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Silent Second Mortgage
These are considered private money second mortgages typically offered by the seller during a home loan transaction. In most cases, silent second mortgages are used when the buyer is having difficulty coming up with the down payment required by the mortgage lender.
Sometimes silent second's are done because the underwriter doesn't like the debt ratio, so a silent 2nd mortgage overcomes the qualifying obstacle by lowering the loan amount. Of course the lender is not aware of the silent mortgage, and would not allow it if they were aware of the private loan. |
Silent 2nd Mortgages are not uncommon with Jumbo purchase loans that exceed 2 million! |
Silent mortgages are risky for Sellers, because these loans are unrecorded second mortgages that may not be enforceable if the buyer stiffs the seller. These private home equity loans are unsecured loans, so the seller has very little recourse if the buyer decides to stop making payments.
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