Short Sale Question - Second deed of Trust

[Josh F]

I need some advice on how to handle this situation. I have a client who was referred to me. He has a house that he has fallen behind in his payments on. He has moved out and is now renting an apartment.

The property in question is a townhouse. It has 199k left on the 1st mortgage. The mortgage is an ARM that is currently at 9% and about to reset again. The owner is coming up on 4 months behind and the account is about to go to loss mitigation. The delinquencies have already been reported to collections, so a refi is out. It's not practical for me to set up any kind of seller financing because of the ARM.

The house might be worth 230k on a good day.

Now, the other problem is the previous owners have a 50k Second deed of trust against the property. The owner has already fallen behind on their payments to them, and the note is about to balloon. They are about to try to pre-empt the bank by initiating foreclosure before the bank does.

This would be my first short sale if I was to go that route.

Anyone have any suggestions on how I can help this guy out and make some money? The only thing I can think of is some kind of short sale, but I'm open to to other ideas.

Thanks,
Josh