silent second

A question for the mortgage people here. I got this e-mail from a friend -

“Im writing an offer for clients who are using 100% financing through the CALFHA program. The lender told me that since the second is a “silent” loan that my buyers won’t be making payments on (payoff when they sell), I should put the second as a down payment instead of putting it on the purchase agreement addendum as secondary financing.”

What are your thoughts on this?

Are you talking about a 2nd mortgage that is secured by real estate with a balloon payment? How long is the amount of time allowed on the balloon payment? I will buy 2nd’s off of you if your interested in selling those

If it’s secured by the house, it is a second- I don’t see a way that it could be “claimed” as a down payment. Also, if it could be construed as a down payment, the lender will need to verify that those funds are available prior to closing. But CALFHA may be a special program where you are able to accomplish this. Is CALFHA a non-profit down payment assistance company?

Sounds like mortgage fraud to me…

Re the questions on CalHFA.


From their website - “For over 30 years, California Housing Finance Agency (CalHFA) has supported the needs of renters and first-time homebuyers by providing financing and programs that create safe, decent and affordable housing opportunities for individuals within specified income ranges. Established in 1975, CalHFA was chartered as the State’s affordable housing bank to make below market-rate loans through the sale of tax-exempt bonds. A completely self-supporting State agency, bonds are repaid by revenues generated through mortgage loans, not taxpayer dollars.”

California Homebuyer’s Downpayment Assistance Program (CHDAP) offers a deferred-payment junior loan of an amount up to the lesser of three percent (3%) of the purchase price or appraised value.

I think Rich is right - it’s usually fraud when someone lies.

For detailed information go to the Press Releases page on CalHFA’s web site.

Any second lien that is “silent” is mortgage fraud. Here’s the exact thing you’re talking about and you need to report them.