What is a quiet second mortgage?
The silent second mortgages are mortgages that are taken from real estate that already carry mortgages. With this particular approach, the first mortgage holder is not aware of the existence of this new second mortgage. While legal in many places around the world, this type of arrangement can be easily used to structure fraudulent properties.
One of the more common reasons for closing the quiet second mortgage is related to the financing of the advance if the individual wants to buy a property. For example, the original mortgage creditor may require the house owner to make a payment of twenty -five percent of the purchase price in exchange for an extension of the loan to cover the remaining seventy -five percent. If the house owner has only ten percent of this amount, he can take a quiet second mortgage as a means of evaluating the conditions related to the prolongation of the first mortgage. Rather than the origin of the creditor who knew of this arrangement, the second loan is secured without reporting the existence of the loan holderThe first mortgages.
Assuming that the owner of the house can repay the quiet second mortgage in a short period of time, while maintaining monthly payments to the creditor of the first mortgage, the strategy allows you to purchase real estate without any problems for any of the three parties. If the debtor had difficulty paying one of the two mortgages, this could lead to the first mortgage holder to learn the situation. Depending on the laws that apply in this area, the house owner can be considered a wine fraud.
The reason why the quiet second mortgage is sometimes considered to be found in the original mortgage contract. In addition, the existence of an unpublished second mortgage has a negative impact on the original creditor in that he or she bears a greater degree of risk on the loan than expected. If the house owner fails on some of the mortgages, the potential is losingThe money on the loan much higher, because now two creditors have to cooperate on the statement of loans by default and find a way to liquidate the property in recovery. In situations where the value of the property has decreased from the original purchase, the holder of the original mortgage and the holder of the silent second mortgage may have to settle for less than the amount he owes.