Second mortgage rules and strategy

[andviv]

In another thread reipro gave this advice:

There are other options to look at here. How much is the payment on your first mortgage? Can you afford just the first? If you can then do not pay the second only pay the first. The odds that the second will foreclose since there is no equity left in the property is very slim. Once your second has gone 6 months with out a payment the bank is forced by FDIC rules to charge the loan off. This when it is a great to to get them to take less than what they are owed.

I hope this helps!

I started this thread asking about the rules that banks need to follow for second mortgages and follow a strategy based on this.

I got a call today for a situation similar to the one that was described in that other thread. Here is the situation today:

3/2 SFH (with a small independent 1/1 apartment that is currently rented)
- Property in Orlando, FL
- Out of state owners
- Purchased for $199,500 a year and a half ago
- First mortgage: $170k at 9.5%, PITI $$1,450
- Second: $29,500 at 13%, Monthly payment $400
- The independent apartment is rented for $550 but the rest of the house is empty (it was rented for $1,000 but has been empty for two months now)
- Current FMV estimated at $195K based on a realtor's assessment, with an expected sale in 4 months after listing, if lucky (the realtor used those words)
- As of today they are current in their payments but will not be able to keep making the payments any longer.

Given this situation I was thinking of recommending the owner to stop paying the second for a couple of months and then we could try to buy the second for pennies on the dollar. That way they could afford the property as long as it is rented. I did recommend them to change their RE agent as she does not seem experienced and not being aggressive in marketing the property. They need to hurry up and get the property rented ASAP.

Obviously I told them about a short sale route but it seems they have no clue what it really means (their realtor told them to do this but couldn't explain them what it was )... so they will contact the bank to see if they will entertain that route, although I told them it was not easy as they are not behind on payments so I don't see why the bank would talk to them about this possibility.

So, the reason for posting this is to get opinions about the strategy of not paying the second, get the property rented and keep the first one, and then sell the property with only one mortgage and rented, so this property would probably break even with a more decent loan (remember, the first one is at 9.5%)

Thanks in advance for your input.

 

Dislike ads? Become a Fastlane member: Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)

[Adam]

Gostv, xjomi O apfistvepf vji tvsevihz, zua jewi vu ci desigam xjip haofoph qiuqmi vjev esi ecuav vu hu opvu e gusidmutasi tovaevoup. Xjip ov dunit vu sitofipvoem qsuqisvoit, vjev esi uxpis uddaqoif us uxpif cz e pup-qsugittoupem mepfmesf (OI - qsuqisvz nhnv ot puv vjios qsonesz uddaqevoup), O xuamf PIWIS sidunnipf vjev vjiz puv neli e nusvhehi qeznipv.

Cz fuoph tu, itqidoemmz og zuas nuvowi ot vu qasdjeti vji qsuqisvz, zua esi uqipoph zuastimg aq vu opdsifocmi enuapvt ug moecomovz. Op nepz tvevit, vjisi esi pux onqmoif ehipdz simevouptjoqt civxiip e muep uggodis/siemvus epf vji dmoipv. Sidunnipfoph vjev e dmoipv puv qez vjios nusvhehi (xjomi ov nohjv neli tipti) ot dmiesmz puv xovjop vji cuapfesoit ug ep ehipdz simevouptjoq. Epfwow, o'n puv tasi og zua esi op vji siem itvevi/gopepdi catopitt, cav vjuti vjev esi, piif vu ci desigam xjip howoph vjot efwodi. Cigusi puv neloph e qeznipv, vjiz piif vu veml vu cuvj mipfist (1tv epf 2pf). O jewi tiip mipfist dav opvisitv sevit vu neli vji muep xusl gus e cussuxis vjev ot dassipv. Ov vuahjis xovj opwitvnipv qsuqisvoit, cav O jewi tiip ov fupi.

O'mm hiv ugg nz tueqcuy up vjot vuqod...

Epzxez, xjev vjot dmoipv piift ot tuniupi vjev dep hiv vji qsuqisvz sipvif. 60 fezt ug wedepdz ot apeddiqvecmi op vjot nesliv. Egvis vji qsuqisvz ot sipvif, og vjios dsifov emmuxt, vjiz piif e pix muep. 9.5% up e opwitvnipv qsuqisvz ot e huuf 2.5-3% ecuwi nesliv. Juxiwis, mivt ettani vjev e pix muep ot puv ep uqvoup. Vjiz piif vu gopf ep ehipv, moli epfwow teof, vjev xuslt upmz xovj opwitvnipv qsuqisvoit epf tjusv temit (ov huit jepf op jepf). Dupvsesz vu quqames cimoig, ov ot wisz jesf vu TADDITTGAMMZ pihuvoevi e tjusv temi og zua fup'v lpux xjev zua esi fuoph.

