On a side not, there is usually a cost not to escrow on a loan, not because teh lender wants to make money off your interest in your escrow account (that's not even legal actually, those accounts are heavily regulated), it's because if you decide you don't like the services received from your city/county/state, they could initiate foreclosure even if your first and second are currently on-time. So the extra risk "not" to escrow is usually passed on via a 0.25 point cost to now escrow (just a tidbit of info incase anyone wondered).
They could: garnish your wages, place you with a credit collection agency, or seek a legal judgement against you.
And if you think this will only affect your ability to purchase items like a vehicle, think again. Just about everyone bases their decisions about you on your credit score these days. You vehicle and homeowners insurance could go up. Your credit card interest rates will go up and your limits can be reduced. A potential employer may decide you are not their kind of person. You will have a difficult time finding a place to rent if you need to.
Another major consideration is this - every mortgage application I have ever seen has the question "Have you EVER filed bankruptcy or been in foreclosure?" Since they use the word "EVER" you have to answer honestly and give them information regarding the circumstances. If a lender decides they don't like your answer, they can deny you a mortgage even if it has been 10 years and has dropped off of your credit report. So a foreclosure WILL follow you around the rest of your life.
Now if you have a hardship, like a loss of a job or catastrophic medical problems, there is help. Try the Minnesota Housing Finance Agency's Foreclosure Prevention program: http://www.mnhousing.gov/consumers/home-owners/foreclosure/i or you can contact HUD and get Foreclosure Avoidance Counseling: http://www.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm?webListA or contact the Minnesota Home Ownership Center: http://www.hocmn.org/stayinyourhome.cfm
These are all good local places to get help.
Also, please be aware, Minnesota is very different from most other states when it comes to foreclosure. You need to speak with a MINNESOTA real estate Attorney before you take the advice of any out-of-state lawyer.
You really should, in my opinion, talk to a local attorney who specializes in foreclosures, bankruptcy, credit, and so on.
DO NOT RELY ON OPINIONS OF OTHERS ALREADY EXPRESSED HERE, I WOULD SAY.
The foreclosure process is different in every state. Some of the earlier responders do not live in MN and seem to be giving you information that is applicable where they live. This may or MAY NOT apply where you live.
You say: "The 20 lender can't foreclose on property." I don't understand why this would be true. But, as a couple of people mentioned, it may be that they could legally foreclose, but your situation is such that they would not gain by doing so. So then your statement might true in practice. However, in general, the second lender DOES have the right to initiate foreclosure proceedings and carry them through to a foreclosure sale. So, legally, what you say does not seem right to me, unless there is some reason they cannot legally foreclosure which you have not mentioned. I have never heard of a lender NOT being able to foreclose, unless stopped from proceeding by a court order. And even then, usually that order is temporary and the foreclosure, after a delay, can go forward.
I've never heard any knowledgeable person say what the junior lender would do in such a position, so I have little to offer you.
If you can get the first loan payment reduced, it might be you could do the same for the second loan. If you could make both those payments into the indefinate future, that might be a good move for you.
While somebody else surmises that you are upside down, with loans greater than the property value, you do not indicate this. I suspect that this could be the case. I'd suspect that the degree to which you are upside down should be used in making a decision as to what to do.
I have read that doing a short sale will effect one's credit less than allowing a property go to foreclosure. So, that may be a better answer than either letting the property go to foreclosure or acting as you describe.
In general, if one can stop paying mortgages entirely, and then live in the house for many many months until the foreclosure is complete and one is evicted or threatened with eviction, with no mortgage or rent, one can save money to be used to move forward. Of course, at that point you would not have a house, but, presumably, you would have your car still.
It might be possible, given the action I just described, to then buy a property from somebody without a new instituational lender. This could be an owner-financed sale, or a lease with option to buy, a contract, or something similar.
There are so many different possibilities, and some of them depend upon details of your own situation, it is not possible to give good advice, in my opinion. Thus, it makes sense to me to consult an attorney. Another possibility would be to consult with a credit counselor or some legitimate service that cousels people in similar situations to yours.
I suggest you be very leary of dealing with the company you mention. I did a google search on the name and there is almost nothing on them on the internet. It would be well to have a chance to talk to other people who have relied upon them, it seems to me, so that you could find out what their experience has been. That it appears that nobody has reported back on them leaves you in the dark.
Good Investigating and Good Deciding***********Ron Starr**************
I am no attorney but eventually the 20 will be able to get a judgement against you and begin to garnish your wages. The 20 does have the power to foreclose on the property but likely won't get much out of a sale so they will allow the property to go back to the first mortgage holder and will possibly pursue you in district court for the deficiency. Once they obtain a judgement against you they will likely begin the process to collect on the judgement. In the end you will lose the house so I don't think this is the best route for you.
You should really think hard before you renege on the commitment you promised to fulfill with your mortgages. And as for the ramification beyond your credit, how about your moral obligation?
Oh, and by the way, if you lose your job, many companies are now looking at people's FICO scores and credit history to see if they would be a reliable employee to hire. Bad credit scores could mean a tougher time of finding a new job.
I hope this helps.