What if your 2nd mortgage won't work with you and the interest rate is 13%!

That's a tough one, and only you can answer that.. but i can say that I personally would never use my cash or 401K to pay off my -negative equity... there might be other options available to you, one is to negotiate with your 2nd to see if they would take a "Cash" Settlement.. it's possible you can save up to 90% of what you owe on the 2nd.. there will be an impact to your credit, but you will get past it within 3 years.. and it could save you 10's of thousands $$. But the best advice I can give you is to contact a LOCAL mortgage broker, not the local "Big" bank, and certainly not one of those 50 states internet lenders... the LOCAL broker is familiar with local customs and works with numerous lenders, seeking out the best loan terms for your particular scenario. Because he has lower overhead, he can offer you lower rates and lower fees than most of the larger lenders.. He also might be aware of refinance programs locally that you might qualify for. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

There are a couple of options available to you, but my advice is to take these suggestions to a Real Estate Attorney in your area that has experience with short sales. There are potential benefits, and pitfalls to whatever decision you make. Please understand that MI laws probably differ from AZ, which is where I am based. If the loans you have are purchase-money loans, that is, ALL of the proceeds of the loans were used to purchase the home, and no money was used for other items, then you may have some leverage. If your first mortgage lender is owed more than the value of the home, the second lender is likely now considered to be an unsecured lender. This can give you leverage, because many times, the first lender will pay something to the second lender to agree to a short sale. The option of getting something for a short sale, vs nothing in a foreclosure usually gets the second's attention. In other cases, disposing the property as part of a bankruptcy proceeding may prove to be beneficial. BUT, you must run all of your options past a qualified Attorney. Here in AZ often it is the actions of the First, with pressure from legal council that gets the second to cooperate. Finally, and this is my own personal opinion, I would never sacrifice my retirement money to satisfy a negative equity position, unless possibly one of the two exist...I only need $3-$5 Thousand to make it all go away, or legally, I am going to be stuck paying the difference anyway. This is why council is so important. Good luck to you. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

This is tough situation to be in and unfortunately you are not the only one. If you are considering selling and don't have the liquid assets to cover the difference between your mortgage obligation and the sales price, there is the option of applying with your lenders for a short sale. This is where the bank agrees to take less that what you owe them when you sell the home. I would strongly advise you to seek out a real estate attorney in which to discuss this. It is possible you could be approved for a short sale, but still be liable to pay back the difference or have exposure to pay income taxes on forgiven debt as income. Mortgage Loan officers are not trained in this subject matter enough to give you proper advise. You have probably heard ads for organizations that specialize in short sales, many of them are good at what they do, but they do not have the expertise to advise you on future liability of forgiven debt and this is where an attorney is a MUST. Good luck!