What are some of the options to a homeowner facing foreclosure?
1. Seek a loan modification •1. Pursue a short sale (list house for sale with short-sales realtor). Submit purchase contract, estimated HUD-1 to both first and second mortgage. Second must also agree to the sale. The first may give some of the sales proceeds to the second to compensate the second. However, the second mortgage retains the right to charge-off their debt / seek a deficiency judgment. Bank of America has a new program (in short sale agreement) asking sellers in a short sale to agree to repay the difference that the bank is compromising. I have seen Aurora try this also. The lenders claim this is simply to protect their investors and insurers. Short Sale or BK? In chapter 7 bankruptcy, maybe the debtor will lose the house, but liability to both the first and the second mortgage lenders will be wiped out. Even in chapter 13, the debtor can often get rid of second mortgage by “lien stripping” and keep the house by making payments over a period of 3 to 5 years. Contact a Bankr
