[excon]

Hello again:

I'm still missing something here.

If the only advantage to being a co-owner and NOT a co-borrower is that your credit won't be ruined when the house goes into foreclosure, then it's not really much of an advantage... Is it? You're going to LOSE your home and ALL your equity, but your credit will be SAVED??

Why would someone do that?

In addition, if the borrower stopped paying, in order to protect HIS interest, the NON borrower would have to make the payments himself, thereby saving the BORROWERS credit, and building up equity for HIM? Plus, he couldn't take the interest as a deduction, because he's not on the loan.

Again, why would someone do that?

excon

[LisaB4657]

Lisa, I ran your question through our underwriting guidelines to be sure. The non-borrower is not required to sign a security instrument. Somewhere in this lengthy tread, I lost track of vesting. Of course no new deed per previous vesting. :) This web site is addictive, huh?

So if the non-borrower is not required to sign the security instrument, how can Countrywide foreclose in the event of a default by the borrower?

[ScottGem]

First, I'm not disputing what you have said, only its logic.

Countrywide requires the bank holding first lien position to grant subornation of their lien, putting Countrywide in a primary lien position.

And why would the primary lender do that? They are giving up a primary position for what? I can't conceive of a reason the primary lienholder would cede their position.

In a foreclosure proceeding, the bank can only foreclose those on the note of the home. In essence, both parties will loss the home, but only those who have signed the mortgage obligating them make timely payments to the lender will have there credit effected.

Now why would both parties lose the home? The lender can only foreclose on what was pledged as security. So if someone else owns half the home, they can only foreclose on the half pledged as security for the mortgage. Depending on the way ownership is held the lender may not be able to force a sale and who is going to buy half a home occupied by someone else?

Furthemore, mortgages are not like auto loans; once the home is foreclosed, that is the end of your relationship with the lender. The lender will not make any attempt collect any past due payments or unpaid balance of the principal.

This is news to me. Is this a Countrywide rule or by statute or what? As I understand a mortgage, it's a promissory note secured by real property. The borrower is promising to pay the borrowed amount. If the property is redeemed for less than that amount, the borrower still owes it.

[LisaB4657]

Hello again:

I'm still missing something here.

If the only advantage to being a co-owner and NOT a co-borrower is that your credit won't be ruined when the house goes into foreclosure, then it's not really much of an advantage...... Is it??

You're going to LOSE your home and ALL your equity, but your credit will be SAVED?????

Why would someone do that?

In addition, if the borrower stopped paying, in order to protect HIS interest, the NON borrower would have to make the payments himself, thereby saving the BORROWERS credit, and building up equity for HIM? Plus, he couldn't take the interest as a deduction, because he's not on the loan.

Again, why would someone do that?

excon

I still don't understand how the non-borrower could lose their home if they never signed the security instrument.

[Fastfun1]

Hello again:

I'm still missing something here.

If the only advantage to being a co-owner and NOT a co-borrower is that your credit won't be ruined when the house goes into foreclosure, then it's not really much of an advantage...... Is it?? You're going to LOSE your home and ALL your equity, but your credit will be SAVED?????

Why would someone do that?

In addition, if the borrower stopped paying, in order to protect HIS interest, the NON borrower would have to make the payments himself, thereby saving the BORROWERS credit, and building up equity for HIM? Plus, he couldn't take the interest as a deduction, because he's not on the loan.

Again, why would someone do that?

excon

Excon, I'm with you all the way. As my wife and I have a great relationship, I would do it if circumstances called for it. But if she was divorcing me, I'll go with GEM and FR and have it handled in court. I like you, exon. You cut right to heart of the matter, no BS. :cool:

[excon]

Hello again:

Maybe there aren't answers to any of this, and the sub-prime meltdown is the result. Certainly, logical questions such as those we pose, WEREN'T asked or answered when they mattered.

excon

[LisaB4657]

Scott, in a refi situation, if there are already 2 loans and the borrower is refinancing the first loan, it is standard practice for the second mortgage holder to subordinate to the new lender. Usually the second mortgage holder is a HELOC or similar and they went into the original loan knowing that they would be secondary. If they refuse to subordinate then the homeowner will have to pay them off as a condition of the refi of the first loan. Once they get paid off they lose the borrower's business and it's awfully hard to get them to sign a brand new HELOC. So it's in their best interest to keep their second position rather than having no position at all.

Of course when the borrower requests a subordination the second mortgage holder reviews the details of the proposed new loan. If the amount is that much higher then the second mortgage holder may not agree to subordinate, since their lending guidelines may have been exceeded.

[ScottGem]

Oddly, enough Countrywide is one of the sub prime lenders who haven't failed as a result of the meltdown. How, they can make such imprudent loans is beyond me.