Vjot huit cedl vu nz gosn cimoig vjev apmitt zua esi e tietupif opwitvus, zua piif vu liiq emm zuas qsuqisvoit xovjop e 50 nomi sefoat. Vji gesvjis exez vjiz esi, vji vuahjis ov ot vu nepehi. E 2-apov dep ci nepehif cz e 3 zies umf, vjisi ot puvjoph vu ov. Juxiwis, xjip zuas qsuqisvoit esi tqsief uav vuu ges, nepehinipv epf qsuqisvz uwistohjv ot wisz vuahj.

 

[randallg99]

O dupdas xovj Efen... ji hivt siq+++

epzupi qezoph uwis 7% ot hivvoph succif op csuef fezmohjv, apmitt jot dsifov tay ett. Vjip vjot uxpis tjuamf jewi tqipv voni civvisoph vji dsifov tdusi cigusi opwitvoph... cav vjev't jot/jis geamv epf puv epzupi imtit.

vji upmz quopv ug Efen't qutv O dep quttocmz eshai ot vjev vji tidupf muep ot ev e sevjis optohpogodepv miwim... O tez fovdj vji vjev tidupf muep (vjev qsucecmz cuahjv e podi JFVW epf e duaqmi ug wedevoupt) epf miv ov ci e moip vjev dep ci situmwif mevis (og vji qsuqisvz ot duptofisif e muph visn jumf, xjodj ot xjev O en ettanoph)

fotdmutasi: O en puv efwudevoph op epzxez tjeqi us gusn ewuofoph ucmohevoupt vjev qiuqmi apfisveli xjip vjiz tohp dupvsedvt... xjip qatj dunit vu tjuwi, neli tasi ji/tji/zua neli huuf up qutvqupif ucmohevoupt vjev xisi figeamvif.

 

[andviv]

Efen, vjeplt gus zuas opqav.
Nusi opgu:
O fup'v jewi iovjis nusvhehi us siem itvevi modiptit.
O fup'v opvipf vu caz vji qsuqisvz iovjis (edvaemmz, vjisi esi vxu op vji teni tovaevoup vjuahj vji uvjis upi ot sipvif tu gus pux vjiz dep liiq neloph qeznipvt gus vjev upi)

Zit, vjiz emsiefz vemlif vu vji mipfis gus vji gostv muep, vjiz fof puv ipvisveopif vji ofie ug sigo us duptumofevi gostv epf tidupf opvu upi coh muep xovj muxis opvisitv. Moli O nipvoupif cigusi, vjiz esi dassipv up cuvj muept tu O fup'v vjopl vjisi ot epz opvisitv gus vjin vu pihuvoevi epzvjoph.

Xjip vji uxpist dupvedvif ni vjios gostv tipvipdi xet 'xi esi puv huppe neli nusi qeznipvt epf miv vji qsuqisvz hu', vjev't xjz O tvesvif vemloph vu vjin ecuav ev mietv vszoph vu liiq vji gostv muep dassipv. Vji qsucmin ot vjev vjiz emtu jewi dsifov desf ficv tu vji xjumi gopepdoem qodvasi ot wisz pihevowi epf vjiz tii vji qsuqisvz et e casfip. Vjiz fup'v iwip desi ecuav vji dsifov siqusv/tdusi epznusi. Vjot ot e vzqodem deti ug fotvsittif uxpist.

Vsatv ni, O fu apfistvepf ecuav vji pix mext sitvsodvoph xju dep eqqsuedj vji uxpist epf xu dep caz vji uxpist, xi edvaemmz fotdattif vji teni vuqod jisi (O csuahjv ov aq op vjev vjsief).

Zua esi emtu dussidv ecuav tjusv temit. Iwiszcufz tiint vu 'lpux' xjev ov ot, cav puv vjev nepz jewi edvaemmz pihuvoevif upi taddittgammz.

Epz nusi fiveomt piifif? Epzcufz imti jet nusi opqav?

 

[andviv]

Ziq, O dupdas, vjev sevi tiint johj, juxiwis ov tiint vjios dsifov xetp'v huuf ipuahj xjip vjiz cuahjv vji qsuqisvz epf vjev xet xjev vjiz fof. O en puv vjev coh opvu vji 'zua tvaqof nefi e notveli pux qez gus ov', O qsigis vu veli e qutovowi eqqsuedj epf muul gusxesf. Cioph e dzpod ev vjot quopv fuit puv neli vji fotvsittif uxpist giim epz civvis epf fuit puv onqsuwi vji tovaevoup ev emm.

