Getting Out From Under Two Mortgages

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I've posted in the bankruptcy forum about a friend of mine who is a young widow and does not want to file for bankruptcy. She's trying to settle her debts which include a house that is too far from her job and too big for her to even make the energy payments (electric/oil). I asked her exactly what the situation is with the house and this is what she wrote. If anyone can suggest the best thing for her to do, or other questions to ask, I would appreciate it.

"I have 2 mortgages. They were both originally carried by Litton but then went to Bank of America. BoA sold the second one about 6 months ago and retained the first.

I have no equity in the house and the mortgage (first) is more than my entire monthly salary. I am currently almost 80k behind in my mortgages. I have not paid in over a year but I cannot afford to stay in the house. I am too far from my job and I cannot afford the heat another winter.

I don't know if I should try to shortsale, deed in lieu of foreclosure (how does that affect the second mortgage) or what? I have asked several times for the original paperwork and they said they do not have it. I assume I could fight foreclosure with that defense, but should I? I don't know what to do.

Should I try to rent the house out? I cannot stay here but I do not want the house to remain empty as I will be liable for what happens to it. Other empty houses are vandalized and I don't want that to happen but I can't stay here through the winter. I am moving in with relatives but I will need to pay rent to them.

I have not heard anything from either mortgage company in months. What should I do?"

Any suggestions would be welcome. Thank you.

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BK, BK....Did I type BK.

There is no way out of this that I can see. Simply walking away and going Chpt 7 seems the logical solution..........If she cant pay the utility's, she could never pay the monies already owed.

Maybe she could do a short sale, yet she has 2 mortgages and already 80k down which is a tuff position........either way the house will set empty, a renter will do no good as she will eventually get foreclosed on, then the renter is screwed, she also may be obligated to disclose this fact.

Best to get out completely and start new.

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A short sale is a viable option. Has she tried a short sale at all?

Even if she wants to do a Deed in Lieu, she will need to show the lender that it has been on the market for sale for a couple of months.

She has a hardship and if she has all of her documentation, a short sale is generally approved. They are much easier to get approved today as the process is more defined. BOA is actually fairly cooperative, as long as you have an experienced short sale agent working with your friend. Get one that handles short sales regularly. Both the first and the second will need to approve the sale, and MI if any, will need to approve it too. Here in our area it normally takes 60 to 120 days for most of he short sales. I have even completed them as quickly as 30 days. However, the seller documentation is critical. Also, with BOA, it is much faster when you have an agent and attorney's office that is familiar with the Equator system. Otherwise your friend will have an uphill battle.

If she can not sell the property via a short sale, then she needs to reconsider the BK.

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I almost never recommend BK, because there are other options.

What is the goal? Do you want to keep it, or let it go?

I agree with Denita about trying a short sale as one of your options. Doing a short sale you have to prove there is no affordability before you are approved. If it sells that is the cheapest way out.

If it is not going to self in the immediate future, doing a deed in lieu of foreclosure and walking away free and clear is a better option. A modification is attempted to keep you in the home. This is forcing the lender to give you the best deal. If you show you cannot afford the home, they approved a short sale listing for 90 days. After which you could walk away free and clear. Noting it can be different between lenders.

Working with BoA on a modification - when you have a second mortgage, I have seen many settlements. In the last month, I worked with two borrowers having different lenders on their 2nd's settling amounts $50k+ for $15k. Last year - a lady owed $86k, BoA made an other to settle for $9k. She couldn't come up with it, 2 months later settled for $0.00. Noting her first mortgage was with BoA as well.

Again what is the goal?

An option to save to home - getting the lowest possible payment on the 1st, and settling on the 2nd. This could be a way to save the property.

If you are sure you want to let it go, make sure you do not give information to the bank showing affordability.

Good Luck...


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