Advantages of Negotiating A More Favorable Deal on Your Second Mortgage

We define a problem second mortgage as a loan which is 100% under water, or close to it. How you address a difficult second mortgage depends upon your ultimate intentions with the property. If this is your main dwelling, and you would like to stay in your home, your goal will result in a strategy intended to manage the loan without risking foreclosure. But if it’s a rental property already lost to foreclosure and the 2nd loan provider is trying to get you to pay up, that would result in a different set of tactics.Identify your objective first - Assess your goal for the home connected with the second mortgage. Whether it’s a main home or a rental property, you need to decide whether you intend to keep the home, sell it, or simply walk away.Staying in the property - If the goal is to retain the home, then both loan modification and settlement (i.e., principle balance reduction) ought to be considered. In order to avoid foreclosure by the main lender, the 1st mortgage should be kept up, or allowed to slip no farther than 60 days late.Selling the home - If the intention is to unload the property, then a short sale should be considered. Locate a local realtor authorized in short sale transactions to help in the process. The second mortgage can be handled as part of the short sale process.Walking away - If the home is already lost to foreclosure, or will be abandoned as a consequence of substantial negative equity or cashflow deficit, then your remaining issue with the second lien becomes the recourse deficiency. These should be taken care of when funds become available, to prevent potential future litigation with the Statute of Limitations period.CAUTION: SECOND MORTGAGES are nearly always RECOURSE loans, meaning the bank can pursue collection action even after the home has been lost to foreclosure. That’s what makes them rather different from first mortgages.UNRESOLVED SECOND MORTGAGES are a potential legal risk for years to come, and will also have an effect on your debt-to-income ratio and therefore impair your ability to acquire future financing.Here are some of the benefits of a 2nd mortgage or HELOC settlement:1. Eliminates the second lien on your property, improving your likelihood for a successful sale or short sale.2. Decreases principle balance , in many cases by 80% or more.3. Takes away long-term risk of a deficiency judgment.4. Removes the balance from your debt-to-income ratio, which improves your overall credit worthiness in the eyes of future lenders.5. Provides you with peace of mind knowing you have a documented resolution with no further liability.PLEASE NOTE: The information provided in this article is not intended to substitute for professional legal or real estate advice. It is strongly advised that consumers seek the advice of a competent, local, legal professional. Consumers seeking to avoid foreclosure by way of the short sale method should seek the assistance of a local real estate professional who specializes in short sale transactions.

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