Posted by Michael Morrongiello on January 08, 2001 at 16:29:46:
You pose a lot of questions that may be not be effectively addressed in this short forum. Here is the “short” version:
What defines a hidden second,
for example a year later a guy takes out a second
mortgage, is that a hidden second, doesn’t seem like it.
Yet if he does a second right after the settlement without notifying the first mortg. holder it’s a "hidden second"
what’s the difference?
A 2nd lien that is not disclosed to a lender that is underwriting a loan for a prospective buyer and is recorded after the lender makes the loan and the closing take place is often called a “Silent 2nd”. It was not apparent to the lender that this debt existed or had to be repaid and thus the borrowers income to debt ratios were not accuratly reflected. These types of deals and the parties that participate in them are involved in a scheme that is tantamount to committing lender fraud and is often considered a federal felony offense if proven.
How do you know the paper you buy is not a forgery?
What steps do you take to protect yourself?
Always insist on obtaining a Mortgagee or lenders title insurance policy that will insure the mortgage, its validity, lien priority, etc.
Do you record it at courthouse? YES always and also any assigments if you want to protect your interests
What searches do you have done? Tax search, title search, etc.
What other steps?, Sometimes a written Estoppel from both the payor and payee parties on the note can be also be obtained in an affidavit format. Additionally it is wise to speak to the note payor to get that “warm and fuzzy” feeling…
Is there any book or web page that will tell you this?
All the things you need to do to cover your bases.
This is important, I don’t want to begin to buy
discount paper until I know the answer to these.
It is my contention that is best at the beginning to BROKER a good dozen (12)or more note deals to a legitimate note funder. Find out their procedures, what they do, their paperwork, etc. to see how they conduct themselves BEFORE you invest you own hard earned dollars and put them at risk. Then once you are comfortable with understanding the process and what is involved do you considered funding deals on your own.
To your success,