Benefits of Negotiating A More Favorable Agreement on Your 2nd Mortgage

We define a problem second mortgage as a loan which is completely upside down, or close to it. How you manage a problem second mortgage depends on your ultimate plans with the property. If this is your main residence, and you aspire to stay in the home, that goal will lead to a methodology designed to manage the loan without risking foreclosure. But if it’s a rental property already lost to foreclosure and the second loan provider is attempting to get you to pay up, that would lead to a different set of tactics.Identify your objective first - Assess your goal for the property associated with the 2nd 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 home - If the goal is to keep the property, then both loan modification and settlement (i.e., principle balance reduction) should be evaluated. To avoid foreclosure with the main lender, the first mortgage needs to be kept up, or allowed to get no farther than 60 days late.Selling the home - If the intention is to get rid of the property, then a short sale should be considered. Find a local realtor certified 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 has already been lost to foreclosure, or has been deserted as a result of considerable negative equity or cashflow deficit, then the remaining issue with the second lien becomes the recourse deficiency. These should be taken care of when resources are available, to prevent possible litigation in the future with the Statute of Limitations time period.CAUTION: SECOND MORTGAGES are pretty much always RECOURSE loans, meaning the lender can engage in 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 possible legal risk for many years to come, and can also impact your debt-to-income ratio and thus impede your ability to obtain future financing.Here are a few of the benefits of a second mortgage or HELOC settlement:1. Eliminates the second lien on your property, thus improving your chances for a successful sale or short sale.2. Lowers principle balance , oftentimes 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 elevates your overall credit worthiness in the eyes of future lenders.5. Provides you with peace of mind knowing you have a documented resolution without any further liability.PLEASE NOTE: The material presented in this article is not intended to substitute for professional legal or real estate advice. It is strongly recommended 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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