We have several customers who have second mortgages with our bank. The borrowers are currently underwater with their homes (typical situation here in Florida). Our bank would like to refinance these customers and combine both their first mortgages (held by other FI's) and our second. The reason is two fold: one to help the customer with a lower rate and more affordable payment terms, secondly it would improve our banks collateral position in the event of a default. Some of these borrowers may be as much as 150% LTV. These customers are not eligible for any of the HARP programs. We are doing appraisals, running credit, and all other underwriting on these loans. Is anyone else doing any loans like these outside of the government sponsored HARP programs? I would appriciate any insight/advice that could be offered. Thanks in advance!

I guess I am not too sure how this would help your collateral position? If the second is basically currently unsecured, how does more exposure help the bank? I'm not aware of too many banks that want to crawl out onto that limb.

The few loans that we are considereing doing the second mortgage that we hold on the properties are much higher amounts then the smaller first. All the loans are performing well and credit scores have been favorable. Upper Managment is thinking that by helping these customers by lowering their payments and interest rates it lowers the chance of default. If default were to occur now by being in second position if the customer does default we would be behind the 1st mortgage holder and recovery amounts would be much less. It really is a shame that so many people here in Florida are so underwater and see no way out that they are just walking away from their homes. We would like to try to help some of these people while ensuring that bank is a better position as well. We have only been approached by customers who really want to stay in there homes. The have been turned down for the HARP programs most because the are not Fannie/Freddie owned loans.