2nd position lien-holder / foreclosure issue in NJ

[Shawn Abadie]

Hello all,

I'm a member from AZ, but have a brother in NJ with a complicated issue. Small house, $6000 left on mortgage with 1st bank. Equity line of credit with 2nd bank. Brother doesn't want the house any longer, can't afford the 2nd's payments.

On the 2nd - outstanding balance is $87k, which includes $17k of taxes and penalites (the 2nd just paid to stop a tax lien foreclosure). House not worth that. Short sale was in works since Oct 2013. Buyer found, offered of $42k accepted, and he hung in there the whole way. 1st agreed, at the last minute, 2nd says "$20,000 more from buyer", now buyer has walked and short sale cancelled.

My recommendation was to tell the 2nd to go pound sand. FMV is about $55-$60k. Maybe $70k tops. Total rehab or tear-down, great lot, near beaches in Cape May County, but not AT the beach and not in Cape May.

I think the options in NJ are: Start a new short sale, let the 2nd start foreclosure, or deed-in-lieu. If if it was me, I think I would write a letter to the 2nd: "Don't want it, you can start foreclosure or do a deed-in-lieu, but don't call me again." Brother's credit already hosed, so he's not concerned about any fall-out there. Primary residence seems to be protected - 1st mtg current with another bank, 2nd (equity line) current. The only thing - the equity line on his residence is with the same bank that has the equity line on the problem property.

What are the valid options for him in NJ? Can the bank with the equity line on both properties somehow tie up his primary residence in all this mess?

Many thanks in advance for any suggestions or information anyone can provide. Brother at the "I don't want to know anything else about it." point.