2nd mortgage: Deed in lieu vs short sale

Guest 0.10 Dollars($)

I own a duplex in palm beach county. It has two mortgages, one for 199,000 and one for 50,000. The 1st mortgage holder has agreed to a short sale, if I can get an offer (highly doubtful). The 2nd mortgage company wants me to send them a complete financial disclosure.
I'm retiring in 9 months and my income is cut to 1/3 of my present salary.

If I can't get an offer, I would prefer to have a deed in lieu performed with the 1st mortgage holder.

Two critical questions:

1. What happens to the 2nd mortage holder (Homecoming financial) if the first goes with the dil.

2. I read that deficiency judgements are not being sought after as much as the public is led to believe. Is that so? Also, can they go after my retirement, soc sec or TSAs?

This is not my home, it was originally bought for income property which has cost me a fortune to remodel, then another fortune trying to pbay mortgage payments on a house once purchased for 259,000 and is now worth, maybe $160,000.

ANY advice or help would be greatly appreciated. Thanks, Linda

Niicss · Posted: Sat Aug 30, 2008 1:16 am Post subject:

Welcome Linda.

If the first mortgage company accepts the deed in lieu then they will not seek deficiency judgment to you. But I feel the second mortgage company has not accepted the deed in lieu. So they can come after you for the deficiency judgment. You should try to pay of the out standing balance of the loan amount.

sara · Posted: Sat Aug 30, 2008 4:19 am Post subject: RE: deed in lieu and second loan

Hi Linda Troy,

When the first lender accepts a deed-in-lieu or dil (chances are less as you already have a second loan), he uses a non-merger clause in the agreement. This is done in order to prevent the second lender from taking any legal action against the first.

To know what happens to second loan after dil on first, refer to a previous forum discussion.

Take care

Guest 0.10 Dollars($)

Thanks for the help, I guess no matter how you look at it all options are nightmares. I really appreciated the straight answer. Linda

Samantha

Hi Linda,

Welcome back to the forum.

Are home prices going too low in your area? I'm asking this because you don't seem confident that you'd be able to complete the short sale. Whether you go for a short sale or deed in lieu (dil), the second mortgage lender may either sell off your debt to a collection agency just as any unsecured debt. This is because once the property is sold off, the second loan doesn't have a collateral and hence it can be considered as an unsecured loan.

Alternatively, the second lender may also issue a second mortgage charge off implying that he no longer wishes to collect the payments. But you still owe the debt. So, if you still keep paying as much as you can afford on a monthly basis and pay off the entire debt in agreement with the lender, it will help you minimize negative impact on your credit score.

The lender may even forgive the second mortgage debt in case you're not able to repay at least a part of it. But you may have to pay taxes on forgiven debt provided you don't satisfy the criteria for mortgage tax relief .

Hope this helps...

God bless you.

Samantha

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