C.L. Haehl asked:




Even when you already have a first and second mortgage on your home, you may want to secure a third mortgage. You may use the cash for some value-adding feature to your home, like a swimming pool or a new kitchen may be the reason. However, securing a third mortgage is not very easy.

A third mortgage loan stands subordinate to the first and second mortgage liens that exist. For this reason, it is very difficult to find lenders offering third mortgage home loans. The risk is much greater for the lender in case of a foreclosure. If the loan does get approved, which is difficult, it would be at a much higher rate of interest as compared to the earlier mortgages.

A third mortgage is a hard equity loan. The approval usually depends on the LTV or Loan to Value and SSR or Superior mortgage to Subordinate mortgage ratio.
LTV is expressed as a percentage of the present appraised value of the house, as against the total outstanding mortgage debt(s). Lenders expect the LTV for hard equity loans in the case of first mortgages to be sixty five percent and between fifty to sixty five percent, in the case of second mortgages. For third mortgages, it is anything between fifty to sixty percent.

The SSR is calculated by dividing the amount of the superior mortgage loan amount by the amount of the subordinate mortgage and expressed as a ratio between the two. For example, if the superior mortgage were for $100000 and the subordinate mortgage for $25000, the SSR would be 4:1. For hard equity lending, the SSR is usually in the range of 1:1 – 7:1. With a low LTV and SSR, a third mortgage loan may possible.

In a foreclosure proceeding, the first mortgagee is given preference over the subordinate/subsequent mortgagees as a general rule. This means that the entire debt of the first mortgagee is first satisfied, after which any remaining amount is applied towards the debt satisfaction of the second mortgagee. If anything is left after that, only then is the third mortgage paid off.

Jesus

David Prulhiere asked:




If you have a reverse mortgage or are considering one, make sure you understand that there are responsibilities that you have, even though you don’t have any payments.

To keep from breaking the rules so you can keep your home, the following things must be done. You are required to pay your insurance and taxes. If you are one of the few that opted to have taxes and insurance money set aside in an impound account, be aware that it only lasts for a specified number of years. After that, you will need to pay the taxes and homeowner’s insurance on your own.

If you live in Oregon, you may be able to defer your property taxes. You will want to do it after you get your reverse mortgage, or you will have to reapply after it is closed. But this is a way you can restrict some of the cash flow that has been leaving your household. Be aware that it will have to be paid someday, like when you get a new loan or if your transfer the title of your home.

Additionally, items like flood, fire, hurricane and earthquake insurance are still your responsibility to pay. Your reverse mortgage does not include these payments, so you will need to continue making them. This includes any condo or association dues associated with the property or anything else your area may have that is property related.

Since most people’s largest expense is the monthly payments on their mortgage, the great news is that these payments are going away. You will see a big difference in your monthly out go, effectively making your other expenses more affordable. If you don’t have a mortgage, your monthly out go won’t change, but you will have access to reserve funds that will help you with other monthly expenses.

Finally, your responsibility is to use the home as your primary residence. This is defined as living in the home at least six months of each year. As long as your intention is to owner occupy the property, you will not need to be concerned with tracking the amount of days you are staying there. This is just in place so loans aren’t done on second homes or rentals.

As you can see, a great way to reduce your monthly expenses and potentially increase income is by doing a reverse mortgage. It doesn’t remove the other obligations that are attached to your properties, and as long as you pay them, you will have a place to live for as long as you choose to live there.

Leon

Charles Kartchner asked:




Are there any other options for upside down mortgage holders besides short sales? There answer is now yes. A new program known as a Principal Balance Reduction is being offered to upside down homeowners that meet a few basic qualifications. As long as the mortgage(s) is worth at least 25% more than the value of the property and the applicant can document a debt-to-income ratio of 50% or less (based on the new, lower monthly mortgage payment) the negative equity can be completely eliminated through a Principal Balance Reduction program.

A Principal Balance Reduction program is essentially a large scale Note purchase program consisting of heavily upside down homeowners, some current on their payments and others that have already stopped making their mortgage payments. Due to the fact that property owners who owe more than their property is worth are very likely to default in the not so distant future, the Notes are sold to the new buyer (in this case a $5 Billion dollar hedge-fund) at a steep discount to current market value. The new owner of the Notes, the hedge-fund, then turns around and changes a couple of terms of the existing Note they just acquired. The outstanding mortgage balance is reduced to 95% of current market value and the interest rate is changed, to either 6.25% or 7.25% depending on the homeowners credit score. The once upside down homeowner now has a permanent principal reduction often amounting to hundreds of thousands of dollars in savings and the hedge-fund makes a quick profit and turns around and repeats the process with new clients.

