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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: loantech who wrote (71188)	10/6/2006 3:01:39 PM
From: ridingycurve	Read Replies (1) \| Respond to of 110194

Nothing puts a smile on a banker's face like having a second behind his first if it is a troubled loan, provided the second has some real collateral value that must be protected. Under these circumstances the second must generally initiate foreclosure and buy out the first mortgage holder if he wants to maximize recovery. The second is aware that if the first initiates foreclosure, he will feel no obligation to carefully market the property so that the second recognizes maximum recovery. There are instances where crafty borrowers will default on the second, but not on the first. Generally this occurs when the borrower knows that the second has no real collateral protection, and therefore has no incentive to foreclose. The first might be inclined to let it ride even though the default on the second might be a condition of technical default on the first.