Legal Question in Real Estate Law in California

While there are no government sponsered programs for rental loan modifications, you can still attempt to get a modification. There are various companies who claim they can get reductions, but which ones actually can I do not know.

The best method of getting rid of the property is through a short sale. Lenders are agreeing faster to short sales now, but it still is a long process.

As this is an area we practice in there is no short answer. While George is right that there are no government programs for rental properties, but sometimes you can get a loan mod on a rental, but it is more difficult. At the end of the day its the same analysis to the bank. Is it cheaper to take the house or do a loan modification. From what I've been told by bank lawyers the lenders don't want the houses back. However from what I've seen they are not doing many permanent modifications either. There is still is a tremendous incentive for the service of the loan as opposed to the owner of it to foreclose. The servicers make more fees foreclosing than they do making a modification.

So if the rental property is underwater i.e. you owe more than what it is worth then a lender is more agreeable to a loan mod. One way to test the waters is put the house up for sale and get some bona fide short sale offers. Once you have those you can better negotiate with the bank.

A short sale obviously will solve the problem as the bank agrees to take less that what is owed and you have exposure to a deficiency judgment because it is not your primary residence. Bankruptcy is also a solution because the bankruptcy court has the power to modify the loans on the rental property as opposed to your primary residence, but then there are a lot of other issues to deal with.

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Good luck and hope that helps.