We need to sell our home in which we are a little "upside down" -- between the first and second mortgages, we owe about $3000 more than the house is valued at right now. A friend told me I could ask the second mortgage holder to release their lien so that we can sell the house, and then write up another contract with them to pay off the balance? Is this true? Or what do you suggest? Thank you!

I doubt the second mortgage holder is going to release the lien just so you can sell the house. I suggest you take everything in the house that you don't need to survive and sell it on eBay or at a garage sale, and use that money to pay down the second mortgage.

If you are "upside down" right now, you will be even more so after closing costs, commission, fees, etc. So take second jobs, sell all unneeded or unnecessary items, and paydown the second.

If they did that, the issue is instead of a mortgage it is a personal loan.

They may allow to let you keep a few thousand as a personal loan, more if your credit is good.

But wynelle is right there is little to do but get that mortgage paid down so you can sell if you can't borrow enouh to make that balance.