I bought my house 3.5 years ago on an arm. I am no longer able to make the high payment due to rate adjustments. I have contacted the primary loan company and found that I cannot do deed in lieu of foreclosure due to the 20% lien. Also, I have had the house for sale for months now with no bites. Therefore, I am looking at foreclosure, but am wondering how that will work with the 80/20 situation. Any thoughts are greatly appreciated!

You don't say what part of the country you are in, but I would assume (I know.. ) that there are too many houses and not enough buyers. Add that to the fact that your mortgage balance may be more than your home is worth, and you have a problem.

If that is the case, you may want to contact a few real estate offices and find someone who is an expert in short sales. If the banks will agree to it, you may be able to make that work. Potentially someone gets a deal on a house and the banks don't spend the $30-$40 thousand to foreclose on you and then try to resell the property at a possible loss. As a bonus, you may be able to come out of it with your credit marginally intact.

This may or may not be an option in your particular case, but spending a few minutes on the phone may give you some new ideas.

Good luck!

LG

Perhaps the FHA secure refinance is the way to go. This program was created for those whose ARM adjusted and then couldn't afford the payment. What state are you in? If you're in Florida perhaps I can help you out.