An old college friend owes $110,000 on a house worth $50,000 in Detroit. The first mortage is with Fannie Mae for $70,000. The 2nd is credit line with a local credit union for $40,000. Can someone give me the lay of the land in Michigan? Would the 2nd pursue him on a deficiency judgement? Is is likley to prevail in negotiating credit line down on a modification or short sale and minimizeing the deficiency judgement?

His job is such he is paycheck to paycheck. The 2nd is a 10% interst.

I am an agent out of state. Just trying to point him in a direction.

Thanks in advance.

Is this a principal residence or a rental he owns??

I don't know Michigan foreclosure laws but can tell you if he believes a second will just forget the money he is having a pipe dream.

If they release the second lien for a few k to do a short sale the second will give the letter to release but reserve the right to pursue in the future for the remaining balance.

Does he not truly want the house or is it he cannot afford the payment?? If he can't afford the payment and has a true hardship they would rather reduce the interest rate on both loans then have a default.

If the second tried to foreclose they would have to buy out the first and won't do that on an asset worth almost nothing now in the current market.You also have does your friend care about his credit scores as well??

There are just so many factors along with if he needs to dump other debt bankruptcy might be a better option.It's impossible without being there.

A quick tip is it costs you NOTHING to get a first meeting with the bankruptcy attorney.Even though he might not consider filing bankruptcy he can take a ton of questions there and the attorney will answer hoping to get him to move forward and file.

no legal advice

The 2nd isn't going to forgive it unless they work out a deal. In fact the 2nd can sell their debt to an investor and they can come after him for the money. Don't quote me on this, but I believe it's up to 7 years and they can extend it for another 5 years by filing some paperwork. Does he live in Detroit? If not what city? I'm only second guessing because there are very few homes in Detroit worth $50,000. His best bet is to do a short sale and work out a deal between both banks.

Lives in Eastpointe. Suburb of Detroit.

If he wants a referral I have an agent in my office who is very good at short sales. I can either pm you her number or you can send me his and I will pass it along. I don't handle short sales or else I would take it since Eastpointe is my market.