Making a loan with second mortgage on borrowers home

[Harry Gamble]

I am considering making a private loan to help someone with a flip.  I am not taking a security interest in the home to be flipped for several reasons.  The flipper has offered a second mortgage on his home.  Based on what he tells me, he has plenty of equity in the home and is current on his first, but I have not verified this yet.  I have dealt with the potential borrower on other deals with no problems.  To cover myself I will require a copy of his first mortgage to see if there is a future advance clause, if so I won't make the deal. I will also require a statement from the first mortgage holder confirming the balance as well as confirming the loan is current.  I can get a reasonable feel for the value of the house and determine that sufficient equity is there.  The plan is that his flip will pay off the loan, but I will only make the loan unless the home second mortgage secures the loan sufficient to get repaid in full along with foreclosure costs in the event I had to foreclose.  What am I missing?  Should I require a title report to make sure there is nothing else that would take priority over my second mortgage?  I guess he could have a judgment or something on record since the first mortgage loan was made that would affect my priority.