Bank records and settling a 2nd mortgage...

[loser104]

After a short sale, DIL, or foreclosure, and if opting NOT to file BK, I wanted to know if any of you have an experience as to how to handle a 2nd mortgage settlement.

More specifically, if and when they ask for bank statements and other financial records, what are they looking for, and how far back will they go??? 3 months, 6 months, 12 months?

If they see that I have $10,000-15,000 in my checking account and or IRA/401k, will that throw up a red flag for them as far as what kind of settlement they may ask for? Do they not realize that that is EVERYTHING I have in life, that that is my WHOLE NET WORTH..........a small portion will be used toward a settlement, some for an apartment, some for moving expenses, etc............

Just trying to get an idea of what I have in store if I end up with a short sale and what and how I can negotiate with my 2nd. You guys and gals have been a tremendous help over the last few months, I thank each and every one of you!

[BrokeOR]

I have heard nightmare stories about 2nds...So glad I don't have one. Traditionally, short sales have offered no relief from the 2nd mortgage, as the transaction is only with the primary lender. You may be out of luck.

I strongly encourage you to get a free consult with a BK attorney (if you haven't already) to ask how best to protect your assets. There are many legitimate ways to do this in a way that will allow you to keep your cash without showing that it's sitting in a bank account. Pre paying certain bills and expenses (like rent) is a way to do this; funding an ira is another. Even if you ultimately don't file, a good consult will give you some info.

To answer your question: No, your 2nd lien holder doesn't care whether or not you have to deplete your last cent to pay them back. They don't evalute with emphathy, only through numbers. Bluntly-it sucks, but it is what it is.

BTW: Short sales have new government mandated rules as of April 5. the good news is that the approval/denial process is set now: A lender must give you an answer on a submitted offer within 10 days of submission. But, if you're going to go this route, make sure you have a licensed reputable realtor on your team. Lenders (as of April 5) now must pre-approve the broker's best price opinion (a valuation term) before you put the house on the market.

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/11/AR2010031104524.html

Speaking of financial documentation, to be approved for a short sale a lender will require a laundry list. Bank statements for 6 months (every single page that comes with your statement, even a cover sheet), copies of last 3 years tax returns (all W2s,1099s and sub-chapter filings if you have them), proof of valid homeowners insurance, copies of your last 4 paychecks-that's just a start. You will also need to submit a hardship letter, detailing why you are asking for a short sale. Lenders are getting too many requests from solvent people who are looking to dump their underwater mortgages, so they make you prove your need before they will approve your transaction. I'm in the middle of a short sale, so I've gotten quite an education.

[loser104]

Really hoping that I can settle with my 2nd for no more than 10%. Do THEY have to approve the short sale, and do I have to reach terms with them BEFORE closing on the short sale???

I have this idea that if they won't agree to favorable terms that I could just refuse to pay them. Then they would sell it off to a collection agency, where I would have a better shot at settling for 10%. Do you think that is realistic? Guess you never know, and each case is different. Just looking for a step-by-step guide to help me along in the process. Really don't want to pay an attorney at this point, but will consult one if necessary down the road.

Will try to avoid BK if I can, but that will remain an option.......

[loser104]

Wondering if this is a good strategy to use right off the bat. When the second mortgage lender or servicer calls, to just flat out tell them that I have 2 options that they can help me with. One, I will pay you 10% and that's it and you will forgive the rest, or two, I will declare bankruptcy and you will get NOTHING!

Probably over-simplifying the process, I know. But that sure would speed up this whole process for everyone involved. Maybe a bit too much wishful thinking.......

[BCA2009]

From what I've heard threatening to file BK means very little to them. If it did everyone would tell them that. They have no idea if you are serious about BK until you give them a case number.