[USER]

I’ve a registered 2nd mortgage against someone’s home (PR) they used to borrow against a few years ago.

The loan is now due with interest but they’ve asked for additional time to pay back the principal plus interest.

What should my action be in this situation – should I allow the couple days/maybe weeks of interest-free delay in payment?

This is a contractual 2nd mortgage and I’ve found based on todays value, the equity in the said property covers both the 1st and 2nd position. But I’d hate to exercise a force of sale.

Or, what is the right interest rate to charge the borrower per day for the delay?

When does the mortgage lien against the property drop?

Is this a legal action the lender (me) needs to exercise when the borrower does pay back?

[Rob]

If you were to foreclose, I think you’d have to pay off the first loan. Is that something you’re able to do?

[Molly]

If the payment due to you is late, do you know the status of the first mortgage? I’d consider giving them up to 60 days to refinance and pay, or get the place on the market for sale.

Put it in writing with rights to withdraw offer if they don’t take appropriate action. Find out from lawyer what the foreclosure process is for that State.

Prepare to file foreclosure… typically there’s at least 30-90 days after they get served where they can sell or pay.

It’s more difficult for them if you have already recorded the Foreclosure Notice.

IF you complete the foreclosure process, you will want to make sure the first mortgage is covered with monthly payments made while you get it sold.

The extra legal cost is typically added to the balance due from borrowers.

[Lauren]

How much time are they looking for an what does your mortgage contract say about late or missing payments?

If this is a balloon type payment your borrower should be refinancing this via a HELOC or other similar refi.

Hopefully your contract has language in it that specifies, for example, late payments will continue to be charged interest at x% per day with a late fee of $y per month or something similar.

[Shawn]

I would charge all late fees and penalty rate as stated in your agreement. Foreclosure should be the last resort.

It is expensive for both of you. Are they making any payments?

Do they have a plan to pay soon?

[Dave]

What are the terms of the loan in this situation?
Foreclosure is a last resort – cost, time and risk there.

But I would not waive any penalties, etc .

[Author]

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