More Lenders Allowing 2nd Mortgage Discounts

These days many 2nd mortgage companies are now asking for 10% of their principal balance in order to release their lien. Prior to these recent changes, ALL 1st mortgage holders allowed a maximum of $1,000 to 2nd mortgages, period. Once 2nd mortgage holders started demanding 10%, it made obtaining approvals from both mortgages quite challenging. After all, 10% is quite a large number! And most 1st mortgages will only allow a maximum of $1,000 right?

Well luckily for us, 1st mortgages have paid attention to the changing trends and have changed their policies to match. Now, more and more 1st mortgage holders are allowing a payoff of 10% to 2nd mortgages to avoid any complications. And for us short sale specialists, this is perfect! One of the lenders that have started to be more open to this policy change is ASC.

Keep in mind, not all 1st mortgage holders are doing this, and it is on a case-by-case basis, but, they are at least open to it and some will approve 10% to be paid to 2nd mortgage holders. Try to determine your particular investor’s guidelines. Some 1st mortgages will only require that their net amount is met, and they won’t have any restrictions on how it happens. But in all cases, it is worth pursuing getting them to pay 10% to the 2nd mortgage, because you just might get it!

Strategy:
When it comes to actually putting this knowledge in practice, the best way to approach it is this: initially offer $1,500 to the 2nd mortgage, that way you can negotiate up with them. On the HUD that you send to the 1st mortgage, include a payoff amount of 10% of the 2nd mortgage’s principal. That way, you can initially explain the situation and try to get the full 10%. Otherwise, you can still hopefully get the 1st mortgage to pay above the $1,500 you initially offer the 2nd, so both mortgages feel like they’ve won!