(Exurban Nation) I'm serious. The time has come to take the plantation back from the masters. Just because I find the moral hazards the current lending crisis has introduced to be excrementitious doesn't mean I don't see it as a great opportunity. If you have a recent 1st & second and the value of your home is near or less than the value of your 1st mortgage lien then stop paying your 2nd now.
Why? Simple. You will make gobs of money with no consequences. Really, what are they gonna do? foreclose? Not hardly. they'd have to spend thousands and thousands only to end up OWING the 1st trust deed MORE than the house is worth. Isn't this great? Then, debt discharged, expenses lower take the paperwork to the county assessors office and have your tax bill likewise reduced by the same of even larger amount. Win-win as our dear departed scamboi used to proclaim.
Remember the rulez. Don't sign anything, they'll try to do to you what Countrywide did to Casey and convert a worthless 2nd to a personal debt that survives bankruptcy. Gosh, I wonder if they'd be interested in selling that $50k note to me for $500? I'd put a garnish on his wages for a bit of sweet passive income.
Second, stretch things out as far as possible. Lead them on. Part of the plan is to turn this into a movement and hopefully you'll just get lost in the flood. The longer things go unaddressed the less likely it is in their interest in going after any phantom equity.
Now here's phase 2. For a few people following my plan the 2nd lien holder may start actually pursuing foreclosure. By this time you've got a tax bill and you've crushed the neighborhood comps and hopefully your neighbors have joined the plan. If the lender is dead set on forcing themselves to take a huge financial hit then it is time to negotiate. You've saved 6-8 months of "their" payments and you've gotten a break on your taxes; a gift that keeps on giving.
Offer them the deal to resume payments at a discount. Have them rescind penalties and accruals and you agree to resume paying on a balance half the previous outstanding.