I was thinking the same to also be able to use those as leverage for a portfolio loan or a LOC using them as collateral.  

Only thing is that recorded deed of trust is in default by the first (i am third) and can no longer be used as a good collateral.  

Lenders want a strong asset as collateral, a strong borrower with experience in the business they are proposing, a good area where the asset is located, etc.

Does anybody know of a good read to better understand cross-collateralization and blanket mortgages?

This would be using either a blanket loan w/ several properties as collateral, or a single-house loan.

For example if you do not have a strong personal credit, or a storng business credit score, you are gonna need collateral.

You put up that $500.00 for collateral.

Having an ownership interest in the collateral held by a lender does not creat an obligation to them and they can not hold her to the obligation, therefore, they can't insist that she suffer any loss arising from the debt.That's my story and I'm sticking to it.

The point being is that this is an example of banks throwing their weight around for additional protection and reducing risks that they have jistorically accepted in disposing of other collateral, they don't like they fact that so much money is being made from their lack of oversight, management and adminstration, they will accept profits from actual work and improvements being done, but not simply from them being inept.

With regard to the loan, you should shop around and see if you can get better rates for one commercial loan with the additional collateral.