More and more people are finding that they have fallen into a trap. They bought a second home or moved to get a job and left their primary home, now when they call their lender to request a loan modification, the lender refuses to give them a loan modification because the home is no longer a primary residence. With that logic, the home will be lost to foreclosure and the lender may end up taking a bath on the loan.

Q: We have a first mortgage of approximately $160,000 and a second mortgage that is about $25,000. The monthly payment on the first mortgage is $1,450 and $360 per month for the second. Due to a job loss, my wife and I could not pay the first mortgage payment. We relocated from North Carolina to another state for a new job and rented out the house. We submitted paperwork for a loan modification because the amount of monthly rent that was paid to us wasn’t enough to cover both mortgages. However, the first lender told us that since we moved, the house was no longer considered our primary residence.  We gave them nothing and the primary foreclosed.

Now the second lender is coming after us for their part of the money. We cannot afford to pay on a house that we are no longer living in. Shouldn’t the second lender get money when the first lender sells the house? Is there anything that we can do to settle with the second lender?

A: First, to qualify for a loan modification, the property in question needs to be a primary residence. When you moved to North Carolina to get another job, you forfeited the opportunity to get a loan modification on your former residence under those loan modification plans that require you to live in the home as a primary residence. At this point, your credit is in the toilet. So, there’s no need to worry about that while you negotiate with the second lender. But it would be nice to have all the bad news hit your credit score now, so you can move forward and improve it over the next few years.

One way to do that is to declare bankruptcy. If you file for bankruptcy, the second loan will likely be discharged. Again, consult with a real estate attorney to explore your legal options. It’s also possible, that the second lender has sent your debt to collections and they are trying to get what they can from you. They’re entitled to get money from the debt you owe the second lender, but if you can’t afford to make a payment to them, the second lender will have to decide whether to write the debt off or continue to pursue you.

To read the full article and for more reader questions, as well as Ilyce's advice on loan modifications, logon to ThinkGlink.com.