"Without recourse," or more accurately, "right to deficiency judgment," only applies to the foreclosure process. "Without recourse" has no meaning in the context of short sales.

"Short sale" means that buyer is buying on the condition that the existing lienholders (1st and 2nd mortgagors in your example) extinguish the liens. Reaching an agreement with the first lienholder does not extinguish the 2nd mortgage, and vice versa.

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Our 1st mortgage Co. sold our 2nd mortgage to a third party who holds our lein & is threatening foreclosure.
We can refinance our 1st mortgage to include the 2nd.
After 10 years in our home, we’d start over with another 30 yr. mortgage and a monthly payment approx. $150-$200 more, but at a lower rate than we’re paying now. We’d be rolling approx. $7,000 in costs into the new loan. New interest rate woud be 6.75, we’re now paying 8.0%
OR we can sell our house to pay off both mortgages. We would walk away with approx. $7,000 after all of the costs.
What do you suggest? What sounds like a better idea financially?
Answers needed ASAP (of course!)
1. Selling our home to pay off the 1st & 2nd mortgages will cost us approx. $16,400 in total costs and we’ll walk away with about $7,000.
2. Refinancing/combining the 1st & 2nd mortgages will roll approx. $7,000 back into the loan immediately.
Our credit score is Okay – in the upper 600′s. We are not behind at all on the 1st mortgage and have not had a terrible time paying the current payment (but are about at the limit).
However, due to incorrect info. from Chase 4 yrs. ago- we have never paid on the 2nd mortgage & that is where the problem is.
Chase Home Finance is our 1st mort. company. They are also the ones who sold our 2nd mortgage (line of credit that was discharged in an ’04 BK), to a 3rd party. It’s the 3rd party (First Mortgage LLC) who holds a lien & is going to foreclose. That HAS NOT yet happened and does not show up on our credit report. Our 1st mort. shows as current.
I’m so confused. What makes more sense financially?
Thank you to everyone who answers.

Call your local bank…

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What would cause a person to take out a second mortgage on their home?

Before the "Credit Crunch" 2nd mortgages were a common way of avoiding mortgage insurance when you didn’t have 20% to put down on the purchase of a home. Those were the first casualties.

Today Home Equity Lines of Creidt (HELOC’s) do exist for preferred borrowers with equity in their homes. They work similarly to credit cards, in that you have a credit line, which you can use for anything you want. Often the first 10 years you pay interest only and then the last 20 years, you can’t charge on them and have to start paying back the principal plus interest.

I think every homeowner with equity should have one established. If you don’t draw on it it costs you nothing, except perhaps a small maintenance fee. It’s like having free insurance in case you run into a financial problem, like a job loss or illness. As I tell my clients, when you NEED it you might not qualify for it.

Because home values have been declining, many HELOC’s have been frozen or credit lines reduced and many lenders have stopped offering them.

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