What is SECOND MORTGAGE? What does SECOND MORTGAGE mean? SECOND MORTGAGE meaning & explanation

What is SECOND MORTGAGE? What does SECOND MORTGAGE mean? SECOND MORTGAGE meaning – SECOND MORTGAGE definition – SECOND MORTGAGE explanation.

Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license.

A second mortgage is a lien on a property which is subordinate to a more senior mortgage or loan. Called lien holders positioning the second mortgage falls behind the first mortgage. This means second mortgages are riskier for lenders and thus generally come with a higher interest rate than first mortgages. This is because if the loan goes into default, the first mortgage gets paid off first before the second mortgage. Commercial loans can have multiple loans as long as the equity supports it.

When refinancing, if the homeowner wants to refinance the first mortgage and keep the second mortgage, the homeowner has to request a subordination from the second lender to let the new first lender step into the first lien holder position.

A second mortgage can be structured as a fixed amount to be paid off in a specific time, called home equity term. They can also be structured like a credit card giving the borrower the option to make a payment less than the interest charged each month.

Due to lender guidelines, it is rare for conventional loans for a property having a third or fourth mortgage.

In the terms of foreclosure, a second lien holder can start the foreclosure process when a homeowner stops making payments. The second lien holder has to satisfy the first mortgage balance before they could collect on the second mortgage balance.

In situations when a property is lost to foreclosure and there is little or no equity, the first lien holder has the option to request a settlement for less with the second lien holder to release the second mortgage from the title. Once the second lien holder releases themselves from the title, they can come after the homeowner in civil court to pursue a judgement. At this point, the only option available to the homeowner is to accept the judgment or file bankruptcy.

Generally, when considering the application for a second mortgage, lenders will look for the following:

1. Significant equity in the first mortgage
2. Low debt-to-income ratio
3. High credit score
4. Solid employment history
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Economic Forecast For July Released




Lenders like The Federal Savings Bank read the latest National Association of Realtors (NAR) economic and forecast update on July 1st. Current economic conditions are conducive to further improvements in the real estate market.

Lawrence Yun, NAR’s chief economist, discussed the improvement seen with the current economy and the impact this is having on the future of housing.

Consumer spending increases

Low gas prices have helped increase consumer expenditures. In fact, this type of spending rose at a 2.1 percent rate during the first quarter. Yun forecast 3 percent growth will take place in the second quarter.

A substantial chunk of money was spent on household items such as furnishings and equipment. Household purchases have grown 6 percent the last two consecutive quarters. This strong growth in sales is likely due to the recovering housing sector.

Construction rises

According to a press release from the U.S. Department of Commerce on April 1st, construction spending was at $ 1,035.8 billion annual rate in May 2015. This is 0.8 percent higher when compared to the revised April estimate and 8.2 percent higher than the estimate from a year ago at this time.

According to the NAR’s released economic and forecast update, housing permits used to construct new homes jumped to an eight-year high. In fact, Yun anticipates builders will construct 1.1 million more houses in 2015 and 1.4 million additional residential structures in 2016. These increases will occur to relieve the housing shortage which drives up the values of homes.

The Federal Savings Bank thinks higher construction spending is likely due to a higher demand for housing and a stronger real estate market. The current level of available inventory does not meet the needs of interested buyers looking for new homes to invest in.

Yun indicated strong demand for housing led to a stronger price growth for homes.

A jump in construction spending will help normalize home values and bolster the market.

Existing home sales hit a high

During the month of May, total existing-home sales jumped to their highest level since 2009. More first-time home buyers are making the move to become homeowners and it is driving up healthy housing market activity.

These younger buyers investing in properties make up 32 percent of all individuals purchasing homes. This is 3 percentage points above the number of first-time buyers from a year ago. Yun indicated lower fees on FHA loans might be driving the increase.

Mortgage rates rise, but remain historically low

Mortgage rates have increased due to events taking place overseas as well as an improving domestic economy. As rates continue to rise, buyers might feel more inclined to make their moves now and secure a lower mortgage rate before interest increases. Yun expects average mortgage rates to jump past 5 percent by the end of 2016.

According to the update Yun provided, the housing market will continue to improve. Homes sales and prices will likely continue to rise. In addition, revenue for the industry will also jump as the market strengthens.

Contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages.







Bank Stocks Tumbled amid Fears about Dept of Mortgage Losses

Bank Stocks Tumbled amid Fears about Dept of Mortgage Losses

Bank stocks plunged for a second day Friday while the cost of buying protection for bank debt surged, driven by mounting fears about depth of mortgage losses.

 

Major mortgage players including Wells Fargo & Co. (NYSE: WFC), JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc.( NYSE:C) , and Bank of America Corp. (NYSE: BAC) kept falling.

 

Although big banks had seen a strong recovery from the financial crisis, there raised concerns about the health of major banks due to flaw foreclosure documents and recent revelations about mortgage fraud. In addition, investors doubted how quickly banks will be able to put the mortgage mess behind them.

