The other people on here must have misunderstood you. You didn’t ask if it was moral or ethical. lol

Your right on the Mortgage Forgiveness Act, you will not be 1099 on the remaining amount (make sure you check the guidelines). But, when you have a heloc, heloan, or Equity line of Credit you will have to explain what you did with the money. If you tell the mortgage company that you paid off some bills the will most likely request you to pay the mortgage back to them through an unsecured note.

Generally the rate is @ 0% interest, so it might be worth your wild to pay off your credit cards but student loans normally have a low interest rate. You might want to re-think this plan, but it was a great question.

Whatever you do, dont pull the 30k and put it in your checking account. The mortgage company will request bank statements and they will see where you spent the money.

There are ways to spend it and they wont request you to pay it back.

Contact me if you have any questions.

ANY borrowing against the home when you are EXPECTING a short sale is FRAUD. If you get caught, you could face CRIMINAL charges.

I imagine that the impending foreclosure is already reflected on the person’s credit history. Once the credit or title is ordered a prospective lender will see the pending short sell and turn the request down.

It’s also unethical. What the party is purposing is also fraud…soaking up the equity in the property and leaving the unsuspecting party (the prospective 2nd mortgagee) going into immediate foreclosure. A short sell is just that the 1st mortgagee holder will be paid off (less than the balance owed) and as far as the party holding the 2nd … it sucks to be you!