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  • Second Mortgage Disclosure

    From Rick@21:1/5 to All on Thu Mar 30 13:14:55 2023
    In the US, if a homeowner has a mortgage on their home and at some point
    takes out a second mortgage on the same property, does any state or federal
    law require notification to the first lender of the second mortgage? I'm
    not addressing the case where the second mortgage was required to pay the
    down payment on the first (such as to avoid PMI) - I'm merely referencing a second mortgage occurring long after the first mortgage has been booked.

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  • From Roy@21:1/5 to Rick on Thu Mar 30 13:35:44 2023
    On 3/30/2023 1:14 PM, Rick wrote:
    In the US, if a homeowner has a mortgage on their home and at some point takes out a second mortgage on the same property, does any state or
    federal law require notification to the first lender of the second mortgage?   I'm not addressing the case where the second mortgage was required to pay the down payment on the first (such as to avoid PMI) -
    I'm merely referencing a second mortgage occurring long after the first mortgage has been booked.

    The second mortgage would be added to the title of the property. I
    would think that the government entity such as the county recorder would
    notify all the lien holders that something was added.

    I was on the board of a small water district and the district had the
    ability to add a lien that was superior to the mortgages. Our office
    was advised by the county anytime the title was changed. We even
    charged a fee when the property was sold.

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  • From Stuart O. Bronstein@21:1/5 to Rick on Thu Mar 30 22:00:17 2023
    "Rick" <[email protected]> wrote:

    In the US, if a homeowner has a mortgage on their home and at some
    point takes out a second mortgage on the same property, does any
    state or federal law require notification to the first lender of
    the second mortgage? I'm not addressing the case where the
    second mortgage was required to pay the down payment on the first
    (such as to avoid PMI) - I'm merely referencing a second mortgage
    occurring long after the first mortgage has been booked.

    I'm not aware of any laws requiring that, but the terms of the mortgage
    sure will. But really, what does the first lender care? That lender
    is first - gets all its money back before the second lender gets a
    penny in case of a default. So if equity is limited, it's the second
    lender who will be screwed, not the first.

    --
    Stu
    http://DownToEarthLawyer.com


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  • From Rick@21:1/5 to Stuart O. Bronstein on Fri Mar 31 09:01:27 2023
    "Stuart O. Bronstein" wrote in message news:[email protected]...

    "Rick" <[email protected]> wrote:

    In the US, if a homeowner has a mortgage on their home and at some
    point takes out a second mortgage on the same property, does any
    state or federal law require notification to the first lender of
    the second mortgage? I'm not addressing the case where the
    second mortgage was required to pay the down payment on the first
    (such as to avoid PMI) - I'm merely referencing a second mortgage
    occurring long after the first mortgage has been booked.

    I'm not aware of any laws requiring that, but the terms of the mortgage
    sure will. But really, what does the first lender care? That lender
    is first - gets all its money back before the second lender gets a
    penny in case of a default. So if equity is limited, it's the second
    lender who will be screwed, not the first.


    The reason the first lender might care is that even if all payments are made
    on time on the first mortgage, a default on the second mortgage would lead
    to foreclosure. And yes, the first lender will get their money first, but
    they will also be losing the future stream of interest payments they
    expected. Now you can argue this would be no different than the buyer selling the home or just paying off the mortgage early, but I would think
    the first lender would want to know if there is an extra element of risk of default by the presence of a second mortgage.

    --

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