A lot of the meltdown is due to borrowers who over bought more than mistakes by the lenders. The real estate price drops caught a lot of people by surprise.

[ScottGem]

Scott, in a refi situation, if there are already 2 loans and the borrower is refinancing the first loan, it is standard practice for the second mortgage holder to subordinate to the new lender.

OK, that I understand. I wasn't looking at it from that angle. I was looking at it from a home equity loan asking the primary loan to subordiante. But if they are refinacing, then the existing secondary becomes primary, so the refinancing lender would want to maintain the primary.

[Fastfun1]

Oddly, enough Countrywide is one of the sub prime lenders who haven't failed as a result of the meltdown. How, they can make such imprudent loans is beyond me.

A lot of the meltdown is due to borrowers who over bought more than mistakes by the lenders. The real estate price drops caught a lot of people by surprise.

Scott, I unfortunately have to disagree. At the inception of the infamous meltdown our stock price dropped 70% and have maintained rather stagnant since. We suffered a huge reduction in force. We lost an entire division known as Specialty Lending. Specialty Lending played a supporting role to our prime offices. Whenever a prime office could not help a borrower, they would refer them to Specialty Lending to explore sub-prime options. For clarification, Specialty Lending was, until not too recently, known as the Consumer Markets Division Dedicated Full Spectrum Lending. A merge between Consumer Markets and Consumer Markets Dedicated Full Spectrum resulted in the development of the Specialty Lending Division. That division... no longer exist. Furthermore, Full Spectrums retail branches have been all but dissolved, from roughly three per state to only a handful spread out the West coast and they have very few products to offer. Countrywide took a beating! Thousands of good people were put out on the street with measly separation packages.

[LisaB4657]

Hello again:

Maybe there aren't answers to any of this, and the sub-prime meltdown is the result. Certainly, logical questions such as those we pose, WEREN'T asked or answered when they mattered.

excon

The sub-prime meltdown is a result of lenders vastly reducing their lending criteria. They did so because the market was booming and the value of the property was increasing quickly enough that, within a year or two the value of the property would be high enough to make the loan fall within a more strict lending requirement.

Then the real estate bubble went boom. The properties were no longer increasing in value at the same rate. After a year or two, when the introductory interest rates expired and the monthly payments went up, the borrower could no longer afford the payment and the property hadn't increased in value enough for it to be sold or refinanced for enough to cover the mortgages.

I handled a sale 2 years ago. The buyers were a young couple just starting. They bought my clients' house with an 80/20 loan. That meant a first mortgage for 80% and a second mortgage for 20%. They were financing 100% of the purchase price. I was astounded that a lender would give them these terms. But the introductory interest rates were low enough that they could afford the monthly payments at that time. I'm pretty sure that they got into big financial trouble when those intro rates expired.

[excon]

A lot of the meltdown is due to borrowers who over bought more than mistakes by the lenders. The real estate price drops caught a lot of people by surprise.

Hello again, Scott:

I also disagree to an extent. I think the lenders are MUCH more culpable than the borrowers.

Borrowers are always going to BS on their applications and buy too much house. But, it's up to the underwriters to ferret them out. Or, it used to be.

I worked as a loan officer when people had to prove they worked and could afford the loan. Yes, there were no income verification loans. But there weren't any NO income verification and NO work verification loans then.

There are now. And, those loans were prevalent until just recently. I know a guy who doesn't work and has no money, who recently got 100% financed for a half a million dollar house.

Both lenders and buyers were relying on the increase in housing prices to bale them out. The lenders should have instead been relying on their borrowers ability to pay them back. They didn't.

excon

[ScottGem]

What are you disagreeing with? Did I say the CW wasn't hurt? All I said was they haven't failed. Since you still have a job that is an accurate statement.

[ScottGem]

Clearly lenders took huge risks by relaxing their standards. They probably felt it was prudent at the time, figuring a bust like the one that occurred wouldn't happen.

But look at people like the ones Lisa's client sold to. They probably figured they could afford the intro payments, but didn't plan ahead for when the interest rates would go up.

[LisaB4657]

But look at people like the ones Lisa's client sold to. They probably figured they could afford the intro payments, but didn't plan ahead for when the interest rates would go up.

I can almost hear their mortgage broker telling them "Don't worry. In a year you can refinance."

[Fastfun1]

What are you disagreeing with? Did I say the CW wasn't hurt? All I said was they haven't failed. Since you still have a job that is an accurate statement.

Sure, albeit the your definition of failure is "completely shutdown, doors closed, no longer in business". :(

[ScottGem]

That's what business failure means; shutdown.