In the US, if a homeowner has a mortgage on their home and at some point
takes out a second mortgage on the same property, does any state or federal
law require notification to the first lender of the second mortgage? I'm
not addressing the case where the second mortgage was required to pay the
down payment on the first (such as to avoid PMI) - I'm merely referencing a second mortgage occurring long after the first mortgage has been booked.

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On 3/30/2023 1:14 PM, Rick wrote:

In the US, if a homeowner has a mortgage on their home and at some point takes out a second mortgage on the same property, does any state or
federal law require notification to the first lender of the second mortgage?   I'm not addressing the case where the second mortgage was required to pay the down payment on the first (such as to avoid PMI) -
I'm merely referencing a second mortgage occurring long after the first mortgage has been booked.

The second mortgage would be added to the title of the property. I
would think that the government entity such as the county recorder would
notify all the lien holders that something was added.

I was on the board of a small water district and the district had the
ability to add a lien that was superior to the mortgages. Our office
was advised by the county anytime the title was changed. We even
charged a fee when the property was sold.

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"Rick" <rick@nospam.com> wrote:

In the US, if a homeowner has a mortgage on their home and at some
point takes out a second mortgage on the same property, does any
state or federal law require notification to the first lender of
the second mortgage? I'm not addressing the case where the
second mortgage was required to pay the down payment on the first
(such as to avoid PMI) - I'm merely referencing a second mortgage
occurring long after the first mortgage has been booked.

I'm not aware of any laws requiring that, but the terms of the mortgage
sure will. But really, what does the first lender care? That lender
is first - gets all its money back before the second lender gets a
penny in case of a default. So if equity is limited, it's the second
lender who will be screwed, not the first.

--
Stu
http://DownToEarthLawyer.com


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"Stuart O. Bronstein" wrote in message news:XnsAFD7AF9A3697Cavocatstuyahoofr@130.133.4.11...

"Rick" <rick@nospam.com> wrote:

In the US, if a homeowner has a mortgage on their home and at some
point takes out a second mortgage on the same property, does any
state or federal law require notification to the first lender of
the second mortgage? I'm not addressing the case where the
second mortgage was required to pay the down payment on the first
(such as to avoid PMI) - I'm merely referencing a second mortgage
occurring long after the first mortgage has been booked.

I'm not aware of any laws requiring that, but the terms of the mortgage
sure will. But really, what does the first lender care? That lender
is first - gets all its money back before the second lender gets a
penny in case of a default. So if equity is limited, it's the second
lender who will be screwed, not the first.

The reason the first lender might care is that even if all payments are made
on time on the first mortgage, a default on the second mortgage would lead
to foreclosure. And yes, the first lender will get their money first, but
they will also be losing the future stream of interest payments they
expected. Now you can argue this would be no different than the buyer selling the home or just paying off the mortgage early, but I would think
the first lender would want to know if there is an extra element of risk of default by the presence of a second mortgage.

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