Home Selling in 92545>Question Details

Stuck In Hem…, Home Buyer in Hemet, CA

Thank you for all the responses regarding selling my home. It seems that all agree I need to do a short sale. What happens to my second mortgage?

Asked by Stuck In Hemet, Hemet, CA Wed Sep 16, 2009

Your second mortgage can't be part of the short sale, right? Also, if I am approved for a short sale and I leave the state to pursue my job offer, can I stop making my mortgage payments? If I stop making my mortgage payments will that make my credit rating even worse than it will be from the short sale? Thank you!

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If your second mortgage is not with the same bank, it is negotiated first since the second has to agree with a short sale-if they don't agree to some sort of pay off, it is useless to negotiate with the first loan. Once you miss payments and foreclosure proceedings begin, the second is more willing to negotiate since they lose out entirely once the first bank forecloses. It is unpredictable and harder if you haven't missed payments. If you are in the redemption period (not sure what it is in California but 6 months in Michigan), they know they won't get anything and may even take as little as $1,000. Something is better than nothing. Your credit definitely takes a hit no matter what. With a short sale, you can negotiate an agreement to pay nothing or something - you don't worry about them coming back later and try to collect for the difference.
1 vote Thank Flag Link Wed Sep 16, 2009
Stuck:

You have a few questions – let me try to answer them:

Q: Your second mortgage can't be part of the short sale, right?
A: It has to be – it’s not going to magically go away. You have to either pay it off or negotiate a settlement, just like with the first. In all of our short sales, we mitigate both mortgages together. Typically, the first dictates what the second will be allowed. More often than not, the second disagrees and then it starts to get ugly …

Q: Also, if I am approved for a short sale and I leave the state to pursue my job offer, can I stop making my mortgage payments?
A: No one in this forum can or should answer this question for you – it’s best answered by your accountant and/or attorney.

Q: If I stop making my mortgage payments will that make my credit rating even worse than it will be from the short sale?
A: This answer is similar to the one above – HOWEVER, I can tell you that most people in a short sale situation have already stopped making payments. It’s nothing we can or will advise you to do – I’m just reporting what I see in our sphere of influence. Will it mess up your credit even more than a short sale? Without all the particulars I can’t tell you – with the particulars, I’m not ALLOWED to tell you. This is where this answers becomes the same as the one above …

Hope that helps – we do a lot of short sales – let me know if you have any additional questions.
1 vote Thank Flag Link Wed Sep 16, 2009
Stuck In Hemet: You need a Real Estate Attorney to look through your loan documents. Only an attorney can tell you if the second trust deed is likely to be included or not. Also, if it is a Home Equity Line Of Credit, HELOC, there can be other long term credit history ramifications. The laws change and Realtors are not attorneys and cannot and should not give legal advice.

I have spoken to two attorneys that feel very strongly that short sales should be avoided in certain instances.

There are many attorneys in Riverside County who will help you and give you free consultations.


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Good Luck!

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Web Reference: http://www.soreal.biz
0 votes Thank Flag Link Thu Sep 17, 2009
Once a short sale has been negotiated and approved with the primary lien holder, I start negotiations with additional lien holders. When negotiations are completed, I receive a document from each lien holder stating that they will release their liens on the property, usually at closing when all debts are paid off.

Not all short sale requests are approved because the owner stops making mortgage payments. The owner needs to prove a genuine hardship before a bank will consider accepting less on a mortgage than what is owed. Please be careful and get all the facts about a short sale before moving forward.
0 votes Thank Flag Link Thu Sep 17, 2009
Dear "Stuck",

In a short sale, the second mortgage is negotiated along with the first mortgage, which becomes a bit more complicated if you have different lenders for your first and second.

Most people stop making their mortgage payments because it is a hardship for them. Some people stop making them because they just don't care anymore. It is hard to say how much your credit score will be affected, because there are many factors that contribute to your score. However, if you take the proper steps over the course of time, you can and will rebuild your credit.

I wish you the best, and better things to come...

Lenore
0 votes Thank Flag Link Wed Sep 16, 2009
It may not be forgiven. Depends on circumstances, but often the 2nd wants you to sign a note promising to pay -the second always takes a back seat to the first. Are they with the same lender? That can make a difference. Your credit will take a hit, but what can you do? It is much like filing a bankruptcy, and you are looking at time to re-establish credit. If you are young and can afford seven to ten years of recuperating not so bad. If you are close to retirement it could hurt.
0 votes Thank Flag Link Wed Sep 16, 2009
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