In another thread reipro gave this advice:
I started this thread asking about the rules that banks need to follow for second mortgages and follow a strategy based on this.
I got a call today for a situation similar to the one that was described in that other thread. Here is the situation today:
3/2 SFH (with a small independent 1/1 apartment that is currently rented)
- Property in Orlando, FL
- Out of state owners
- Purchased for $199,500 a year and a half ago
- First mortgage: $170k at 9.5%, PITI $$1,450
- Second: $29,500 at 13%, Monthly payment $400
- The independent apartment is rented for $550 but the rest of the house is empty (it was rented for $1,000 but has been empty for two months now)
- Current FMV estimated at $195K based on a realtor's assessment, with an expected sale in 4 months after listing, if lucky (the realtor used those words)
- As of today they are current in their payments but will not be able to keep making the payments any longer.
Given this situation I was thinking of recommending the owner to stop paying the second for a couple of months and then we could try to buy the second for pennies on the dollar. That way they could afford the property as long as it is rented. I did recommend them to change their RE agent as she does not seem experienced and not being aggressive in marketing the property. They need to hurry up and get the property rented ASAP.
Obviously I told them about a short sale route but it seems they have no clue what it really means (their realtor told them to do this but couldn't explain them what it was
)... so they will contact the bank to see if they will entertain that route, although I told them it was not easy as they are not behind on payments so I don't see why the bank would talk to them about this possibility.
So, the reason for posting this is to get opinions about the strategy of not paying the second, get the property rented and keep the first one, and then sell the property with only one mortgage and rented, so this property would probably break even with a more decent loan (remember, the first one is at 9.5%)
Thanks in advance for your input.
There are other options to look at here. How much is the payment on your first mortgage? Can you afford just the first? If you can then do not pay the second only pay the first. The odds that the second will foreclose since there is no equity left in the property is very slim. Once your second has gone 6 months with out a payment the bank is forced by FDIC rules to charge the loan off. This when it is a great to to get them to take less than what they are owed.
I hope this helps!
I started this thread asking about the rules that banks need to follow for second mortgages and follow a strategy based on this.
I got a call today for a situation similar to the one that was described in that other thread. Here is the situation today:
3/2 SFH (with a small independent 1/1 apartment that is currently rented)
- Property in Orlando, FL
- Out of state owners
- Purchased for $199,500 a year and a half ago
- First mortgage: $170k at 9.5%, PITI $$1,450
- Second: $29,500 at 13%, Monthly payment $400
- The independent apartment is rented for $550 but the rest of the house is empty (it was rented for $1,000 but has been empty for two months now)
- Current FMV estimated at $195K based on a realtor's assessment, with an expected sale in 4 months after listing, if lucky (the realtor used those words)
- As of today they are current in their payments but will not be able to keep making the payments any longer.
Given this situation I was thinking of recommending the owner to stop paying the second for a couple of months and then we could try to buy the second for pennies on the dollar. That way they could afford the property as long as it is rented. I did recommend them to change their RE agent as she does not seem experienced and not being aggressive in marketing the property. They need to hurry up and get the property rented ASAP.
Obviously I told them about a short sale route but it seems they have no clue what it really means (their realtor told them to do this but couldn't explain them what it was

So, the reason for posting this is to get opinions about the strategy of not paying the second, get the property rented and keep the first one, and then sell the property with only one mortgage and rented, so this property would probably break even with a more decent loan (remember, the first one is at 9.5%)
Thanks in advance for your input.
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