LoanPerformance, a subsidiary of First American Real Estate Solutions, today announced the introduction of SecondLook, a new service that aims to uncover the existence of second mortgages added after origination.
Identifying second-mortgage liens has been a challenge for mortgage industry stakeholders, especially issuers and investors of mortgage securities. SecondLook enables originators, investors and issuers to identify, evaluate and monitor home equity lines of credit (HELOC) and second-mortgage loans on active first-mortgage pools and portfolios. SecondLook offers one-time, monthly or quarterly monitoring of additional liens. In addition, a daily update of new liens with alerts to servicing and portfolio managers is available with the monthly or quarterly monitoring service.
SecondLook combines the resources of LoanPerformance’s HELOC and second-lien loan database with First American RES’ property data, which covers 97 percent of all real estate transactions in the United States, according to a company statement.
“The growing popularity of second liens, and the inability, until now, to identify their presence, has added a significant element of risk for mortgage lenders and investors,” said Dan Feshbach, chief executive officer of LoanPerformance. “Our analysis of outstanding mortgage pools shows that between 23 and 53 percent of first-mortgage borrowers add a second mortgage within three years of origination, masking the true risk of the assets being held or under consideration for investment.”
Feshbach added that these encumbrances place Wall Street traders bidding on pools of loans at a disadvantage since the true combined loan-to-value (CLTV) ratio may be significantly higher than what is disclosed, due to the addition of hidden mortgages concurrent or subsequent to the first lien’s recordation.
SecondLook can identify a wide range of second liens, such as “silent” seconds, where the seller finances the second; “piggyback” seconds, in which the originator provides a second simultaneous to closing; “up-sell or cross-sell” seconds, where the originator markets a second after closing; or “borrower-initiated” seconds, where the borrower acquires a second after closing through another lender.
When clients provide first-mortgage loan information, including borrower and co-borrower name and address, SecondLook automatically returns appended files that describe all additional liens recorded on the properties, including new lien dates and amounts, and an updated loan-to-value (LTV) ratio based on automated valuations or repeat sales indices with summary reports detailing changing risk profiles of mortgage securities pools.
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