OT - Advice needed...the next chapter of NIk's mortgage drama...

 I actually used to be a foreclosure lending specialist in another lifetime, and I can definitely say that a Deed in Lieu of Foreclosure will be a better option. It's quicker, and it's a sure thing. You just mail them the keys and tell them you're done. The plus side is that things move so slowly on the bank's side, you're often left with a few extra months past the ones they give you to occupy the house while they figure out what to do with it and hire people to clean it out.

Both options you've been given aren't the best for your credit, but they're certainly better than an all out Trustee's Sale and foreclosure. With a short sale, you have to find a buyer as if you were selling your house normally, get the lender to agree on a short sale price that the buyer agrees with, and wait and wait and wait for escrow to close, all the while praying something doesn't fall through on the buyer's end. How many months are you in default, if I may ask?

Three. But I want out of this house so bad I can taste it. The payment simply isn't sustainable and the mortgage company won't permanently modify the loan or help me out in any way. I'm surprised they are being this helpful about my options (read: suspicious). We need a bigger house and one that is a bit more energy efficient.

My credit is already effed up though. I took this BS mortgage to rebuild my kitchen which was a deathtrap at the time. At the time I told the loan officers I couldn't sustain this loan payment long before I'd have to rely on credit to get by. I was in between a rock and a hard place though as the kitchen really was sinking into the basement. They told me I could re-fi (out and out lie) in six months to a year to get my payment down. Then the housing market went to crap and the rest is history. I did have to rely on credit to get by and have been basically robbing Peter to pay Paul ever since. So it'll be nice to actually have a budget and be able to stick to it.

I don't need a lot. Don't need fancy digs. The ability to support my kids AND have heat would be nice. Thanks for all the advice.

Oh Nik, my DH and I got fed the same BS from a lender.  We needed a new roof and due to outrageous medical bills due to one of our kids we had no choice but to re-fi with a subprime lender.  Yeah, we have tried to permanently have our mortgage modified and are unable to.  I think it is disgusting that the market allows such practices.  UGH, it's not like we're low life dishonest people.  We are just like you, stuck between a rock and a hard place.