We would like to put the properties into each of their own LLC and drop the umbrella policy, but the lender's won't allow us to do so.So, what are your opinions on how much liability coverage is appropriate?

Chances of WAMU lowering the amount you owe AND letting you stay in the house is zero.

I know that some banks have a policy not reducing to less than 7.5%.

If I own a property free and clear with no payment...it seems the basis of the tenants argument would state that I should lease it out for zero dollars a month.The argument from the lender side would obviously be different...especially if the money was lent based on the fact that the rental income was apart of the loan approval process....like multi-family units.

just stop making payments; it will take them 3-5 months to initiate foreclosure ( it starts with " notice of default"); but in the meanwhile congress will passs the BAILOUT; then uncle sam will buy your " toxic" note for something like 30 cents on a dollar; after that - most likely - uncle sam will " modify" your loan ( how'bout zero interest plus knocking off 65% of principal - would'n you make that kind of payment ?)

I'm not seeing any possible way to make this work without shorting the second nearly to zero, and the first by $30K plus.

I can see loans still being tight, and zero down loans to anyone who can fog a mirror won't happen.

Yep, I'm a broker and I advocate not using one in this situation as you will typically pay double origination.Sure, portfolio lenders will accept a package from me but they will not give me wholesale rates and zero origination unless I have negotiated a master loan commitment with them.

Unless its spotless, its hard to get a new tenant in with zero work.

I can see the wanna-be investors lining up for their zero down loans thinking that things will be back to the way they were.