Wells 1st & Wells 2nd- Need Advice

[WellsWellsWells]

Live in CA. Bought home in 2004. Did Refi on 1st for rate & term purposes, Wells 1st w/Wells Fargo Home Mortgage- for 345K. 1st is a portfolio loan, owned by Wells, Fannie Mae. The 2nd is a HELOC w/Wells Fargo Bank, owned and serviced by Wells Fargo for 175K. I had did refi back in 2004, from a lower HELOC amount to access addtl $$. Pulled the money out from the 2nd and bought 2 investment properties (20-30% down on each). The 2 rentals are now at break even to slightly underwater. One of these is with Wells- WFHM. No credit card debt, no debts other than these mortgages. Have my bank account w/Wells. Acct has 1-5K at any given time. Was self employed through mid 2007 in real estate. Took a W-2 job in 2007 as market continued to get worse. Got laid off at end of 2008. Hardship is a 100K+ loss of income. Wife has a 100K W-2 job. Trying to get going again on self employment but $$ isn't there. Started working with someone to help me on loan mod on 2nd. They submitted paperwork and after review Wells Fargo Bank- HELOC 2nd says we are not eligible b/c DTI ratios fall within guidelines. About 30% DTI between 1st & 2nd. Not sure how they factor, but we have 4 mortgages between 3 properties. Trying to quickly modify 1st under the new Home Affordable refi/modification program guidelines. Not behind on either 1st or 2nd. Both wife and I have 750+ FICO. Our 2nd which is a HELOC, which was a 5yr I/O just went adjustable in Oct 2008. Payment is still low b/c it is at prime. Our 1st is about to adjust in July 2009. It too is a 5 yr I/O based on LIBOR. Margin is 2.25%. Current rate is 4.125%. Payment will go up slightly once it goes adjustable in July. Our two investment properties are at break even monthly. Other $$ goes in with slow pay renters, repairs, etc. Wells suggested I sell those 1st then come back. Trying to sell or short sell either investment property will either require me to come up w/$$ or at best get me out of costs that come up in between tenants/repairs/etc. This house w/ the 1st & 2nd is my primary house. Worth 345K. Which is balance of 1st mortgage. With job loss and the fact that we are upside down 175K. It doesn't make sense to stay on current course. Ideal scenario would be to settle w/2nd but they want 80% to settle. I would be willing to pay 5-20% at most. All of our $$ is in 401K/IRA, would cash out some if I could get 2nd to go away. Thoughts are to re-negotiate the 1st, then stop paying on the 2nd. I have slow payed the 2nd HELOC for 3 months in a row but not let it go over 30days late at any point. Will going delinquent on 2nd hurt chances to refi/modify 1st? I like the home but no that attached. TGot into all these homes w/stated income, now that stated income has dried up. With income changes from W-2 and unwillingness for WF Bank-HELOC not willing to help I am ready to let it go. Will Wells HELOC become more willing to help when I go delinquent? Someone told me that Wells have different departments based on how delinquent you are? Over 60, over 90, over 150 days delinquent. Just about at that point where I will be forced to stop making a payment. Seems like principal reductions aren't happening in good numbers. I would rather short sell and settle with 2nd to get out from 175K upside down. Any chances at keeping house based on someone who had a similar scenario? If not any advice on some options would be helpful.

[Dan Bailey]

Wellswellswells,
Glad you found the forum and posted.

You wrote: "Seems like principal reductions aren't happening in good numbers. I would rather short sell and settle with 2nd to get out from 175K upside down"
Principle reductions are not happening. Period. There has been principle forbearance in some modifications. (amt due at later date as a balloon)

Since you own several properties, perhaps focusing on the property you reside in would be the thing to do. Most folks here are worried about staying in the home rather than the amount upside down. ( home vs. investement)

Unless the ability to pay all the mortgages on time is available...credit is going to take a hit sooner or later. It will be hard to show hardship with that many properties being owned. Short sale, walking away, allowing any payments to become late on any of the mortgages-will result in credit reporting.

[WellsWellsWells]

Dan,

Thanks for the reply. After reading through hundreds of threads a few additional questions came up.

If 2nd is a recourse HELOC (and the 1st mortgage encumbers property to current net present value) As the burn rate of my acct funds go below $0 and into negative my thought is to not pay 2nd before racking up credit card debt. Are you familiar as to what options 2nd recourse HELOC's are doing to collect? Saw some threads that mentioned sending debt to collections. What is the best strategy to try and work out a settlement? Now before I am delinquent, when I am 60 or 90+ days past due? or deal with collections company? Any thoughts on best possible courses of action would be helpful. Would love to keep my home but not upside down by a 175K.

[Dan Bailey]

Wells,
We cannot give you advice on "pay/not pay" different debts. Your situation seems quite complicated and it may be in your best interest to seek the advice of a Real Estate Attorney familiar with debt collection practices.

As I stated before, principle reductions are not being done, so if your decision is to not keep a home that is upside down, you may want to consider Deed in Lieu/walking away, which, once agin, would require planning with an attorney.