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We have a house with a 180k 1st mortgage (Huntington) and 55k 2nd mortgage (PNC). Each is from a different company. The house just appraised at 190k. I'm being transferred by my employer from Michigan to Texas. I have decided to keep my job and accept the transfer even if it means I have to lose the house. How should I handle the mortgages? I have not talked to either mortgage company yet, but is there any chance of the 2nd mortgage releasing the house as their collateral? If I have to default, what are the consequences? Anything else I should know?

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Are you able to keep the house, rent in Texas and let your Michigan home out to some renters? If you can find a renter and rent something for yourself in Texas at a similar price, you should be able to keep making your repayments.

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    Good suggestion, we are considering this option. It scares me because I have no one in Michigan to monitor the house, so I could end up with bad renters, but it's an option. Thanks. – Chris Phelps Oct 24 '11 at 14:41
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    You could go through a property management company to rent it out. They would probably take quite a bit of the rent, but would be local and can do background checks on the renters and periodic inspections. – Zach Oct 25 '11 at 1:16
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I believe that Michigan lies somewhere between a state like New York (where the lender has recourse to sue you) and California (where the lender has no recourse, and you can just walk away).

If your intention is to walk away without going bankrupt, you need to consult a qualified Michigan attorney.

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    Even if your intention is to walk away and go bankrupt, you should probably consult an attorney. – Zach Oct 25 '11 at 1:16
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This could be rare, but I know of one company that gave their employees the option of selling the house to the company as part of the transfer. I think it might be similar to a relocation package. Understand that the arrangement is not to make a profit; the employer makes the purchase at the loan value. You may want to inquire with your employer to find out if they offer options of this nature.

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    It is going to be hard to get the company to purchase the home above appraised value. – user4127 Oct 24 '11 at 14:12
  • I did talk to the company about this option, but unfortunately I'm upside down. What I'm really looking for is an opinion on how to get out of the mortgages. Do I default, let the house get sold, and then just make payments on what's left? If I default, how would the banks handle the situation? – Chris Phelps Oct 24 '11 at 14:42
  • Or, are their any options to work with the banks. I'm not really looking to screw anyone and am willing to pay the upside down portion of the loan(s) if they are willing to put me on a payment plan without the house colllateral. – Chris Phelps Oct 24 '11 at 14:46
  • @ChrisPhelps - You would need to talk to the bank about converting to an unsecured loan. It will probably cost quite a bit more interest. If you have a retirement account or life insurance policy you might be able to borrow against it. – user4127 Oct 24 '11 at 18:05
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Have a local property management company send someone out to give you an estimate of how much you could rent it for. They take 10%, but it may allow you earn enough to pay off the mortgage without defaulting.

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