80/20 Mortgages...both by same bank? Options?

Question

Hey yall, Ive come upon a few 80/20 loans that were written by the same bank and was wondering if there is any different way of dealing with them.  Seems to me they would have to go as a normal short, but I wasnt sure if I was missing any other creative way?

Bill Gulley · Answer

Hi, the 2nd was probably collateralized with another asset as well as the real estate, if it was purchase money. These loans are classified differently so you need to appoach it as if the 2nd were held by another lender, as a seprate matter. In the back room, they will look at it like that too. Bill

Steve Babiak · Answer

I don't think that changes what Scott was recommending, that the poster get the status and details of the BK to understand how to proceed.

Steve Babiak · Answer

If the lender for both liens is the same, and both liens are "owned" by the same backer (portfolio or securitized), then this might have a chance since that first position lender can clear his own second lien.  More details would be needed to see if this is a possibility.

Bill Gulley · Answer

Hi, we seem to make our comments based on assumptions. The more info, the better. As to what kind of second as mentioned above. My first post assumes a bank made the loan. By that I mean funded, actually made, not just originated the loan. GF has a point, but not necessairly so. Seems that if the loan were that bad, the bank owns it now since the loans are originated on a recourse basis, so they have probably been cramed down to the originator. Give us more.....Bill

G. F. · Answer

You have to approach this as it is two different lenders. The mortgage's are owned by different investors but serviced by the same servicer. 80/20's from the same lender were just a sign of the times back then. A big conflict of interest but banks didn't care because it's was other peoples money.

Scott Hubbard · Answer

Samuel-

The BK could be a good scenario for the seller especially if the second is a non-purchase money.  Generally, lenders will be open to settlement when the debt was included in the BK because they can no longer collect.  This also means that you should have an understanding of the discharge.

To answer your question?  You need to:

1.  Determine who owns or services the note. Is it a privately or institutionally held note?  Is it government-backed, Freddie, Fannie, or Ginnie?  Was the second an HELOC, or is it purchase money.  Is the state in which the property is located an anti-deficiency state?

2.  You need to determine the details of the discharge on the BK. Have the seller give you a copy of the  BK discharge and determine if the deficiency (losses) were included in the discharge.

3.  Once you have his information, come back her and post the answers.

Good Luck

Samuel Ksiazkieicz · Answer

Bill, sorry I meant it as a general question but youre right, Ill fill in the specifics of it to make it more understandable.

Ha yes, this is actually a ridicccculousss situation.  Got a call from a realtor I have send me leads that a friend of his is about to foreclose.  Turns out this seller just went through chapter 13 and is, get this..........2.5 years behind payments out of the 3 years hes had it......oh ya its a 5 year interest only with a bigg balloon and an 80/20 by the same company. The house lol is a4/4/3 with a loft, over 3100sq, just a taddddd bigger than these people should be in lol

How did they get the house you ask? The investor that sold it to them also had a mortgage company, did a super fast qualification for them and yes, that investor subsequently had his home raided and was charged with 23 felony counts of fraud and laundering, which he was later aquitted of all counts.

Ha so overall it is a bizarre situation, no equity obviously.

So I am still wondering, besides the obvious "hey this loan is underwater", does the second loan give me any other bargaining chips?

Would you briefly explain how you make money off of deed in lieu?  Havent done much research on it besides reading the actual government publication.

Bill Gulley · Answer

Hi, what makes it a possible short sale in the first place? I assume it's in default. While I didn't pose a question above the comment concerning additional collateral and it being a purchase money second might be addressed. Depending on the equity involved, if I have a first, I'm not motivated to do anything until I see whast the 2nd is going to do. If I have the second, if it's significant, I'll take out the first and there are several ways of doing that. But if I have 100% LTV what makes you think I'm not willing to deal if I think you're going to walk? I'd restructure it if I could, but you can't make a bad loan go good, so maybe a deed in lieu is in order. So far, I don't know what the LTV or CLTV is, what kinds of loans they are any many other factors in the market. If you have found several of these loans, sounds like really poor banking practices to me, their knees should be knocking.   Bill

Samuel Ksiazkieicz · Answer

So are you saying that the second loan can get written off by the bank just as if it were with a different bank?  How is that possible, being that the whole reason we normally have leverage with the second bank is that they know if the 1st forecloses, the second will get nothing, but with this, they are both the same company, so what leverage would we have?