A charge off occurs when a lender declares a debt as uncollectible and removes it from their balance sheet. For a mortgage, this usually happens if payments are 90-180 days past due. While the homeowner still owes the debt, it becomes much harder to remedy once the loan is charged off. If the loan has not been charged off yet, the homeowner must make full monthly payments to avoid it. But if it has been charged off, it will likely be turned over to collections and the lender will expect at least 20% of the amount to settle, making it difficult to close a real estate transaction.

1. Absolute Consultant Group (ACG) “The leading conduit for mortgage workout bulk processing” SECTION: CHARGE OFF Absolute Consultant Group

2. Contents What is a Charge Off? What are my steps to proceed? What should I expect? Absolute Consultant Group

3. What is a Charge Off? Definition - A debt that is deemed uncollectible by the reporting firm and is subsequently written off. This type will be classified as 'bad debt expense' on the income statement, and removed from the balance sheet. A charge-off or chargeoff is the declaration by a creditor (usually a second mortgage) that an amount of debt is unlikely to be collected. Traditionally, creditors will make this declaration at the point of 180 days but can come as early as 90 days depending on the investors. The purpose of making such a declaration is to give the bank a tax exemption on the debt. For the bank Bad Debts and even fraud are simply part of the cost of doing business. NOTE: The charge-off, though, does not free the homeowner from having to pay the debt. Absolute Consultant Group

4. What are my steps to proceed? IF THE LOAN HAS NOT BEEN CHARGED OFF- If you have received this notice it is because we have been advised by one of the lenders, usually the Jr. Liens (or subordinate loans to first mortgage), that the loan is on the verge of being charged off (please refer to the "additional information about the charge off status" above to terms and conditions). NOTE: To remedy this is the homeowner must make enough full monthly payments to keep the loan below its thresholds and to avoid the loan going to a charged off status. IF THE LOAN HAS BEEN CHARGED OFF- If the loan has been charged off the lender will rarely turn this around. The homeowner may call the lender but if a significant amount of time has passed or we have rolled into a new month, once the loan reaches this stage, it will be assigned to a collection company or managed by the banks own internal recovery department. NOTE: Where a lender may have previously settled for 3-5k once charged off the lender will be expecting a minimum of 20%. As most Sr. Liens rarely pay more than 3k to the Jr. Leins (Second Mortgages) it becomes increasingly more difficult to close your transaction. Absolute Consultant Group

5. CONTACT INFORMATION Absolute Consultant Group 26500 West Agoura Road, Suite 102-252 Calabasas, CA 91302 P (888) 945-5553 F (877) 544-0104 www.ACGNow.com Absolute Consultant Group