New short sale question

[Anonymous]

Little background....due to loss of job and move, we are listing our home for the amount that lets us walk away without any cash (just enough to cover everything).  However, it is possible that we will need to do a shortsale on our home.  In the meantime, we will probably not be able to keep making all of our mortgage payments.  We have a first mortgage and a Heloc with CU. The credit union is the only one that will be short any $$$ with a short sale, as we did 20% down on our mortgage and that should be covered. 

BUT, what if the first mortgage starts foreclosure proceedings and it forecloses?  It would seem they would be fine financially speaking, and may decide to list the house WAY under market to get their cost returned....but what about the credit union, who is the one taking the loss?  What part do they take in this decision? 

 I don't want a foreclosure on our credit AND then end up having to file a chapter 13 to pay off the HELOC.  any advice or answers to these?

Also, if the CU says "yes" to a short sale......would it be noted in FICO as a foreclosure or what?

Thanks everyone!!

[Junejer]

Usually, during a foreclosure with multiple mortgages, one mortgage company will buy out the other, to protect its interests. I have seen it work in both directions in my days of banking.

[Anonymous]

That is interesting. I had no idea they would do that.  That makes more sense for the Credit Union to watch out for themselves.  I'm pretty sure the mortgage company won't!

Thanks.

Message Edited by wtdjtoo on 04-18-2008 03:08 PM