Rod Everson

http://www.ontrackreading.com/economics

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Tue Mar 11th 12:49 PM | Rating: 0 0
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Banks Using Leverage to Force Home Equity Repayments

The post by "I should know" frames the issue well. While it seems to make sense to prefer that the homeowner should be allowed to get into a more secure financial situation, it's also true that circumstances have changed and the holder of the second mortgage (the HELOC) is in a more precarious position than when the original loan was made.

By denying the subordination request, the holder of the second gains negotiating power and might be able to improve his position somewhat (via a higher rate, shifting some of the second to the first, outright reduction of the balance on the second, etc.) and he is acting within his rights in attempting to do so.

In any case, the borrower signed documents enabling this situation in the first place. Contracts do matter, so far anyway.
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