What are the furthest extents that banks are willing to help distressed homeowners in the current market?

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I purchased a home nearly 2 years ago with a 100% financing with 2 loans for $ 365K in Northern California. I have a 1st 80% and 2nd 20% from the same lender, both loans closed on the same day, never refi the loans and the 2nd 20% loan is not a HELOC. The properties comparable to my house around my neighborhood now sold for $ 265k-$ 280k so in that respect, I’m very upside down. To make long story short, I’m having difficulties paying my mortgage and here’s my question: If I foreclosed on the property, the bank would lose about $ 80k-$ 100k. If I go with short sale, assuming the bank approves it. It would still only be selling around $ 265k – $ 280k at the most, I’m 90 days late on my mortgage and I realized this might be a good time to negotiate with the bank since I might be able to leverage the current market turmoil situation to renegotiate the terms. What are chances the bank are willing to forgive my 2nd loan, which is at around $ 72k? Please advice, time is running out. Thank you.

3 Comments
  1. Reply
    Truffle lover
    February 3, 2011 at 3:53 am

    You are in a bind- if you foreclose, your credit will be seriously damaged for a very long time! If it was me- I would look at getting the interest rates lowered, maybe going interest only for awhile and getting a second job fast. You really should not have gone 90 days- try to negotiate with them, see if they are willing to work with you till you can get out of this. they don’t want your home back either and the prices will rebound- when the going gets tough… I would try to ride it out.

  2. Reply
    Kay
    February 3, 2011 at 4:22 am

    You have pretty much lost all negotiating power you might have had because now you are so past due. I dont know of any bank that will forgive such a large debt. Do call them asap and try to work something out BEFORE foreclosure starts. Once foreclosure proceedings start they are very reluctant to talk.

    Even if the bank sells the property at a loss they will take you to court to get the rest. So you still will not be off the hook for what is owed.

  3. Reply
    frankie b
    February 3, 2011 at 4:43 am

    There are options, call the bank and ask for the loss mitigation dept. Speak to no one else, they are the only ones who can help you.

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