I just figured it out.

This post relates to the the “Another Short Sale Flip Flop”.
I just figured it out right now. It’s not the first time I have encountered this. This was an 80/20 purchase.

The borrowers have told me they don’t pay PMI. That’s right. They don’t. I used to think the second (20%) got a policy for mtg ins. But you know what?

I don’t think so now. I think the first has some kind of agreement with the second to give them anything they get above what they are owed after they resell the property. That’s why they list them for above market value hoping for the best. And that’s why the 2nds don’t want to negotiate!!! They think they are going to get most or all of their money back.

So if you are doing a deal with an 80/20 just realize this fact of life. The 2nd is not going to cave in. They are going to take what they can get from the REO sale over and above what the first is owed, or maybe more.

See we not are privledged to know the inner workings of the financial market. We don’t know the dealings between the first and the second. This is a hugely untransparent market.


Why would the first lien holder offer anything to the second position? There is no legal, moral or ethical reason for them to offset the second’s inferior position. How would they benefit from such an arrangement?