Would this second mortgage be marketable? - Posted by Mike

Posted by DT (NY) on May 27, 2000 at 03:12:40:

With no investment from the buyer and 100% financing you are talking about a very unattractive note there but there are investors that will take it you have to look around… I have a private investor that buys my garbage 2nds for 25 cents on the dollar…Its a deep discount but like I said its high risk paper…No equity in the property…chances are if the buyer defaults the Investor would loose his investment since chances are the first would be lucky to be satisfied in a foreclosure after the expenses, mortgage balance, attorney’s, etc.

Contact some note buyers (not note brokers) and see how they would like to se the note structures to bring you in the most on the sale of the note.
If you dont have any luck email me and I will try to point you in the right direction


Would this second mortgage be marketable? - Posted by Mike

Posted by Mike on May 26, 2000 at 09:13:50:


I’m in the process of putting a deal together with a potential buyer for a property I’m selling. Here’s how we’d like to structure this deal. Property worth $140k. Buyer can qualify for 80% LTV with 20% down. He has the 20%, but doesn’t want to use it. The lender will not allow a seller carryback. The 80% will cash me out of the deal and give a couple thousand to walk with. Here’s what I thought we’d do. We can do the closing with the buyer coming with 20% down and afterwards I can put a second on the property and lend his 20% back to him. I see no reason why this couldn’t be done. What I’d really like to know is whether or not a second mortgage that is created after the initial sale will be marketable. I’d like to sell it at a discount after collecting a few payments. Is a note like this going to have any value? Is there a better way to structure this deal?

Any input is appreciated.


Re: Would this second mortgage be marketable? - Posted by Bud Branstetter

Posted by Bud Branstetter on May 28, 2000 at 17:49:50:

Most note buyers limit their exposure to 80% at closing. Maybe 90% with great credit and owner occupied. After some aging(6-12 mo) you can sell up to 90%. So do a 2nd. and a 3rd if you really want to. If a lender will only do 80% why do you want to do 100%CLTV. get a 1003 and a credit report to see what you might be able to sell the note for.

Re: Would this second mortgage be marketable? - Posted by Craig

Posted by Craig on May 27, 2000 at 13:14:02:

I’m assuming you know whether or not you can legally make that loan afterwards. Many states require anyone making loans to be licensed. Some allow a limited number of them to be made in a year by an unlicensed person. With some that only applies to purchase money mortgages. Some states have different laws regarding equity lending than they do purchase money lending.

As for the marketability of the note, some institutional note buyers don’t do 2nds at all. The ones that do, like to see a junior lien amount of 50% or more of the senior lien amount. Even in that case they have ITV(investment to value) restrictions that are rarely above 90%, and that is with 10% down. There are some that will buy those “higher risk 2nds” but they want to see really good credit and sometimes require a personal guaranty from the note seller.