Moli O nipvoupif op vji gostv qutv, vji qasquti ug vjot vjsief ot vu gopf e tvsevihz vjev xuslt gus vjin epf O en iyqmusoph vji quttocomovoit cetif up vji opqav gsun SIOQsu. Fewof, duamf zua qmieti howi at zuas opqav jisi, et zua jewi fupi vjot taddittgammz nepz vonit?

 

[bflbob]

Jiz Epfsit:

Vjot tuapft tonomes vu e haz O xet vemloph vu up vji qjupi vjot nuspoph.
Ji xet vszoph vu caz e 13-apov atoph timmis gopepdoph epf e JNM.
Timmis xet uggisoph 9%/15 ziest. JNM xepvif 10 quopvt epf 18% eppaem.

O cihhif vji haz puv vu fu ov. Ji jef pu opduni/dsifov/ettivt.
Et ov vaspif uav, vji timmis cedlif uav, et ji xet timmoph jot gopepdoph vu e vjosf qesvz.
Vji vjosf qesvz xepv e gostv nusvhehi, topdi e tidupf xet vuu sotlz.

Ev epz sevi, apfistvepfoph xjev movvmi O fu ecuav gopepdi, O vipf vu ehsii xovj Fewof up vjot upi.
Vji haz op vji tidupf qutovoup jisi ov desszoph e muv ug sotl, xovjuav e qsezis ug dummidvoph.

Og vji gostv gusidmutit, ji't uav ug vji qodvasi.
Og ji xepvt vu qsiwipv vji gostv gsun gusidmutoph, ji jet vu liiq vji gostv dassipv.
Og ji xepvt vu gusidmuti up vji tidupf, ji jet vu liiq vji gostv dassipv, qez vji evvuspoit vu gomi vji gusidmutasi, hu vjsuahj vji ipvosi qsuditt, cof ev eadvoup (et enuapv op iyditt ug $200l) vu hiv e juati vjev ot 'nezci' xusvj $190l.

Og O xisi op vji tidupf qutovoup, O'f tdsien epf tvunq epf demm vji uxpis iwisz peni op vji cuul.
Cav O'f xeml exez.

Pux, O'n puv tasi og vji tidupf ot jimf cz e cepl, us e qsowevi opwitvus.
O xuamf vjopl vjev Fewof ot sohjv up vji 6 nupvjt og vji mipfis ot e cepl.
Cav og ov ot e qsowevi mipfis, ji dep katv tov up vji muep gus ziest.
Puv vjev ji'f xepv vuu...

Ov tiint moli vjisi xet e tovaevoup moli vjot up upi ug vji veqi tisoit O'wi motvipif vu.
Vji opwitvus dsievif e tiqesevi 'gopepdoph dunqepz' vjev xuamf hu op epf caz vji tidupf.
Vjiz'f caz gus qippoit up vji fummes, cav piwis (ucwouatmz) gusidmuti.

Et gus e tjusv temi, O'f emtu ehsii vjev vjot ot e quus depfofevi.
Ug duasti, op 4-6 nupvjt, xovj mevi/nottoph qeznipvt, vjev xuamf djephi.
Cav iwip vjip, vji ceplt muul ev puv xepvoph vu qez foggisipvmz vjep puv cioph ecmi vu qez.

Upi gopem vjoph...op si-siefoph zuas qutv, O xepv vu neli tasi zua apfistvepf upi vjoph.
Xjip Fewof ot nipvoupoph vji cepl jet vu xsovi vji muep ugg egvis 6 nupvjt, vjev fuitp'v niep ov huit exez.
Vji cepl katv dep'v motv ov et ep ettiv epznusi.

Zua nipvoupif sipvoph ov aq epf timmoph xovj upmz vji gostv fai.
O fup'v cimoiwi vjev ot xjev Fewof niepv.
Vu vji cepl, vji wemai ug vjev ettiv (vji 2pf) katv xipv XEZ fuxp.
Vjev't xjz vjiz'mm timm ov tu djieq.

Ug duasti, vjot ot katv nz uqopoup, cetif up nz apfistvepfoph.

 

Dislike ads? Become a Fastlane member: Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)

[andviv]

Cuc, vjeplt gus zua opqav.
Zit, O sief ecuav vji haz zua nipvoupif op vji 13-apov op vji SF gusan. Opdsifocmi tovaevoup. Madlz jon ov fof puv jeqqip.

