Second mortgage question?

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I bought a house three yrs ago with no money down. The house is now worth about $ 180k, down from $ 280k. I have been paying all my bills on time but choking in them.
My first mortgage is was modified and sold to a new provider and is at 4.125%. My second mortgage is at 10.25%.
First mortgage is about $ 225k and about $ 820 a month. Second mortgage is about $ 55k and about $ 500 a month.

I have over $ 30k in credit card debt also.

I was advised to try to have the second mortgage forgiven for 1-10% of the loan amount by claiming hardship and mentioning that I’m considering bankruptcy.
If the house is foreclosed they would see no money whatsoever so it might be a good deal for them to get $ 5-7k in a lump sum and write off the rest.

If I could make the second mortgage go away, than I might be able to make payments. I’ll get the money from my parents as long as it’s a reasonable amount.

Has anyone done this? Can someone recommend how I should go about it? Or can you suggest other avenues?

Thanks.

2 Comments
  1. Reply
    ghothem
    February 3, 2011 at 11:40 pm

    It can’t hurt to ask. I would contact the second mortgage holder and discuss it with them. Ask to speak to the Loss Mitigation Department. They clearly have no collateral value behind their loan if the house is worth less than the first mortgage. You might want to offer them 10-20% of the remaining balance ($ 5,500-11,000) in exchange for a complete satisfaction of the debt. Be sure you get a written agreement that it will not affect your credit rating and that they accept the lump sum as payment in full.

    You will still end up with a $ 225K first mortgage on a house worth $ 180K, but at least you have some chance of getting back to a positive equity position when the market comes back in the future.

  2. Reply
    Pat F
    February 3, 2011 at 11:46 pm

    As long as the debt is in good standing, it’s going to be hard to negotiate with the 2nd lien holder.

    You can call and ask to speak to their LOSS MITIGATION department or loan retention department in order to work out a settlement. Don’t talk to customer service, because they literally don’t knwo what they’re doing. Also, press the option for spanish when calling, and you’ll get an american/english speaking account rep – the outsourced account reps have no grasp on local situations.

    You’ll need to prove hardship with the lender, but like I said, you may not be able to do much until that account is behind. That’s not proactive of the lender, but they have no motivation if the account is active.

    Keep up your hope – short refi’s and short sales happen all the time, especially with the 2nd lien. Best of luck.

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