Hi Chris,

Is it a short sale? Do you owe more than the house is worth in today's market?
Let be proactive and call a HUD Approved Mortgage Counselor to get the facts straight and for them to answer the questions precisely.

You may qualify for a loan modification through your lender. With some lenders you DON'T have to be late to qualify.

You can list the property now if you have worries that you might be laid off.

The first comment that you received from "Sam" was incorrect. A deficiency Judgment is possible. A deficiency judgment may be awarded to the lender if the property is found by the court to have been abandoned for at least six (6) months before the decree of foreclosure. This is not the case if you reside in the home throughout the whole process.

Also taxes will be forgiven as the Mortgage Forgiveness Act helps homeowners.

Contact the counselor so you can create a plan for your family. Good Luck Chris and Take Care.
http://www.washingtonhousingadvocates.com

Chris,

I am also in Marysville and work with clients that are in pre foreclosure and short sale situations. To answer your questions,
If we foreclosed, would we be on the hook for anything financially? If your first lien holder does foreclose, no you will not "be on the hook", in most cases. However the 2nd lien holder can still pursue you for what is owed to them.
Same question if we shortsale. When you get an offer from a buyer that is "approved" by the first lien holder, that lien holder will release their lien on the property and no, you will not "be on the hook". However, you will still need to get an approval from the 2nd lien holder also. Once the 2nd lien holder gives their approval of the offer they MAY still pursue you for the difference they are owed. The key work is MAY.
In either situation it is difficult to get out of the grasp of the 2nd lien holder but not impossible.
If your 1st and 2nd mortgages are with the same Bank (Chase) for instance. It depends on how the negotiations are handled. It is important to get a real estate agent that knows how to handle these negotiations.
Obviously a short sale is better on the credit rating long term. - I would agree with your statement. You do have other options available to you also.
If we miss a payment, what would our time frame be before anthing happens? - The typical scenario goes something like this. You miss 3 payments and you will be sent a Notice of Default ( this is telling you that you are behind on your payments and are in default of the terms of your loan). usually during those 3 missed payments. Normally, around payment 4 you will receive a Notice of Trustee Sale. (This notice will give you the date that your home is going to auction along with other information on the past due amounts and which assest company is pursuing you). The Notice of Trustee sale date is about 3 months out. So now you are anywhere from 4 to 6 months behind on payments.
If you are going to sell your home it is recommended to start that process as soon as possible. Once an offer is received from a buyer, your agent should submit it to your lien holders for review and approval.
What legal ramifications would/could we face? This entirely depends on your situation. I would have to talk to you in person. In general, you would want good referrals to tax accountants and possibly an attorney. I give my clients these resources on an individual basis.
How does a short sale really work and who would I go thru to pursue one? - Once an offer is received from a buyer, your agent should submit it to your lien holders for review and approval. The lien holders will look at what kind of loss they are going to be taking and compare that to what it would cost them to foreclose on your home and then sell the property themselves. Your agent should be able to do this for your lien holder. As far as who you should go thru to do this- In my opinion it is best to go thru a real estate agent that does this everyday. Has experience in negotiating on your behave with your lien holders, knows how to put together an excellent "package" for your lien holders to review, has a resource group for their clients and has a good closed ratio for their clients.
I hope that helped and don't be sorry for all the questions. You need to do this research so that you can make an educated decision. Good Luck to you.

Chris
I would first contact your lender. Since your income has changed you may qualify to redo the loan at a lower interest rate/payment. Some of the government programs require that you are behind in payments but others do not. Ask for the loan modification department. You will need to have pay stubs to prove your current and past income, list of all bills and expenses that you have so good to have this ready before you call. If this does not work or you don't believe that you can stay in the property then you may decide to give the deed back to back in lieu of foreclosure or do a short sale. It is up to bank whether or not they do a deficiency judgement against you if the house (in a short sale) would sell less than the amount owed. As always it is a good idea to get a legal opinion as to your rights and responsibilities. The bank will send you a phamplet about your options or you may find it online through the lender's website. An agent can give you an idea of current market value versus the amount you owe on the property.
Mary

A short sale is your best option if you think your odds are good of being layed off. If you are still current on your mortgage it is hard to get much help. The mortgage companies are swamped with putting out fires or short sales and foreclosures.

If you are or have gotten behind it may effect you the same as a foreclosure. i have seen where folks have gotten behind and then paid the mortgage current. Their credit report was like they had been foreclosed on and stayed on their report for 7 years.

There is also a slight possibility that the 2nd lien holder could go after you and put a judgement against you. This is probably unlikely because of our current mortgage crises we are in.

You are in a tough situation with many other Americans. I recommend that you sit down with a real estate agent and go over all of your information and get some options on how to proceed.

Keep praying you hold onto your job.

Steve R Halvorson

If you are concerned with your credit rating in the end the best option may be a deed in lieu. This is where you agree to turn the home back over to the mortgage company. It actually shows them you are responsible enough to realize you can not sell it for what it needs to be sold for and you do not wish to be put through or make them go through the legal and costly foreclosure process. This can also take a little time, so you could find some where to go.
A short sale is not a bad idea and just takes a lot of patience. First call your mortgage company and they will send you a packet of information to fill in requesting a short sale. Also, put your home on the market, at market value but have your agent put in the remarks this is subject to bank approval for short sale. They will want to see that you are trying to sell it. Once the get your packet back you will be placed with a case worker who will tell you your next step is to bring them an offer. This is the lengthy process, it can takes weeks or months to get a response to your offer. But, it can be very appealing to a buyer looking for a deal so they are likely to be willing to wait. You will get a 10-99 for the difference of what was owed at tax time the next year, since it looks as though this was income to you. But in most cases you will not have to come to closing with any money.
Short Sale will not affect your credit score as much as a foreclosure. If you stop making your house payments now you can expect to start getting calls and letters requesting payment. Most of the time once you have missed 2 or 3 payments (some will wait until 5 or 6 missed payments) you will get a letter they are starting the foreclosure process. A date will be posted to attempt to sell the house at the courthouse steps. If someone bids and wins the bid they have approx. 30 days to come up with the funds and close, at that time they would have to start the eviction process. Or if the home does not sell at auction a holding company for the mortgage holder will attempt to sell the house using a local Realtor. This would also result in an eviction or the REALTOR would try to contact you to offer you an incentive to leave the home clean and in good condition. Either way you are looking at approx. 6 months.
Good luck on the job, I hope you do not need this info.

If you get foreclosed upon, there will be no deficiency judgement against you in Washington. That is the ONLY positive in a foreclosure. It's ugly on your credit for a long time, you'll probably won't be able to buy again for quite a while.

A short sale has to be worked out with the lender, and you have to negotiate if you'll owe the remainder of your loan. The bank can go either way, attaching a lien later or forgiving the debt. In the case of forgiveness, you may owe taxes on the amount forgiven (consult a tax advisor).

Short sales can be slightly better on your credit, depending on how long they take. If you're behind on payments for 6 months, it's going to look very similar to a foreclosure.

Get a local agent on your side now, so you're prepared. Most importantly, work hard and keep your head down at work. Keeping the home is your best possible option.