Short Sale 2nd Mortgage

Paul,

I own a home in NJ that I purchased in 2005 for $760,000. I refinanced one year into the ownership, I now owe $735,000 over an 80/10/10. I also own another home with equity of about $50,000 where I live, and I own 1/4 of a home in NC, with equity of about $50,000. I have about $30,000 in retirement accounts.

I am a Realtor, my income has decreased from approx. $300,000/annually to about $100,000/annually. I cannot afford to carry the house with the $735,000 loan (PITI is around $5,000/mo.). I have had it on the market for about 60 days, currently asking $745,000, no interest.

Both the 80% and 10% loans are with Wamu. I am not behind on any of my loans at this point, so I don’t think Wamu is going to work with me too much on short sale at this point.

My question is this – since I owe 80% on the first and 10% on the second, I can easily sell and clear the 80% loan. Do you think the short sale is easier to get on the 10% second, or would they allow me to take that on as a personal unsecured debt, or tack it onto my primary home?

What is your recommendation as to the best course of action to take?

Jessica

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Hi Jessica,

That’s an easy one - shorting the second and particularly when you are willing to sign for it as an unsecured note is a no-brainer for WAMU.  That wouldn’t be the way that I would present it to WAMU however. 

I wonder if, for example, in a fire sale, how much equity you really have in the other properties?  Also, retirement money is yours if you filed bankruptcy, so the lender doesn’t get any of that.  From $300,000 down to $100,000 is a documentable hardship.  You may end up signing for a portion of the deficiency, but don’t submit it with that proposal and definitely don’t offer to tack it onto your primary.  They can provide a zero interest unsecured note. 

Thanks for the questions and hope this helps.

Paul