ROBERT BRUSS: Unrecorded silent second mortgages have downside
August 4, 2006 Detroit Free Press – republished by Ralph Marcus (Mark) Maupin, Jr.
BY ROBERT BRUSS
Dear Bob: We are having great difficulty selling our rural house. It has been listed for sale about eight months and we've had only one offer.
The buyer will obtain a 70% first mortgage, pay us 5% down payment and give us a 25% second mortgage. However, this is to be an unrecorded "silent second" mortgage. The Realtor says the idea is to make the mortgage company think the buyer is paying a 30% down payment. He says it is done all the time, especially with difficult properties like ours.
What is your advice? -- Vickie V.
Dear Vickie: An unrecorded silent second mortgage is a fraud on the mortgage lender. I know it goes on, but lenders rarely prosecute the borrower or seller.
However, an unrecorded silent second mortgage is dangerous for you. If the borrower doesn't make the payments to you, you can't foreclose to get the property back if your second mortgage hasn't been recorded.
At the very least, you should record your silent second mortgage. But you should be aware that before it gets recorded, your buyer might incur liens, which would have priority over your later-recorded second mortgage.
For example, your buyer might have a prior judgment lien, income tax lien, child support lien, or other possible liens, which could attach to the property. If you decide to proceed, please be aware of your high risk and try to minimize it. For details, consult a real estate attorney.
Dear Bob: We obtained a senior citizens reverse mortgage in 2004. Recently, we received a letter from our mortgage company outlining why we should refinance to obtain greater reverse mortgage benefits. Is this possible? -- Jopie C.
Dear Jopie: Yes. Reverse mortgages can be refinanced. Perhaps your home has greatly appreciated in market value. The reverse mortgage lending limits have increased substantially in the last two years, making today's reverse mortgages more attractive than a few years ago.
If you have a need for increased funds, I suggest you inquire about the advantages of refinancing.
Dear Bob: I bought my house in 1960 and paid it off in 1980. I have a living trust in my name.
My problem is that for the last 18 months I have been receiving mail from Realtors addressed to a person I don't know, asking whether I want to sell my home. I phoned one Realtor to ask where he got her name. He said he got the name on the Internet. I called the county assessor and he told me not to worry as everything is in the name of my living trust. But I have misplaced my title insurance papers. Any advice? -- Phillip V.
Dear Phillip: If you are receiving your property tax bills in your name, you probably have nothing to be concerned about. However, when you are in the area of the county recorder of deeds office, stop in to double check how the title to your home is held. Mistakes do happen. Or there could be a forgery in your chain of title.
I don't mean to alarm you, but checking won't do any harm. If you find there is a title problem, contact your owner's title insurer.
Dear Bob: We are considering buying a retirement home in a very nice new golf course development near where we frequently vacation. However, we learned the houses are on 99-year land leases.
Although we don't plan to be around when the lease expires, won't that hurt the value of the home as it becomes older? -- Connie S.
Dear Connie: That 99-year land lease is a great deal for the developer but not so good for the home buyers. The reason is that at the end of the 99 years, title to the house reverts to the landowner.
As you can see, the market value of the house will decline as the 99th year approaches.
However, if the 99-year land leases contain an option for the individual homeowners to buy the land beneath their houses, that makes them more attractive for several reasons.
The major reason is your land lease payments then become tax deductible, just like interest. But another reason is most people want to own the land under their home.
ROBERT BRUSS is a real estate attorney and syndicated columnist. Write to him at robertjbruss@aol.com.
August 4, 2006 Detroit Free Press – republished by Ralph Marcus (Mark) Maupin, Jr.
BY ROBERT BRUSS
Dear Bob: We are having great difficulty selling our rural house. It has been listed for sale about eight months and we've had only one offer.
The buyer will obtain a 70% first mortgage, pay us 5% down payment and give us a 25% second mortgage. However, this is to be an unrecorded "silent second" mortgage. The Realtor says the idea is to make the mortgage company think the buyer is paying a 30% down payment. He says it is done all the time, especially with difficult properties like ours.
What is your advice? -- Vickie V.
Dear Vickie: An unrecorded silent second mortgage is a fraud on the mortgage lender. I know it goes on, but lenders rarely prosecute the borrower or seller.
However, an unrecorded silent second mortgage is dangerous for you. If the borrower doesn't make the payments to you, you can't foreclose to get the property back if your second mortgage hasn't been recorded.
At the very least, you should record your silent second mortgage. But you should be aware that before it gets recorded, your buyer might incur liens, which would have priority over your later-recorded second mortgage.
For example, your buyer might have a prior judgment lien, income tax lien, child support lien, or other possible liens, which could attach to the property. If you decide to proceed, please be aware of your high risk and try to minimize it. For details, consult a real estate attorney.
Dear Bob: We obtained a senior citizens reverse mortgage in 2004. Recently, we received a letter from our mortgage company outlining why we should refinance to obtain greater reverse mortgage benefits. Is this possible? -- Jopie C.
Dear Jopie: Yes. Reverse mortgages can be refinanced. Perhaps your home has greatly appreciated in market value. The reverse mortgage lending limits have increased substantially in the last two years, making today's reverse mortgages more attractive than a few years ago.
If you have a need for increased funds, I suggest you inquire about the advantages of refinancing.
Dear Bob: I bought my house in 1960 and paid it off in 1980. I have a living trust in my name.
My problem is that for the last 18 months I have been receiving mail from Realtors addressed to a person I don't know, asking whether I want to sell my home. I phoned one Realtor to ask where he got her name. He said he got the name on the Internet. I called the county assessor and he told me not to worry as everything is in the name of my living trust. But I have misplaced my title insurance papers. Any advice? -- Phillip V.
Dear Phillip: If you are receiving your property tax bills in your name, you probably have nothing to be concerned about. However, when you are in the area of the county recorder of deeds office, stop in to double check how the title to your home is held. Mistakes do happen. Or there could be a forgery in your chain of title.
I don't mean to alarm you, but checking won't do any harm. If you find there is a title problem, contact your owner's title insurer.
Dear Bob: We are considering buying a retirement home in a very nice new golf course development near where we frequently vacation. However, we learned the houses are on 99-year land leases.
Although we don't plan to be around when the lease expires, won't that hurt the value of the home as it becomes older? -- Connie S.
Dear Connie: That 99-year land lease is a great deal for the developer but not so good for the home buyers. The reason is that at the end of the 99 years, title to the house reverts to the landowner.
As you can see, the market value of the house will decline as the 99th year approaches.
However, if the 99-year land leases contain an option for the individual homeowners to buy the land beneath their houses, that makes them more attractive for several reasons.
The major reason is your land lease payments then become tax deductible, just like interest. But another reason is most people want to own the land under their home.
ROBERT BRUSS is a real estate attorney and syndicated columnist. Write to him at robertjbruss@aol.com.
posted by Ralph Marcus (Mark) Maupin | 7:00 AM
1 Comments:
ROBERT BRUSS answers are right on the money. Mark Mauin
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