Second Mortgage Lender Won't Allow Me to Sell

**silverado** · 06-02-2011, 06:52 PM

My question involves debt management in the State of: Arizona. I have just enough equity left in my home to cover the balance on my 1st mortgage. If I could sell and downsize, I could eliminate the rest of my debt at a much faster pace. 2nd lender(credit union) claims that this home is what secures their loan, which makes no sense to me since the equity no longer exist. I thought they could convert the 2nd mortgage to a personal unsecured loan. I assumed the interest rate would increase and that I would loose my tax deduction, but they won't even let me consider selling, even if I agree to continue making payments on the 2nd mortgage.
Even though I have not suffered a financial hardship, and can still afford payments on all my debt. What if I just walk away, what will happen then? If I ruin my good credit with a forclosure, how will that affect my ability to make purchases in the future. Any advise is appreciated!

**Mr. Knowitall** · 06-02-2011, 07:10 PM

The home is the security for their mortgage. If you believe you qualify for a personal, unsecured loan, get one, pay off your second mortgage, and be on your way.

**silverado** · 06-02-2011, 10:51 PM

The value of my home would have to double inorder to cover both 1st & 2nd mortgage. No bank would give me a personal loan needed to pay off the 2nd, should I find a buyer.
So it appears I'm stuck with this home untill such time that the equity builds enough to cover both loans, as property values are still droping.
Since I can't sell, and I walk away, what becomes of the 2nd mortgage debt? I don't have lump sume to pay the 2nd mortgage loan, but I do want out of this house.
Some solid advise please. Thank you!

**Mr. Knowitall** · 06-04-2011, 09:59 AM

It isn't your lender's fault that you owe more than your property is worth, nor is it your lender's fault that you don't have sufficient credit to qualify for an unsecured loan. Why, if you admit to being wholly unqualified for a personal loan, would you expect the HELOC lender to give you one?

You should consult a lawyer about Chapter 13 bankruptcy, as you may be able to cram down the HELOC in bankruptcy.