bankruptcy, foreclosure, or short sale, you should not expect to do so otherwise.
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USAA has been my insurance company for 40 years. It is run by ex-military officers and serves the military community, and their extended families. Don’t expect USAA to operate by the same code as other companies.
Over 40 years, I have occasionally explored other companies offerings, and always found USAA’s to be substantially better. Don’t underestimate the future value of doing business with USAA.[/quote]
I agree with Analyst. USAA can choose to wait until there is sufficient equity to foreclose via market rebound, 1st mortgage principal reduction, or some combination of both. Folding in penalties, fees, and the unprecedented lack of confidence in the housing market, the OP will probably never realize any future appreciation especially with a 40 yr loan. The only viable option wrt to the 2nd is to try and settle.
Regarding the loan mod on the 1st from 7%? to 4.8%, I’m not sure I would have accept it. The $600 monthly reduction is due to both lower rate and term extension from 30 to 40 years, with probably $400-$450 attributed to the rate reduction. This permanent benefit is balanced against the hit to the FICO, maybe 150 points since they probably reported it 90 days late, which I understand is much more severe than 30 or 60 days late. Probably worth it if nesting long term. Did you try to get them to report your payments current even with a loan mod?
I’m pretty sure lenders have many internal loan modification programs and the Obama home preservation plan is just one option. For example, the 729K upper limit on loan mod is nonsense as I know several people with 1M+ loan balances that received modifications. What I didn’t know was that a non-distressed homeowner (with PITI to gross less than 31%) can also qualify as evidenced by the OP. This takeaway is quite shocking and it means anyone can theoretically get a loan mod.
