What you should be concerned as 1st lien holder if there's 2nd loan?

[Linda L.]

Property appraisal value: 265K

Borrower's down payment: 79K

You 1st trust deed: 132K

Seller: 2nd trust deed: 70K

Two year balloon

In addition to the high combined loan to value, what else should you look at to evaluate the risk of this deal?

[Jon Holdman]

Once concern is that if the borrower defaults on the first lien you will have to go through a foreclosure. A deed in lieu is not an option because you need to get the second wiped out.

Another is that the value isn't real. A trick that's sometimes used is to jack up the purchase price and have the owner carry a second. The first thinks they have a strong position. In reality, the value is much lower and the owner is going to forgive the second after closing.