What are silent seconds and how to deal with these mortgages


Silent Seconds

Silent seconds are second mortgages that no one except your person issuing the 2nd mortgage should really learn about. Silent seconds aren't that uncommon.

In fact, I sometimes hear people discuss them - Realtors, loan officers, and title people included - as if these were pretty much the rule of the road. They are not. They're silent for any reason: They're illegal.

What is so illegal about them? Lenders make loans based on a lot of things, and 2 of the most significant situations are your debt ratios and your equity position, or deposit. Silent seconds affect both. If your lender items you a mortgage loan for 80 % of the value of the home, it is going to assume that you've got a 20 % deposit.

That's one of the factors it requires into consideration in approving your loan. The lending company also examines your debt ratios with 20 % down. If your ratios are in 45 percent, then your loan might be approved on those terms.

But go into the silent second. Suddenly you've zero equity, and since you're borrowing more money, your ratios could zoom in to the stratosphere. The lending company were not sure - that is, before you couldn't pay the home any more, therefore the lender foreclosed. And through your foreclosure proceedings, it discovers concerning the second mortgage you didn't mention.

Now your lender's attorneys contact the FBI since you committed loan fraud, and you've got to visit jail for any while.

Silent seconds are often carried by the seller of the property and therefore are sometimes produced by individuals who just need the offer to shut. This may be the borrower or even the Realtor or anyone involved in the transaction, for that matter.

The vendor is told something similar to, "Hey, we're just a little short on funds here; do you consider you can have a loan outside of the closing to transport our buyer over for any little while? No one has to understand." Unfortunately, because silent seconds have grown to be common in some areas, consumers might think they are not only common but additionally legal.

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Note: This article was sent to us by: Andrew C. Bell at 08102011

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