OK here's the situation:  You have 2 loans - for the purpose of this example lets give them names: (Mort =First Loan) and Gage = Second Loan): This example is for those of you that have Two different both lenders.  Mort(1) tells you that they will not be able to approval a short sale unless YOU get Gage(2) to approve first. The reason is because Gage(2) will get a significant smaller amount of money on the amount owed.

Lets put some figures on this situation: Mort(1) is for $500,000 and Gage(2) loan is for 100,000. However, if a short sale is approved by Mort(1), they will only give Gage(2) a total of $3,000.  That will prove to be a $97,000 shortage to Gage(2). This is based on you bringing in an offer that is lower than $500,000 ~ which in this market more than likely it will be much shorter than the amount of Mort(1).

Now YOU have to get the second loan Gage(2) to agree to taking much less % of what you owe than what the first is getting in % of amount owed ~~ this is where the negotiation skills are needed ~~ get an agent involved.  It happens all the time.  However... sometimes the second will play hardball and make their requirements harder to accomplish, or they will delay giving a decision to let the sales date come or they will simply deny the short sale.

SO basically, what I am telling you is when the first file the Notice of Default, they will talk to you quicker and they will point you in the direction of the second for you to negotiate a short approval with them and leave it up to you to tell the second what amount the first will break them off and in the same breathe you will still have to get an approval from them.  The second is a bit harder to deal with in this situation and you will probably spend more time trying to satisfy the second than you have to do with the first.

There is another situation when the second is the one that has filed the Notice of Default on your home.  What determines who files the Notice of Default depends on which one you are in default with and the timing of who files first.  Seconds will usually try to work something out with you because they will lose in a short sale, foreclosure or whatever the end result is because they are always in second position over the first. That's another post.

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Sample letter that you should send to the SECOND lender - if you have 2 lenders and you are in need of a short sale approval:

I need your assistance in getting my short sale request approved.  I have fallen into a hardship situation and cannot afford to keep up the payments on my first loan and it is now in default and I am in pre-foreclosure proceedings. A copy of my hardship letter is attached, along with verification of my situation (bank statements, pay stub or disability stubs, etc.).

I have obtained an offer to purchase my home and have presented this offer to my first mortgage and to you.  I am requesting your approval for a short payoff on the second lien that you hold.  I have enclosed all the items that you require for a short payoff approval.  The first has agreed to pay you __________________ on the short payoff.

I need your assistance in getting the short sale approved.  By selling my home in short sale it will avoid my getting a foreclosure and it will allow another person that can afford to purchase the home to get into my home at the price in which the offer is for.

(give your availability here)  * also, change the wording to fit your situation.

Thank you in advance for your consideration and assistance in helping me save my home from foreclosure.

Important information to let the lender know:

1. You want a short sale approval
2. You had a hardship that caused you to get behind - you provided verification of that hardship with dates, pay stubs, letters and other information.
3. You are asking for assistance
4. You have obtained an offer
5. Your availability