Expert: Michael Brotherton - 1/29/2008

Question

Hello:

I own a house in Michigan, I paid $400K in 2000, I have a mortgage of $285k and a Home Equity Loan of $65K for a total debt of $350K. The housing market is such in Michigan the house has been appraised at around $275K to $300K. I own a second home in another state that I own free & clear. To make matters worse I have lost my job and prospects of a similar job are not good. I can no longer make the house payment or HEL payment. I do have some other assets, 401K's, IRA's and some CD's. I would like to just walk away from the house in Michigan and go live in my other house in another state and I would like to do it ASAP. I have only missed one mortgage payment. What are my options. Can I just hand the mortgage company the keys without going through foreclosure? Are my other assets protected?

Answer
Hi Les,

Although the bank may consider taking a "Deed in Lieu" of foreclosure it is not as simple as handing them the keys. There is a process to DIL and it can take several months to complete the process. You must also make a reasonable effort to sell the property before they will approve a DIL.

YOu will also have to provide financial documentation and other info since DIL is a hardship program.

The problem is you have a second mortgage. The second lienholder will not release the lien to the first without some promise to pay or arrangements on the debt. This leaves only one viable option, Short Sale. List the property and try to get some offers. If you don't after 30 days, lower asking price. Once an offer is received submit to lender.

If you need help with this I am available. This is what we do.

Your second property is only in jeopardy if the lender knows about it. You are probably safe. There is no national information system where they can  access this information.