Private Second Mortgages that Are Silent

Private Second Mortgages that Are Silent

A silent second mortgage is typically a second mortgage offered at preferential (subsidized) terms to those who qualify. These are generally offered by the state by one of three federally empowered programs, the Mortgage Revenue Bond (MRB) program. These programs typically require a 97% FHA loan and a 3% silent second mortgage that is offered at below-market rates or forgiven thoroughly after a certain period of time.

Counties and municipalities also offer Mortgage Assistance Programs (MAP) to first-time home buyers that buy in their communities which assist in providing down payment to complete the buy of the home. These generally come in the form of a silent second mortgage placed on the character at the time of closing that is forgiven after a certain period of time as long as the owner doesn’t sell nor do a cash-out mortgage refinance. Counties and municipalities also offer silent seconds for home improvements and renovations. Check with your local redevelopment agency for more information.

A silent second mortgage for investment similarities is different than it is for residential similarities. It generally entails second or junior mortgage loan on the character that does not require a scheduled payment until the rental income levels have reached a pre-determined point.

Silent second mortgages are already sometimes used as a workaround for when home owners are behind on their mortgages. instead of foreclose, the lender might modify the loan by reducing the rate, or offer a “silent second,” in which payments on the past-due amount are deferred until the house is sold.

The riskiest form of a silent second mortgage is an unrecorded private money loan from the seller to the buyer during a buy transaction. An example of this is an 80/10/10 plan where the borrower puts down 10%, the seller lends the borrower 10%, and the first mortgage is 80%. However, Robert Bruss, author of the nationally syndicated “Real Estate Mailbag”, states that an unrecorded silent second mortgage can be dangerous for the seller because if the buyer doesn’t make the payments to the seller, the seller can’t foreclose to get the character back.

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