Litton Loan 1st, CIT Bank 2nd

[LasVegas37]

I live in Nevada. I owe $280k on first, owe $50k on heloc. I originally had an 80/20 loan in 2004, refinanced to the above loans in 2006. My house is worth anywhere from $150k-$200k. I am current on both loans and my wife and I both have 700 credit scores. We secured these loans with stated income application and if we provided W-2's or tax returns the banks would see that we can not afford the payments. However, if they see our bank accounts they would see enough money deposited each month to pay the bills. We only have about $2k in liquid assets and have about $20k each in 401ks.

We would like to do a short sale and have a couple of concerns.

1) If the house sells for $200k and the 1st lien holder agrees to short sale, does that prevent them from coming after us for the balance (80k) or filing a deficiency judgment against us?

2) Will I be able to negotiate with the 2nd lien holder to reduce the total amount due, make payment arrangements or some other settlement? And prevent them from coming after me for any deficiency?

3) How will this affect my credit if I can accomplish this without missing any mortgage payments? Or am I better off to just stop paying on both of these loans to force their hand.

I should let you know that I can afford to continue making payments, but I have just made a business decision that I can not keep paying 2,500 a month on loans that I am upside down by $150k. Some people may not agree with this and say it is unethical to walk away but I am strongly considering this even if it hurts my credit I believe I will be better off in 5 years.

[Moe Bedard]

LasVegas37,

Short Sales are offered to homeowners who are seriously delinquent on their mortgage payments when other avenues have been tried but failed.

In order to keep the house out of foreclosure, lenders might accept less than what is owed on the mortgage note. Certain requirements must be met including showing a hardship and the presentation of a Short Sale package to the lender. Although requirements vary from lender to lender, typically lenders will require the following information:


A) Household Income versus Household Expenses Financial Statement
B) Hardship Letter stating why a Short Sale is necessary
C) Bank statements, Check Stubs, and Two Most Recent Tax Returns
D) Listing Agreement with a Realtor or Attorney
E) Executed Sales Contract
F) Lender Letter or Financial Statement showing proof of buyer's financing
G) Estimated HUD 1

Keep in mind that short sales agreements require that you do not have any equity in your home and must owe more on the mortgage than the home is worth. Short sales are very hard to negotiate, with that being said it is a good idea to hire a professional (Realtor or Attorney) who can assist you in organizing and negotiating a short sale offer.

The primary goal in real estate Short Sales is to convince the lender to accept payment in full without pursuing a deficiency judgment. What this means is the lender agrees to accept less than what is owed on the mortgage note and not to pursue you for the difference. Not all banks will agree to this and some require homeowner's to pay the difference between the Short Sale amount and loan balance.
If you are unable to pay the difference, the lender can file a deficiency judgment against you. Deficiency judgments are reported to credit bureaus and can remain on your credit history for 7-10 years, even after it has been settled and paid in full.


Nevada Foreclosure Law

[LasVegas37]

So I guess my best route would be to stop making any payments on both my 1st and 2nd mortgage. The only problem is that could lead to a foreclosure (if they never approve the short sale) and although I really don't care if my credit gets damaged, I am worried about any deficiency judgments after the foreclosure and how those would then cause me to file for bankruptcy. Not really sure what my best route is. Is it automatic that a short sale will not be approved unless you are in default?

[Moe Bedard]

Not necessarily, but you would have to show a hardship has happened to cause you not to be able to afford the mortgage moving forward.........

here is a sample hardship letter for a short sale..........just rework it for your situation...............


To Whom It May Concern:
I am writing this letter to explain my unfortunate set of circumstances that have caused me to
become delinquent on our mortgage. I have done everything in our power to make ends meet
but unfortunately I have fallen short and would like you to consider working with me to consider
a short sale for my home.
The main reason that caused me to be late
is :_________________________________________________ ___________________________
__________________________________________________ _____________________________
__________________________________________________ _____________________________
It is my full intention to pay what we owe. But at this time I have exhausted all of my income
and resources so I am turning to you for help.
My situation is not likely to become better as I cannot sustain the payments on my salary alone
and feel that a short sale would benefit us both. I would appreciate if you can work with me to
meet my request.
I truly hope that you will consider working with me and I am anxious to get this settled so we all
can move on.
Sincerely and Respectfully,
Ms. _______________
Signature_____________________
Loan # _______________________
Address_______________________
Phone_________________________




It is better to have either the real estate attorney or agent negotiating that route because they can negotiate with the lender for the deficiency.........if it does go into foreclosure the options become limited