Getting a Discount on Your Second Mortgage Part 1
July 12, 2008
How would you like to be able to buy back your second mortgage for significantly less than when you took out the loan?
In our previous episode of the short sale show we talked about why it may not make sense to continue paying on your second mortgage if you cannot afford the payments on the first. We discussed why your second mortgage company probably would not initiate foreclosure proceedings because they would need to buy out the first mortgage company in full.
This current state of affairs has left investors, mortgage lenders, and mortgage banks with a lot of bad second mortgages on their books. When people cannot afford to pay both their first and second mortgages and have a strong desire to stay in the home they will often stop paying on the second mortgage and only pay on the first.
When this happens the mortgage is then considered to be a nonperforming asset in the banking community. And because of its lack of security in a second lien position against a house that is most likely in a negative equity situation, these second mortgages begin to lose their value very quickly.
In fact, nonperforming second mortgages and home equity lines of credit are only able to be sold at around five cents on the dollar, if that, on the secondary market right now. Unfortunately, the lending community has not quite come to the point where they will call you up and ask if you want to pay off your $70,000 second mortgage for $3500. They will sell it to another investor on the note market for that amount though.
In this episode of The Short Sale Show we will talk about how it may be possible to work around the standard policies in order to buy back your second mortgage at a discount.
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