Refinance foreclosure would then refer to a foreclosure instituted by the holder of the second mortgage. A second mortgage holds “junior” status to the principal mortgage, which means that in the event of a foreclosure the principal mortgage is paid off first and the second mortgage lender is second in line for repayment.
This second lien position makes many borrowers think that second mortgage lenders will shy away from foreclosure because they are last in line to be made whole. That is not necessarily the case. Particularly in the case of an 80% loan-to-value ratio, the second mortgage lender is likely to get his money back –minus legal fees and the cost of the home’s sale. But a second lien does not mean that the lender is going to look on the loan as an acceptable risk under any circumstances.
Many refinance foreclosures are the result of default on the second loan while the primary mortgage is kept current. Second mortgage holders may be relying on home appreciation to provide them with full repayment. Some second mortgage holders have even been known to purchase the first mortgage and then put the second in default. The result is that the refinance foreclosure puts the home in the hands of the second mortgage lender.
A substantial number of refinance loans – second mortgages – have restrictive language with regard to defaults. One late or missed payment may be enough to trigger foreclosure action. Fine print of this type is not unusual in a home equity refinance agreement. If the home has equity remaining in it or has substantial appreciation potential, refinance foreclosure may be just what an unscrupulous lender is looking for. Prepayment penalties on these loans can be substantial and a foreclosure might trigger the prepayment penalty clause.
Traditional lenders have traditionally been loath to put a home in foreclosure because the process costs the lender money. They lose on the whole transaction. However a refinance foreclosure from a lender who is offering 125% loan-to-value ratios on a full refinance may well be the lesser of two evils with a borrower who is struggling with the increased payment that a loan like that will inevitably bring to the family budget.
2 Questions to Ask in the Bank Refinance Scenario
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Adjustable Rate Mortgages Carry Substantial Risk
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Banks And The Mortgage Frenzy
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Calculate your Refinance Savings for a Lower Rate
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Efficient Refinancing: Four Tools You’ll Need
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Home Refinancing Can Create A Bind Down The Road
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How To Find The Best Subprime Loan
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If You Plan To Cut Spending: Refinance & Reduce
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Investment Refinance is a Game for Financially Savvy Homeowners
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Its A Buyers Market Lower Home Costs And Lower Interest Rates
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Mortgage Settlement Costs Differ From State To State
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Mortgage Shopping? There's No Comparison
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Paying Ahead – A Mortgage Boon Or A Deduction Loss?
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Paying Off A Mortgage Isn’t Always A Good Idea
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Refinance Fees for a Home Equity Loan Are Similar to Mortgage Fees
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Refinance Lenders are Busy Turning out Home Equity Loans
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Refinance Rates are Defying the Laws of Finance
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Refinance Tax Deductions is what makes Second Mortgages Valuable
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The Popularity Of Reverse Mortgages
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The Pros And Cons Of A Reverse Mortgage
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What Defines An Adjustable Mortgage Rate
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When In Debt, Don't Look For Quick Fix
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