[The Professor]

There will be little, if any, communication between your lenders, except in those rare circumstances involving a negotiated short sale. Their interests are actually not aligned. The first loan is in a much better position and in situations like yours where the unpaid balance on the first loan is larger than the present property value, the likely conclusion is the first will simply foreclose and eliminate both your interest in the property and the interest of the second loan.

I guess in all of this I wouldn't be at all positive that a workout will happen with the joint cooperation of both lenders. Yours is the classic example of why modifications don't improve the situation relating to the home being underwater. Modifications under these circumstances seem to just extend the time it takes to reach the final conclusion (foreclosure). After all, who wants to continue to pay an amount that exceeds the fair rental value of the property, with the result being the vessel sinks into deeper water with each passing month.

Daniel