What is so bad about foreclosure?

[InFL&Need2Sell!]

Florida

My wife and I purchased a home in May 2005 for $180,000. In September of 2006 we used a HELOC on the first to close on a second home in the same neighborhood which is now our primary residence. Our intention was to use the HELOC to pay the first home's mortgage until it sold. The house never sold and the HELOC will run out in 5 months. At that time we will no longer be able to pay the mortgage, the balance of which is $166,000. We will also owe $33,000 for the HELOC which is in first lien position.

My questions are these:

-How does a HELOC in first lien affect a foreclosure?

-In a foreclosure, would we owe the difference of what they received for the house and what we owe?

-The HUD.gov website states that there is something called PFS or Pre-Foreclosure Sale. Can this help me in my situation?

-Being that there are 5 months before this process starts, is there anything else I can do?

Thanks in advance for your guidance!

[lcannister]

the balance of which is $166,000. We will also owe $33,000 for the HELOC which is in first lien position.

How did a 33k HELOC gain a first lien position? Doesn't sound right.

Have you lowered the price on the house to the absolute bottom even to where YOU have to come to the table with money?

Have you ask the bank to accept a deed in lieu? Short sale?

Why won't the house sell, decline in property values in your hood, priced to high, curb appeal? Sellers are having to become creative right now in many areas.

Can you turn it into a rental property?

[FlyingRon]

Originally Posted by InFL&Need2Sell!

-How does a HELOC in first lien affect a foreclosure?

I agree with LC, the HELOC is a junior lien to the original mortgage (unless there's something you haven't told us). What happens is the money from the foreclosure sale goes to pay off the liens in their order of seniority. The first mortgage is paid off, then the HELOC with the surplus if any.

-In a foreclosure, would we owe the difference of what they received for the house and what we owe?

Certainly. The foreclosure doesn't wipe out the debt, just the lien. All the creditors can come after you for a deficiency judgement on the stuff that wasn't paid off by the sale.

-The HUD.gov website states that there is something called PFS or Pre-Foreclosure Sale. Can this help me in my situation?

I'm not sure you qualify. You'll need to more fully explain the situation.

-Being that there are 5 months before this process starts, is there anything else I can do?

Yes, sell the second house.

[nextwife]

Originally Posted by FlyingRon

Yes, sell the second house.

I agree. Price it competitively and get it SOLD!