Are short sales a thing of the past? Possibly. If a homeowner qualifies for the program, why just walk away from the property and let someone else get a great deal. Also, short sales have negative tax implications and don’t do your credit any good. A Principal Balance Reduction program allows the homeowner to essentially short sell the property to themselves without the negative tax implications or ruining their credit rating.

The hedge fund has a very high success rate at purchasing these Notes at a substantial discount to market value. The portfolios presented to the lender, often consisting of over 100 properties, are all upside down by at least 25%. These are toxic assets that if haven’t soured yet and going to at an alarming rate in the coming months. The banks know that homeowners with no equity and especially those so upside down as the participants in this type of program are very quick to hand the keys back to them if the slightest financial challenge comes their way. Rather than wait a year or two and have to go through the expense of a foreclosure only to end up with what they are being offered now to take this entire lot of souring “assets” off their books, the banks are understandably jumping at the opportunity.

There is a nominal fee to participate in the program and it is paid after the homeowner has been prequalified and is submitted with the complete package of supporting documentation. In California, there are absolutely no upfront fees to participate in a Principal Balance Reduction program. Once the word gets out that a program like this even exists, the flood gates will open with homeowners rushing to shave hundreds of thousands of dollars in negative equity permanently from their mortgage balance. If you would like more information about a Principal Balance Reduction program, visit http://www.short-sales.org and request a free consultation with a Principal Reduction Specialist.

Emma

Oswin Grant asked:




When a homeowner decides to pursue a home loan modification they have to go through their investor. The investor is the responsible party for financing their home purchase, in other words they have put up the money to cover a borrower’s purchase of the home. In the mortgage industry mortgage notes are acquired in large block of purchase. Investors then sells their house notes, or they outsource it to a service company. An investor tends to modify a Home loan quicker than a mortgage servicer.

The investor could be the mortgage company, the bank, a private investor, or several private investors. A loan servicer is not hired by the investor, but they contract with the investor to take over handling the day to day servicing of the home loan for a fee for each loan they service for the investor. The loan servicer handles everything on a loan including collecting on past due payments or missed payments, customer services, work out any disputes with the loan itself, loan modifications, among other duties. However, a mortgage servicer does not approve a loan modification on a mortgage loan without consulting with the investor that owns the note. The mortgage investor makes the final decision on modifying any mortgage loan.

A servicer will take a bit longer when it comes to getting a loan modification approved; because they have to be given access to modify a mortgage by the mortgage investor before they can grant the borrower a mortgage loan modification. When a borrower tries to reach their lender when they have a servicer it can be an issue, because the investor pays the servicing company to service the mortgage loan. So the investor is not expecting to be fielding questions from individual borrowers. An investor that has a servicer does not want to be bothered with the daily activities of servicing their loans, they have already contracted with a servicer to service the loan. Regardless, a homeowner can get mortgage help through either their mortgage servicer or their mortgage company.

Renee

Jeong Lee asked:




Honesty you are in a treat in this low rate refinance environment if you have a secure job, reasonable home equity and favorable credit rating. Anybody who has all of those is likely able to spend a little bit more towards paying off mortgage in half the time. In fact, depending on when you have signed your current home mortgage you might not even need to spend more than what you are paying for a much longer term mortgage.

Present 15 year refinance rates are roughly half a percent lower than 30 year rates. Therefore, you would execute three objectives at once by refinancing now. Obvious ones are to reduce your mortgage rate and term. The other one is to secure these great rates for the rest of the mortgage term because they are really low at the moment. Who knows when these low rates offered by lenders again, maybe you never see them at all.

Whilst you have the means it is recommended to put that money in your home in this market environment. House valuations may be low at the moment, nonetheless, keeping the money on your home is still the secure option for people who are not in business to turn around capital fast and make money several times over. Holding the money in the bank does not positively pay much and stocks are still really risky.

Having a home mortgage free would be quite handy when you stop working and your income comes down. It may be that just about the time you pay off your home loan you would have to think about college fees for your children. Whatever the future may bring, with the equity safely reserved in your home you could have much confidence in your capability to cope with life’s unforeseen turns. Have a little search to determine what mortgage refinance rate offers are out there for you.

Ernest