Private second mortgages that are silent

A silent second mortgage is typically a second mortgage offered on preferential (subsidized) terms to those who qualify. These are generally offered by the state through one of three federally authorized programs, the Mortgage Revenue Bond (MRB) program. These programs typically involve a 97% FHA loan and a 3% silent second mortgage that is offered at below-market rates or is fully forgiven after a certain period of time.

Counties and municipalities also offer Mortgage Assistance Programs (MAP) to first-time homebuyers buying in their communities that help provide a down payment to complete the home purchase. These usually come in the form of a silent second mortgage placed on the property at closing that is forgiven after a certain period of time as long as the owner does not sell or refinance the mortgage with a cash-out. Counties and municipalities also offer silent seconds for home improvements and renovations. Check with your local redevelopment agency for more information.

A silent second mortgage for investment property is different than it is for residential property. It typically involves a second or junior mortgage loan on the property that does not require a scheduled payment until rental income levels have reached a predetermined point.

Silent second mortgages are even sometimes used as a solution when homeowners are behind on their mortgages. Instead of foreclosure, the lender might modify the loan by lowering the rate or offer a “second hush,” in which payments on the past due amount are deferred until the home is sold.

The riskiest form of a silent second mortgage is an unrecorded private money loan from the seller to the buyer during a purchase transaction. An example of this is an 80/10/10 plan where the borrower puts up 10%, the seller lends the borrower 10%, and the first mortgage is 80%. However, Robert Bruss, author of the nationally syndicated “Real Estate Mailbag,” asserts that an unregistered silent second mortgage can be dangerous for the seller because if the buyer fails to make payments to the seller, the seller cannot foreclose. mortgage. recover the property.