 

Standard & Poor graded Bank of America stock as “Hold” on Friday. Previously, the nation’s biggest bank had received “Strong Buy”. According to S&P analysts, it is possible that the bank lacked cash to offset losses on fraudulent loans.

 

Two days before Friday morning, it cost 10 percent less to insure bonds issued by Wells Fargo, Citigroup Inc., Bank of America, and JPMorgan. Investors viewed that the banks would not be able to pay back bondholders.

 

In January 2008, Bank of America announced they would buy Countrywide Financial for $ 4.1 billion. Wells Fargo bought Wachovia for about $ 14.8B in an all stock transaction in October 2008. In the same year, JPMorgan Chase bought most of the banking operations of Washington Mutual from the receivership of the FDIC. After taking on deposits and branches of Washington Mutual, the bank raised $ 10 billion in a stock sale to cover writedowns and losses.

 

Such big banks took on billions in bad loans for the purchases, leading to their deeper mortgage problems.

 

Many major banks have halted foreclosures. Bank of America delayed foreclosure proceedings in 23 states to stall the process amid documentation problems across the U.S. The U.S. largest bank’s move added to a growing list of mortgage companies suspending foreclosures including J.P. Morgan Chase and Ally Financial Inc.’s GMAC Mortgage unit.

 

The employees of mortgage companies signed documents in foreclosure cases without paying attention of the verification of information in them. Bank of America, JPMorgan, and Wells Fargo face billions in losses on fraudulent loans.

 

However, the foreclosure suspension is not just bad for banks. They can delay writing down loans in foreclosure due to slow foreclosure process.

 

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What Rate Of Interest Should I Expect You’ll Spend On An Additional Mortgage

What Interest Should I Expect To Pay On An Extra Mortgage
The attention rates on Second Mortgages are usually more than those
of very first Mortgages. It is primarily due to the increased risk for the Second mortgage company.
Merely, in case of standard, the Second mortgage-holder would only
recover his funds through the proceeds after the first-mortgage ended up being happy. Aside from the
First-mortgage any Municipal Taxes due, appropriate costs Payable and all
Processing costs would need to be compensated aswell, before the 2nd Mortgage
lender would get any
funds to meet the Second home loan. Sometimes of standard
the 2nd Mortgage lender may choose to assume 1st Mortgage to
protect his curiosity about the property. This will be not merely frustrating
but costly the Second mortgage company.
The Interest prices based on both Institutional and Private loan providers
on 2nd Mortgages depends on many underwriting criteria.
Credit History associated with applicant
Earnings
Location, Type and Condition of Property
Debts which will remain following the Second home loan is within spot
The sum total Loan to Value (LTV): the quantity borrowed as a
portion of the worth of home

In the case of a homeowner who has got great credit, steady income,
acceptable residential property, low debts and simply needs, let”s state,
A Personal Credit Line. They should have no problem in securing a
loan to 80% of houses existing worth and should anticipate an
interest close that a primary Mortgage or Bank Prime.
However, a home owner who may have weak credit, less stable or
verifiable income, outstanding problems such taxation arrears or
credit selections may expect to be able to secure an extra home loan
loan to 65%-85per cent of the property present value with an intention price like consumer loans.
And finally, a home owner who simply needs the financial institution to forget all of the underwriting guidelines and
lend the cash exclusively regarding the Equity in your home may expect you’ll be able to secure a moment real estate loan
to 65%-85% of the property existing worth with an interest rate like a credit card.

The attention rates on 2nd Mortgages are usually greater than those
of very first Mortgages. That is mostly due to the increased threat for the Second Mortgage Lender.
Just, in case of default, the 2nd mortgage-holder would only
recover his funds from the proceeds following the First Mortgage ended up being pleased. Aside from the
First-mortgage any Municipal Taxes due, Legal charges Payable and all
Processing expenses will have to be compensated too, prior to the 2nd home loan
loan provider would receive any
funds to satisfy the Second home loan. Sometimes of default
the Second Mortgage lender may want to assume 1st Mortgage to
protect his desire for the house. This will be not only frustrating
but high priced for 2nd mortgage company.
The Interest rates dependant on both Institutional and professional loan providers
on 2nd Mortgages will be based on numerous underwriting requirements.
Credit rating associated with the applicant
Income
Location, Type and Condition of Property
Debts which could stay after the 2nd home loan is within spot
The total Loan to Value (LTV): the total amount lent as a
portion of the worth of home

When it comes to a home owner that has good credit, steady earnings,
appropriate home, reduced debts and simply needs, let”s state,
A Line of Credit. They should have no issue in securing a
loan to 80% of the houses existing value and really should expect an
rate of interest near that a primary Mortgage or Bank Prime.
But a property owner and also require poor credit, less steady or
verifiable earnings, outstanding problems such as for instance tax arrears or
credit choices may expect to have the ability to secure an additional Mortgage
loan to 65%-85per cent of the home current worth with an interest price like customer loans.
And lastly, a homeowner whom merely needs the financial institution to forget all the underwriting directions and
lend the funds exclusively regarding the Equity in your home may expect to be able to secure an additional home mortgage
to 65%-85percent of the house current price with an intention rate similar to that of a consumer credit card.

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