One of my clients asked me if we could just short the 2nd, pay them off and keep the first in place… He wants to keep his home. Wiping out the 2nd he said he feels he would be able to afford it. is this possible???
are you a Real Estate Agent ??
ummm not to be mean but does this make any sense to you ??
everyone in america would do this wouldnt they ??
The homeowner can’t short sale his own second.
I don’t see any benefit to the homeowner to have an investor arrange a short sale on the second. The homeowner would have to still make the payments to whoever bought the second.
I can’t see much benefit to an investor to buy the second and leave the homeowner in place with the homeowner owning the house and keeping the first mortgage, when the homeowner clearly can’t make his payments. (and is in a position to take out another second on the house)
The banks aren’t accepting short sale offers without solid proof that the homeowner has no way to pay them. The guys holding the second have no motivation to short sale unless the first mortgage is also a short sale.
What does being a RE have to do with it? (nope not an agent anymore)…
As far as “does it make sense”? The answer is… “it depends.”
The fact that they are two seperate loans and the second holder “is” in second position, depending on their their fiscal health, (2nd lender) if it makes sense for the second to take a loss (dpending on their current health of the company) it just might make sense for the second to take a loss and the H/O keep his home…PROVIDED the homeowner can qualify for this short sale. That’s 500 dollars he’ll save by not paying the 2nds payment.
Afterall, they are two seperate loans. Two seperate transaction with two different lenders… The property just so happens to be the collateral for both security instruments. And the 2nd is more at risk of not getting paid, is all.
I think i’m going to go for it anyway. Hey weird things are happening…the second just might. Like the last deal i did, HSBC was in second position and they accepted 2200 (of 65K) and the H/O wanted to keep the home but I told him that wasn’t possible… Than I thought, wait a minute? Why woudn’t it? Unfortunately, I made a boatload of cash in the flip and the H/O had to get out 
… Thanks guys!
the thing is short sales dont allow the homeowner to keep the property. They’re not even allowed to rent the property from the new owner.
this may change with the banks unstable position and the government wanting the housing market to solidify. Let us know what the lender tells you.
No prb liquidity. I may be wrong, I usually am but I’m going to see. You do make a good point as far as them keeping the house but we’ll see. Thank you so much for your expertise and you definetly make a good point… :beer
The reason why seconds take such a hit on short sales is because if the first forecloses they will get nothing. If the first, in this case, is up to date why would the second want to short?
I have yet to see a short refinance or otherwise a loan modification result in a loan balance reduction, but they make sense in that they would put the mortgage in line with property value. Of course, everybody would want one, thus, cause mass disruption in the stock prices and value of lenders.
The second will not short without the first. Especially if the homeowner is keeping the home. The second would rather hold on to the note in hopes the homeowner makes it through this mess and when there is finally equity in the house and the homeowner refi’s or sells, the 2nd is then paid - that is what they are thinking. Now instead, what the homeowner can do - and it’s risky as well and they may want to consult an attorney about this because I am not one - but because the 2nd cannot foreclose without the first, assuming the homeowner can afford the first and it is the second that is brining them down - and they are already behind on the second - simply stay behind and keep paying the first - because of the current market conditions, the lender can’t do anything but keep the homeowner in collections. Also assuming the market goes no where in a year a two as predicted - collections will at some point request to settle. That’s when you negotiate. Not now. Any input on this?
Cruzv you make the best point. I certainly see how this would work… I will advise my client to continue to pay at least on the first. Now i’m just wondering if the second is in any power to push for the sale of the house (If there’s no equity it wouldn’t make any sense).
cruzvarian - your strategy would hit the homeowner’s credit as the second would report him late to the credit bureaus… Having a 30 days late notice is one thing… going past 120 and into collections is much worse to your credit… You may save few bucks now but may end up paying it back in higher interest rates in the future… Just my 2 cents…
Have a nice day!
True - in the cases I work they are already late so it may not be as much of a hit. If someone is not late already that would definitely be a different story.
You can purchase the 2nd non-performing note at a discount. Have an investor purchase it with your money if you have enough. The 2nd should sell it at least 40 cents on the dollar or better, but you will have to have cash and buy it in a name different than the H/O.
and if the home goes into foreclosure you get nothing ???
I hope you realize that this is fraud… :O)
I have saw a property owner short the second, it is possible. It is not easy. The guy I saw negoiate down his second was a former lawyer
So it is possible and it is happening