Major bank employee says "if we could get $1,000.00 towards our second we'd be happy"

berettafan · 10-11-2007, 06:08 AM

Realtor friend of mine has two deals near closing in which banks holding 2nd mtgs will be coming up waaay short (as in $4k on $120k) if the deal is consumated. In both cases he expects the banks holding the 2nd to approve the deal!

A friend of his who works for a MAJOR bank said to him "if we could get even $1,000 towards a 2nd we'd jump on it".

Wow.

legion · 10-11-2007, 06:53 AM

Not incredibly savvy on the bank loan terminology. What do you mean by "$4k on $120k"?

Rick Lee · Rick Lee's Garage

3% of something is a lot more than 100% of nothing. Second lien position sucks.

GDSOB · GDSOB's Garage

The second mortgage holders will generally take 10% of the lien as a first offer on any short sale. $1000 is not unheard of, since they will get zero if it goes to FC.

berettafan · 10-11-2007, 07:41 AM

So nothing new here?

I know there has been a lot of talk about subprime loans defaulting but this seems like it would be yet another problem all together.

part of what surprised me about the story i related was that the houses in question were listed via MLS and were not forced auction properties. i would have thought this to be a rare thing.

Rick is the situation different if the same bank holds the first and second? I would guess it isn't but am curious just the same.

Porsche-O-Phile · Porsche-O-Phile's Garage

But. . . but. . . but. . . my realtor told me RE only ever goes up!!!

GDSOB · GDSOB's Garage

Quote:

Originally Posted by berettafan

So nothing new here?

I know there has been a lot of talk about subprime loans defaulting but this seems like it would be yet another problem all together.

part of what surprised me about the story i related was that the houses in question were listed via MLS and were not forced auction properties. i would have thought this to be a rare thing.

Rick is the situation different if the same bank holds the first and second? I would guess it isn't but am curious just the same.

It depends on who bought the loan. The same loan originator could write the first and second mortgage, sell off the first to one investor, and the second to another. Also, the mortgage insurance company can be a factor on the amount writtten down since they may have to pay a claim.

onewhippedpuppy · 10-11-2007, 10:12 AM

Common, the president of the small bank that holds my mortgage told me it happens often. According to him, because the first few year's worth of payments are mostly interest, they can come up short on the principal and not really lose money. They lose money on paper, but thanks to the interest paid are still ahead, relative to the money loaned. Like they said above, something is much better than nothing.

the · 10-11-2007, 10:21 AM

Quote:

Originally Posted by berettafan

Realtor friend of mine has two deals near closing in which banks holding 2nd mtgs will be coming up waaay short (as in $4k on $120k) if the deal is consumated. In both cases he expects the banks holding the 2nd to approve the deal!

A friend of his who works for a MAJOR bank said to him "if we could get even $1,000 towards a 2nd we'd jump on it".

Wow.

Like said above, not surprising, and has always been the case. Most of the time a property goes into foreclosure, it is underwater (no equity in it). By the time the first trust deed holder forecloses, adds in all their principal, interest, late charges, fees, costs, etc., most of the time the foreclosure sale proceeds are not enough to leave anything left for the 2nd TD holder.

When that happens, the 2nd TD holder is wiped out. So anything is better than nothing.

the · 10-11-2007, 10:25 AM

Quote:

Originally Posted by onewhippedpuppy

Common, the president of the small bank that holds my mortgage told me it happens often. According to him, because the first few year's worth of payments are mostly interest, they can come up short on the principal and not really lose money. They lose money on paper, but thanks to the interest paid are still ahead, relative to the money loaned. Like they said above, something is much better than nothing.

Your comment is confusing because it mixed 1st TD holders with 2nd TD holders. The first part of what you are saying is true, as applied to 1st TD holder, but your last sentence suggests you are talking about 2nds.

The first TD holder is usually going to come out ok. The second TD holder is going to pretty much lose the majority of their money, it's a pretty catastrophic event most of the time for the 2nd.

HardDrive · 10-11-2007, 10:30 AM

We paid off our second just last week.

Its a good feeling.

onewhippedpuppy · 10-11-2007, 11:38 AM

Quote:

Originally Posted by the

Your comment is confusing because it mixed 1st TD holders with 2nd TD holders. The first part of what you are saying is true, as applied to 1st TD holder, but your last sentence suggests you are talking about 2nds.

The first TD holder is usually going to come out ok. The second TD holder is going to pretty much lose the majority of their money, it's a pretty catastrophic event most of the time for the 2nd.

I was talking more about loans in general. I'm sure it's more common with the holders of a 2nd, because they just get screwed in forclosure. But, it also happens with 1st mortgages. Often times it's easier for the bank to allow a short sale and take a loss on paper than deal with forclosing on the property.