Relaventhomes is the name its in Oregon really nice stuff.. he did an 8 plex but it did not sell and I know its underwater.. but he has the dough for these type  of ventures he wanted to do it for environmental reasons was his first motivation. 

The first alone in your example is at a 94% LTV Loan To Value ($375,000 1st divided by $400,000 value) and the wrap mortgage is underwater at 101% LTV ($405,000 divided by $400,000 value). 

It usually means a company is underwater and trying to determine how many pennies/ nickels/dimes/quarters on the dollar they will be giving investors as if they gave full redemptions to everyone they would run out of money and most funds are pari passu. 

You will likely be underwater from day one because the natural buyer is unlikely to pay retail when you sell and customarily the section 8  turn key providers are not seeking out neighborhoods with strong fundamentals that suggest meaningful appreciation will occur.

If there is no equity or the property is underwater, there will be a strict foreclosure, where the owner and interest holders prior in right to the bank will get a chance to redeem the note, and if none do, the bank then becomes the owner.

We have several clients that bought houses based on some AI-generated numbers who are deeply underwater.

ONLY do this if you know the property will hold value so that you don't find yourself underwater when you have to re-up the loan in 3-5 years when the ARM adjusts or balloons.

At those numbers, mortgage is 1,400 a month and you'll be under water with the HELOC payments.

What if you pull it out, put that money somewhere else and that is illiquid and then you need to sell this property and you are underwater.

Never take someone else's word for what the ARV and reno costs will be especially if they are trying to sell you the property... guaranteed you will be underwater by the end of the deal.Pulling comps that you know are valid are essential.