If you are an owner of a home with a second loan that is a Home Equity Line and you are having trouble paying your mortgage you should do something about it right away. I know you have probably heard that banks are taking up to 2 years to foreclose so you have plenty of time, but there is a dirty little secret in the mortgage world. HELOCs are not entirely like traditional mortgages, they are more like credit cards. If you do not pay your first mortgage your lender needs to find a way to collect the money or take your home back. However, with a HELOC the lender can turn the account over to a collection agency, get some money for it right away, and you are left to deal with the debt collector.
This can become a potential problem if you decide that your best option is a short sale. If you decide to sell your home as a short sale it is often easier to negotiate the payoff to the second if it is still owned by the bank, rather than the collection agency. The bank sold to a collection agency for pennies on the dollar, and would be more likely to let you go for the amount that the first lender offers. By the time it goes to collection that entity had invested money and will expect to make a profit by getting a settlement larger than what they paid. If you cut out the middleman (in this case the collection agency) it should be cheaper.
So, if you can not pay your mortgage, don't just stand there, DO SOMETHING. Whether is is going for a loan modification, refinance, or short sale, get started earlier rather than later. It will be less stressful in the long run, and generally much less complicated.
If you have any questions about short sales in the Silicon Valley please feel free to contact me.
Marcy Moyer
Keller Williams Realty
marcy@marcymoyer.com
650-619-9285
D.R.E. 01191194
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