My wife and I recently reconciled and bought a house together. We each own an additional house (all in California) where the values have dropped tremendously (over 50%). I have a first and a second on mine and my wife has just a first on hers. My wife lost her job and she earned over 50% of the family income. We are current on our residence mortgage but both of our other homes are up for short sale. Renting them would never cover the loan payments. What should we do? We are current on our credit cards and other expenses at this time.
See if you qualify for a refinance as per the plan announced by President Obama by visiting MakingHomeAffordable.gov. Be sure to beware of scams that take advantage of people in your situation. Because you are not occupying your other two properties, you will most likely not qualify, but others reading this blog may.
Try to avoid foreclosure on your other two homes. In your circumstances, a "short sale" on both may be your best option. By definition, a short sale is where the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. However, Bills.com readers have reported that some lenders are going after the former owners for the deficiency balance.
What is a deficiency balance? When something is repossessed, the lender usually auctions the property (be it a car, boat, or real property) and applies the amount received at auction to the balance of the loan. The former owner is responsible for the balance of the loan less the amount received at auction, which can leave the former owner owing many thousands of dollars in a deficiency balance.
In almost all cases involving non-governmental debts, a creditor must file a lawsuit against the debtor and obtain a judgment before attaching a lien to the debtor's property or garnishing the debtor's wages.
We wrote more about short sales in my blog Foreclosure Short Sale. Be sure to read the reader comments at the bottom of that page for additional information on this emerging area.
I wish you the best of luck in resolving your situation. I hope that the information I have provided helps you Find. Learn. Save.