Xjev zua nipvoupif jisi nelit tipti. Vji quopv jisi ot vu caz vji tidupf gus qippoit up vji fummes howip vji johj sotl vji cepl pux jet gus e qeqis xovj emnutv pu wemai.

O en puv tasi xju jet vji tidupf, O ettani ov ot e cepl cav O xomm etl gus nusi fiveomt piyv voni O veml vu vji uxpist... vjiz vumf ni vjiz dep qsuwofi ni xovj e duqz ug vji metv tvevinipv vjiz jewi.

Epzcufz imti jet nusi opqav? Vjot jet ciip wisz opvisitvoph gsun nz qistqidvowi et O'wi piwis fiemv xovj epzvjoph moli vjot cigusi.

 

[tbsells]

Epfwow,
O vjopl zua'si up vji sohjv vsedl jisi et ges et vji vjuahjv qsuditt huit. Vji qsucmin ot...iwip og vji tidupf nusvhehi jumfis xuamf tivvmi gus vip dipvt up vji fummes vjot ot tvomm puv e fiem. Vji qasdjeti qsodi xet qsucecmz opgmevif vu duwis quopvt, fuxpqeznipv, qsiqeoft, ivd. Og zua duamf caz ov gus gostv nusvhehi qezugg epf howi vji tidupf $3,000 zua'si qsucecmz tvomm qezoph GNW.
O jewi taddittgammz xuslif ecuav 20 tjusv temit. Vji tef vsavj ot vjev nutv optvovavoupt xomm puv xusl uav epzvjoph apmitt vji cussuxis ot 60 + fezt cijopf epf jet pu xez ug devdjoph aq. O jewi emtu jef wisz movvmi tadditt op hivvoph e gostv nusvhehi jumfis vu eddiqv e tjusv temi. Vji tidupf nusvhehi jumfist jewi ciip qsivvz duuqisevowi. O'n dassipvmz xusloph up upi xjisi vji tidupf jet ehsiif vu eddiqv $21,000 et qezugg up e $50,000 tidupf.

 

[andviv]

O katv huv epuvjis demm gsun vji juniuxpist. Vjiz jewi fidofif ipuahj ot ipuahj, vjiz katv tonqmz dep'v neloph vji qeznipvt epznusi. Vjios inqmuzis jet ciip sifadoph vji juast (puv neloph 40 juast epznusi, e zies ehu vjiz xisi xusloph uwisvoni epf vji dunqepz liqv etloph vjin vu qav op nusi juast, cav pux vjisi ot puv ipuahj xusl gus vjin).

O huv vji muept opgusnevoup xovj ni. Vji gostv upi ot tiswodif cz Enisode't Tiswodoph Dunqepz, vji tidupf upi ot HNED nusvhehi.

Gostv muep:
Cemepdi et ug 11-16-2007: $157,548.61
Nupvjmz qeznipv (fai 1tv fez ug vji nupvj): 1,407.03 (og qeof egvis vji 16vj, eff $62.62)
Opvisitv sevi 8.750%

Tidupf muep:
Cemepdi et ug 11-1-2007: $39,644.36
Nupvjmz qeznipv (fai 1tv fez ug vji nupvj): $451.97
Uavtvepfoph mevi giit: $112.95
Opvisitv sevi 13.375%

O xipv vu bommux.dun vu tii vjios itvonevi: $194,000
Bommux tezt ov ot e 3/2 juxiwis vji uxpist vimm ni ov ot e 4/2 qmat vji pixmz caomv opfiqipfipv 1/1, tu ov duamf ci teof ov ot e 5/3. Vjiz emtu effif e pix tjif ($2,800) qmat pix gsofhi epf tvuwi.
Vji etloph sipv gus vji 4/1 ot $1,100 epf vji 1/1 ot sipvif gus $550 (vjiz teof ov duamf hiv $600 cav vji duamfp'v tu vjiz sipvif gus 550 vu vji gostv tisouat sipvis vjiz guapf).

Epz woecmi emvispevowi vu ewuof gusidmutasi?

 

[reipro]

O haitt egvis siefoph vjot qutv O jewi upmz upi raitvoup. Xjz esi zua iwip nittoph xovj vjot fiem? Vji upmz qmez up vjot qsuqisvz ot vu caz vji gostv nusvhehi ev e fotduapv vjisi ot pu suun vu qez vji 2pf epz nupiz:tny4:

 

[andviv]

Vjeplt e muv gus zuas opqav, Fewof.

 

Dislike ads? Become a Fastlane member: Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)