Make payments on a debt about to be settled?

December 19, 2012 11:57 AM

make payments on 2nd mortgage about to be settled in short sale?

I haven't made a payment on my 1st or 2nd since September. I'm about to close (hoping by the 31st for taxes, but more likely by Jan 9) selling the marital home (divorced in 2012) in a short sale. The payments on the 2nd are interest only and about 1/20th of those for the 1st.

I got a call from the bank holding the second this morning warning me the missed payment from Sept 25 will be reported as 90 days late on Dec 25. I don't care much about my creditworthiness, but my ex might want to get a car loan in a few years. Won't the two settled (charge off?) debts affect credit a lot more than some late payments?

There's also the possibility that suddenly being "able" to make payments will change the bank's mind about accepting a short sale. Is that a realistic worry? [2nd holders get a much smaller % of what they're owed- the 1st is getting over 90%.]

The deed and both mortgages are in both names (me & ex). I was supposed to "assume" the loan, but it turns out the bank holding the 2nd doesn't allow that

posted by morganw to Work & Money (2 answers total)

Best answer: Oh the whole enterprise is going to screw up your credit. The short sale itself will.

Save the dough. By the time your ex is ready to get a new car, he can save up a hefty down payment.
posted by Ruthless Bunny at 12:01 PM on December 19, 2012

Best answer: I just went through a Short Sale in August and we had to miss 4-5 payments to get it through. From looking at my credit report, it looks like the payments missed were a lot more damaging than the short sale itself - BUT, Ruthless Bunny is right, it's all going to be screwed up anyway. Just get out of it spending as little as possible. (My score is already climbing again)
posted by getawaysticks at 12:31 PM on December 19, 2012 [1 favorite]