I’ve Got Multiple Mortgages, Can I Still Short Sell?

The Oak Park and River Forest short sale lawyer at our firm often fields questions from clients trying to get help with mortgage problems.  We often explain that a “short sale” is a helpful tool whereby those struggling to pay a mortgage can deal with the problem without the need to go through the entire foreclosure process. In fact, a short sale is possible even when one has two (or three!) mortgages on a single home.  It is not easy and can get complicated, but a competent legal professional in the area can help you get it done.

Short Selling with Multiple Lenders

A short sale involves a homeowner working out an agreement with a bank to sell the home to a third-party for less than the total debt due on the home.  Many local residents were severely hurt in the recent recession—through no fault of their own—and found their house value plummet.  The short sale then, is an important way to escape from underwater homes.  When multiple lenders have a lien on the property, however, each lender must sign off on the short sale.  For example, if you took out a second mortgage on your home, both lenders would have to consent to the short sale before it could go through.

Some local resident might worry that getting two lenders to agree might pose a complication.  Of course, it is always a possibility that one of the lenders might hold up the process or put an end to it entirely.  Yet, our Cook County short sale attorneys understand that in some situations lenders are growing more eager to approve short sales.  Getting multiple lien holders to agree on a sale is not an insurmountable barrier.

For one thing, junior lien holders may have clear incentives to approve a short sale.  The junior lien holder is usually the second (or third) lender.  These lien holders often have little to gain via a foreclosure.  In a foreclosure, whoever holds the first mortgage gets first priority.  There is rarely any money left over for junior lien holders, and they may end up with nothing.  A short sale may prevent this

Last week news broke regarding changes in policy that will likely make short sales move along more quickly.  Federal regulations now require Fannie Mae and Freddie Mac to give short sale buyers a decision within two months.  This represents a big improvement and will make the short sale process more feasible for many local residents—including those who have multiple mortgages.

Dealing with foreclosure, the threat of foreclosure, or an underwater home can be a stressful, lonely time.  But resident should never forget that legal options exist to help them out of the situation.  The first step for those in our area is visiting with a local Cook County real estate lawyer to learn what is available in your case.  There is nothing to lose from learning more from legal professionals who have experience navigating all of these short sale and foreclosure complexities. 

See Related Blog Posts:

High Percentage of Underwater Mortgages in Chicagoland                              

Emotional Consequences of Illinois Foreclosures