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Gil, Home Owner in Arizona Country, Cha...

What will happen if I stop paying the 2nd mortgage on my rental?

Asked by Gil, Arizona Country, Chandler, AZ Sun Jan 15, 2012

My husband & I lost 2 rentals to foreclosure in the past 2yrs. We are in the process of getting a divorce. We currently have a rental which we took out a 2nd to purchase one of the houses that went into foreclosure. We owe 72k on the 1st & 48k on the 2nd the house is worth 78k. My sister lives in this house & I will not lose it to foreclosure. I was told if I stop making payments on the 2nd the bank will probally settle for a lesser amount. I don't know what to do?

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Hi Gil:

Sorry to hear about your situation.

The first two answers are as good as you are going to get on a public forum such as this, where the professionals answering are not attorneys. You are asking a legal question of non-legal people. We are restricted to "Yep, they might negotiate or they might foreclose..."

I recommend you contact Kristi Collins of The Scottsdale Law Group and ask for a consultation. They specialize in this type of situation and help people all over Arizona. Only then will you have an idea of your best course of action. You can reach her at: kcollins@scottsdalelawgroup.com or (480) 478-0709.

Good luck.
1 vote Thank Flag Link Sun Jan 15, 2012
If the property is only worth 78k and you have already lost 2 rentals I would suggest you (and I assume your state would allow this) file for bankruptcy and in Georgia and other states you can have property appraised and if it only appraises for 78k or less they would drop the 2nd but you would be responsible for making the note for the next 5 years. I'm not telling you to file for bankruptcy but it's another choice you have in case other things don't work out. Remember your credit is already shot.
0 votes Thank Flag Link Tue Jan 17, 2012
Sometimes lenders can be unpredictable, but second lienholders with no equity may very well settle.Ive seen this happen several times. Call and tell them you want to settle. They will likely have a department that handles this type of request and will ask you to get a package together and apply. Doesnt hurt to try, just keep in mind if it doesn't work out you have a new situation on your hands.
Web Reference: http://www.homesbyminna.com
0 votes Thank Flag Link Mon Jan 16, 2012
Hi Gil,

Who is your bank? Some banks are settling 2nd liens. I know that because I am in touch with some executives at one of the largest lenders in the USA. In your case, your combined loan to value is over 100% so most probably they will not proceed on foreclosing your 2nd lien. Did you try to talk to your bank about either settling your second loan or applying for a 2nd lien loan modification? If not, you should try doing so. Also MyCaal.com has the best platform for applying to a loan modification shall you decide to make lower payments and if you are not successful at settling it.
Web Reference: http://www.mycaal.com
0 votes Thank Flag Link Sun Jan 15, 2012
Gil

Some of the 2nds will negotiate and having a hardship tends to help the process. The other response is correct that they likely have the right to foreclose, however it will take some time.
Web Reference: http://www.McVinua.com
0 votes Thank Flag Link Sun Jan 15, 2012
They may settle for a lesser amount, but they may also institute foreclosure proceedings. I would recommend you call the second mortgage company and explain your situation. Are you having a financial crisis that is making it difficult for you to pay the second mortgage? Most banks will only negotaite if there is a hardship. However, I have had clients with a hardship (and a divorce usually constitutes a hardship) that were able to negotiate a settlement on the second mortgage. It certainly doesn't hurt to try.
0 votes Thank Flag Link Sun Jan 15, 2012
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