Home in Short Sale - (1st) GMAC - Refinanced 2nd (wells)

[blondehoudini]

I have a few questions
My home is currently on the market as a short sale in California.
I had two initial loans with GMAC - a first regular loan and the second was a HELOC - both with GMAC. Two years ago - I refinanced the second (HELOC) with Wells Fargo in order to get my interest rate lowered. So now I have my large loan (1st) with GMAC and a refinanced WF HELOC loan.

I am completely up to date and have never missed any of my mortgage payments - we are expecting our second child in October - we are having a hard time paying our mortgaga and we live in too small of a place that we paid $450K for - it is on the market for $265 because property values have declined so rapidly - we cannot sell and buy a home to fit our family - we are doing the short sale to get out and be able to rent a home that will fit our family and for less than what we were paying for our mortgage.

2 QUESTIONS:
ONE:
Is there any risk of the short sale and any deficiency in amount that WF receives in the short sale since it was a refinanced HELOC (not used for anything but reducing interest rate)? Will they be able to go after me for the difference? I've read a lot about refinanced loans and am worried. I would like some facts on this, as I have gotten a lot of opinions but no one seems to know the hard facts on this....>>

TWO:
Many people have told me to quit paying the mortgage since I am selling anyway - what could happen if I quit paying my mortgage at this point? Would it be beneficial if I only decided not to pay the first...or...?? Again - if anyone has FACTS on this ...not just opinions it would help a great deal...I have a nearly perfect credit score, but know that it will be hit hard with a short sale...so at this point, I am not too worried about it being hit even harder by not paying...my big concern is them coming after me for money after the short sale.

My goal is that I want to be free and clear of any loans/mortgages/home debt once I sell!

any help would be appreciated!

thanks!

[Evan Bedard]

Welcome and thank you for joining the community.

Is there any risk of the short sale and any deficiency in amount that WF receives in the short sale since it was a refinanced HELOC (not used for anything but reducing interest rate)? Will they be able to go after me for the difference? I've read a lot about refinanced loans and am worried. I would like some facts on this, as I have gotten a lot of opinions but no one seems to know the hard facts on this....

Since your second mortgage was refinanced it is no longer a purchase money loan which means they may be able to come after you for the deficiency. Personally I would contact a local real estate attorney for a free consultation to discuss this matter. But from what I have noticed around here in CA is they will more than likely issue a 1099 for the deficiency after the short sale is complete.

Many people have told me to quit paying the mortgage since I am selling anyway - what could happen if I quit paying my mortgage at this point? Would it be beneficial if I only decided not to pay the first...or...?? Again - if anyone has FACTS on this ...not just opinions it would help a great deal...I have a nearly perfect credit score, but know that it will be hit hard with a short sale...so at this point, I am not too worried about it being hit even harder by not paying...my big concern is them coming after me for money after the short sale

If you are able to achieve a short sale while current on your payments your credit should not go down to much. We have several members here that have done so and their credit only went down anywhere from 30-60 points. For those who stop payments prior to the completion of the short sale and fall many months behind you can expect your score to drop 100-200 points..

[ItWillWork]

When you get a buyer, the banks have to agree on how to divide up the money. You will be required to sign a legal document during the sale which will itemize who gets what out of the buyer money. There will be closing fees, including the agent's fees, the 1st will want the most, and the 2nd is usually offered a few thousand. Most often, the 2nd will ask for additional money from you to satisfy the debt. They'll start with over $10,00, then you have to negotiate them down. Go to the agent's office, and do it together. Make sure you get an experienced agent. If you stop payments, the foreclosure clock starts ticking. On the news in 2009 was a story of how the bank foreclosed on the CA house (wasn't even a short sale) while it was in the last part of escrow for the sale. If you have the money, it would be best to pay the mortgage, at least up until the 30 day escrow. If it falls out of escrow, you can cure the debt without it being in foreclosure territory. Good luck!