If you haven't paid your mortgage for 6 months or you've been through a foreclosure or short sale wherein you couldn't pay off the second loan after getting rid of the first, your lender is likely to issue a second mortgage charge-off.
What is second mortgage charge-off all about?
If your second mtg lender intends to charge off the loan, it means he's declaring the debt as uncollectible. So, the lender will no longer collect payments from you. But this doesn't mean that you don't owe the money. The lender reports the debt as a loss when he files a Profit and Loss Statement (for his company) with the Internal Revenue Service. He sells off or assigns the debt to a collection agency that'll collect the payments on his behalf. So, your debt hasn't been canceled or forgiven.
What happens after a second loan charge-off?
Will I get 1099-C Form after a second loan charge-off?
Can I remove second loan charge-off from credit report?
I can feel what you are going through. But don't lose hope. Let's hope that things will be better after some time. The only thing is that you need to be confident and have patience.
Regarding the charge-off, it does have a negative affect on the credit report; most charge-offs stay on the report for 7 years and 180 days from the date of the first non-payment (under the Fair Credit Reporting Act).
Paying down the debt cannot remove the charge-off from the report. Instead, it will be updated to a "paid charge-off" after the unpaid debt is paid off. Often a creditor may accept a partial payment towards the debt and in that case, the account is reported as "settled charge-off".
Once the charge-off is marked as "settled" or "paid", the lien on your house will be removed. It does not matter if the loan is in your husband's name. If your name is on the deed and you are able to pay off a certain amount towards the unpaid debt, the creditor may settle the charge-off and remove the lien. You can thus save your home.