To Short Sale or Not To Short Sale That Is The Question?

[Frank Fiore Jr]

I realize there is no sure fire way to guarantee a lender will agree to a short sale and in a lot of cases it seems to come down to "the bottom line", will it be it more profitable; or should I say less costly; than a foreclosure. There are variables I just don't know and I'm not sure anyone can know all of them, but we can make an educated assessment of the overall likelihood they will agree to a short sale. This is what I'm trying to determine; if I move forward will they say "yes"?

Looking for feedback; lots of feedback! (Questions at the end of Post)

Overview:

- Hardship is difficult to explain but both financial and health related (This is my biggest concern)

- I have basically been "robbing Peter to pay Paul" for many years to stay current on my mortgage payment. I can't do it anymore, something has to change. I have been shifting the liability for one location to another. (Credit cards, - savings, 401k loans) etc...

- Even with both units rented I am paying out monthly

- I am current with my payments but considering stopping I am out of money!

The Numbers:

- Loans total: 310,000$ (80/20 loans)

- House value: 220,000$ (educated guess, not official comp)

- Property (Mortgage, Tax, Insurance) % of Gross Income: 30.72%

- Property (M,T,I + Property Expenses) % of Gross Income: 34.70%

- Property (M,T,I,E + Living Expenses) % of Gross Income: 54.45%

Cash Flow:

- Rental Property: monthly expenses: $2,706.86

- Living monthly expenses: $1540.85

- Expense Total: $4247.71

- Monthly Income (including rent): $4,717.50

- Remaining: $469.79 (monthly remaining cash)

Additional Numbers if it matters

Investment to date: $26,000

Future Investment: (Work next 10 years): $74,000

Questions:

Debt Relief

- Was "The Mortgage Forgiveness Debt Relief Act and Debt Cancellation" extended to 2014?

- I do not live in this property will this void the "principal residence" requirement for the forgiveness?

Credit Score

- I'm reading a short sale hit to your credit is equal to a foreclosure is that accurate?

Deficiency

- Likelihood the lender will agree NOT to pursue any further payment by the homeowner. The difference between balance owed and short sale price?

- Does Massachusetts ban deficiency judgments on Short Sales or Foreclosures, or both?

General:

- Any chance I can try and stay current (keep making payments) and still get a Short Sale approval?

Final Thoughts:

I have been living with this mistake for 10 years, I have tried numerous methods to turn it and, I don't qualify for HARP or HAMP, additional subdivision, turn attic into a studio, add a bedroom to the current 2 bedroom, both will be costly and no guarantee the town will allow it.

The projected future investment needed to update this place is crazy high, I haven't figured future rental increase or appreciation to find a breakeven point yet, but I think it's obvious it is way out there in years, and this place is starting to take a physical and mental toll on me. It is not my nature to give up on something; I was not raised that way so even with all the stress and financial destruction I am having a hard time deciding to move forward with it.

Thanks in advance for your input.