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The question:

Bill asks:

“Hello. I have a first mortgage and two home equity lines of credit. I have never been late with a payment. The value of my house is worth far less than the amount I owe, and I would like to sell it because I’m now unemployed. Is it possible to convert one of my loans to an unsecured loan so I can sell the house and afterward make payment on the unsecured loan? I want very much to avoid foreclosure or bankruptcy.

Thanks!”

My answer:

Bill,

The second and third lenders will not voluntarily release the home as security for their mortgages in most cases….so the answer is “probably not”.

Of course, it never hurts to ask. The third mortgage lender is the one I would approach as they are in a very risky position currently and going unsecured isn’t much worse than the risk they are already taking on. Only after those attempts failed would I contact the second mortgage lender.

If you are going to sell with both the first and the two home equity lines liening the home, you are left with having to cover the short fall yourself. I was going to suggest you contact the first mortgage holder and ask for a short sale reduction of the first mortgage. But since you are not in default or even late on the payment, asking for short sale won’t work either.

Once again, it’s probably futile, but ask anyway. Read this post to learn more…Short Sale Foreclosure – How To Save Your Home

If you get shot down on both attempts, your only solution might be to get an unsecured loan on your own…maybe a loan against your 401K for the spread…to bridge the gap at closing.

Thanks for the question!

Author: The Mortgage Insider

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