Short Sale in CA with 2 different banks for 1st and 2nd.

I'm gonna assume that your house is undervalued; i'm going to assume that the current market value of your home is not even enough to satisfy your first mortgage's interest, making your 2nd mortgage essentially unsecured debt.

Generally, when your 1st approves a short sale, the 2nd will "approve" the transaction for a nominal fee. In my experience, it is uncommon for them to require you to bring money down, especially something like $17k!

Of course, if they run your credit and see that you have several other homes, they might not be as sympathetic to you.

If, however, you are compatible with the short sale poster child, i.e., undervalued primary residence purchased b/t 2003-2008 to a family that can no longer afford the payment (and doesn't own other homes), the assumption is that you're broke, that you can't bring in cash, and that if they (your 2nd) don't "approve" the transaction, the 1st will foreclose and the 2nd will get a big fat ZERO.

What your 1st lender is really asking them to do is to release their interest in the property. The first can still short sale its interest, but what buyer will purchase in this market subject to a second lender's interest? Nobody. So, practically speaking, 2nd mortgages can kill the deal if they don't play ball.