If your questions have not yet been answered on this, please be careful and consult with an experienced real estate lawyer.

With friends and associates who are highly qualified real estate lawyers here in Orange County, I will provide you with information about them if you let me know about you by email contact or telephone call.

I am a real estate broker ... and also a lawyer for many years here in Orange County. My business is real estate and no longer do lawyering for individual clients.

Harrison K. Long, Coldwell Banker Previews, Irvine, CA.
http://www.ExploreTheOC.com
ExploreProperties@gmail.com

Hi Shawn,

There are many options. I can give you the best advice to help you if given all of the information. You should consult an accountant about the IRS issues. I would be happy to give you information (at no cost) to help you make the best decisions. Please feel free to email me at amy.mosley@yahoo.com or call me at 949-315-9326 if you would like some help.

Hi Shawn, Foreclosure is not your best option. This will damage your credit and cause the most damage to your financial situation. You have better options and they are free.

It seems that doing a short sale would be the best option as others have mentioned that lenders are seldom approving loan modifications on investment properties You can do a short sale on 1 or both of the properties depending on your situation. If you are insolvent than a short sale would not make you liable to pay taxes on the money the bank has lost because of the sale. A visit with your cpa can determine if you qualify for the debt relief act.

I specialize in doing short sales and I have a great website that is dedicated to answering all the questions you may have. I can also refer you a CPA if you need one. Please take a look at my website http://www.orangecountyshortsalehelp.com and feel free to email me or call me should you have any further questions.

Hi Shawn,
I believe Harrison is right. Emily's pamphlets may help too. You need to seek some legal advice here. There is also another factor I did not see mentioned and that is; are your loans purchase money loans or did you refinance the homes? Also, are you living in the one you want to keep? There are a different set of rules that apply to the way a lender can seek damages in court depending on the type of loan you have, I mean purchase or refinance.
Loan modification seems your best bet. Banks have typically not been willing to modify a rental but things are changing everyday! It is worth a try. Be prepared for long waits on the phone, but the outcome could be a real benifit to you.
I will be pulling for you, good luck and let us know how things turn out!
Connie Bramble
714-337-8718

There is no benefit to "just letting them foreclose". Deed in Lieu is not the answer.

Both of your mortgages are separate, they can't go after you on the other property if you do a Short Sale.

Short sale is your best option. You CAN do a short sale on investment property. You do not have to be late on payments to get a short sale approved. There is an IRS form (982) that you can fill out with your CPA for tax time next year. Basically what this form does, it to help you show the IRS that you are insolvent (lost of job, cut in pay etc) and that you can't afford an increase in tax to the IRS.

With a short sale, the bank agrees to Forgive your Debt. This is from the Mortgage Debt Forgiveness Act of 2007 & it expires Dec. 31st 2012. When the bank agrees in writing to forgive the debt owed, they can't go after you on your current residence in which you are still making payments.

I can email to you some more useful information about the advantages & disadvantages of Short Sale vs. Loan Modification vs. Deed in Lieu. I will NEVER spam you, but it would be worth your time to read it.

Just shoot me an email & put in the subject line: Loan Mod vs. Short Sale & I'll send it right to you. It's only 1.5pgs long in a Word doc.

emilyknell1@yahoo.com
562-430-3053 cell

It's correct that you should not pay any servicer moeny in advance to do a loan modification or short sale and not use private loan negotiators who ask for fees.

If you want and need a loan modificaton to keep the 2nd property (rather than allowing it to go by foreclosure), you can do that the old fashioned way ~ Do Your Own Loan Modification.

If you decide to let the 2nd property go by foreclosure, there will be negative consequences. Your credit history score will get bounced about 200 points, and you probably won't be able to buy a house for two or more years. You will be required to pay local property taxes for each day up to the day the home is sold at foreclosure sale. Your US and state income tax situation must be determined by you and your CPA and income tax professional.

Your last question about whether a mortgage company can hurt you on the first property is complex. We don't have enough facts here to help with a valuable answer. I recommend that you seek a CPA or counsel (an attorney) on this to help you determine your own financial situation and what effect a foreclosure on property two will have on your ownership of property one. A primary consideration will be terms of your original note and deed of trust on property one and whether the lender would have any legal right to impact or call your balance due on your loan on that home if you allowed foreclosure on property one.

Thanks for your good question and best wishes.

Harrison K. Long, Realtor and Broker, Explore Group, Coldwell Banker Previews, Irvine, CA. http://www.ExploreOCHomes.com

Hi Shawn

To answer your question, there are some definite strategies that can be utilized in your situation. It sounds like you would like to keep one of the homes. First off, they can not come after the second home if you default on the first. Essentially, the home itself is the collateral for the loan. Secondly, in my experience, the lenders don't typically want to modify a loan unless it is your primary residence. So of your second home is a rental, good luck.
Finally, while I would not pretend to know anything about taxes or what the IRS might do, you could probably learn a lot by consulting your CPA and asking him or her about the Mortgage Debt Forgiveness Act of 2007. The most important things to be clear about in your decision will probably be determining which home is considered your primary residence and which Realtor will do the best job helping you with a Short Sale. Drop me a line, I will be happy to point you in the right direction.

DaveO@TheOCmls.com

Shawn,

You should not "let one foreclose".

Find a very experienced short sale Listing Broker / REALTOR (like myself). If you short sale one or both, you will have some control over the losses and may even be able to work an arrangement with the bank such as a Short Sale or Deed in Lieu. DO NOT PAY ANYONE IN ADVANCE TO DO A SHORT SALE OR A LOAN MOD. Also, if you use an experienced Short Sale Listing Broker / REALTOR, there will be no additional charges for the negotiations as it comes from the commission. DO NOT USE 3rd party negotiators that are paid in a fee in addition to commission.

Best of luck,

Thom Colby
Broker & REALTOR
Orange County, CA

Read the Testimontials on my website