South Carolina foreclosure lawyer Dean D. Porter is available to assist homeowners who are interested in obtaining short sale approval on properties with second mortgages. If you are facing foreclosure and are interested in negotiating a short sale, visit http://www.porterlawyers.com to learn more about foreclosure defense and to request a free legal consultation.
For homeowners, getting
short sales approved with second mortgages on the property is proving to be a challenge. Most first mortgages are guaranteed by Fannie Mae and Freddie Mac or held by other investors. Second mortgages, on the other hand, are typically held by banks and credit unions. Banks are reluctant to write down second mortgages because many are current, even if there is negative equity in the home. Also, Freddie Mac will allow no more than $3000 in sale proceeds to go toward the second mortgage. The banks have the option of pursuing borrower’s assets after foreclosure since these loans are personally guaranteed.
Second mortgages have become one of the largest short sale obstacles since more than one-third of properties in some stage of foreclosure have a junior lien. Many seconds and home equity lines have little value in a foreclosure because home prices have fallen so sharply. This gives the second lien holder the right to play ‘nuclear chicken’ since they feel they have nothing left to lose. Second lien holders are demanding some form of debt repayment. Banks are concerned that forcing write-downs on a large number of loans could significantly reduce their capital.
This may raise the question as to why try to do the short sale. One key answer is that Fannie Mae and Freddie Mac allow borrowers who complete a short sale to become eligible for a new loan after two years, whereas borrowers who complete a foreclosure must wait as long as seven years.
Has the government done anything to get second lienholders to cooperate? Under the Home Affordable Foreclosure Alternatives program, holders of second lien mortgages must accept 6% of the unpaid balance up to a maximum of $6000 and relinquish all claims.
Dean D. Porter is a foreclosure defense lawyer at The Porter Law Firm, located in Mount-Pleasant, South Carolina. He focuses his practice on foreclosure defense, short sales and loan modifications and has an extensive knowledge of real estate law and the foreclosure process. To learn more about Dean D. Porter and alternatives to foreclosure, please visit http://www.porterlawyers.com/.
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