Posted by Michael Morrongiello on February 14, 2002 at 12:08:29:
In Reply to: 2nd Mortgage Is Passed The Due Date.... posted by SuziQ on February 11, 2002 at 22:34:08:
SuziQ;
Your scenario points out the real danger of agreeing to financing terms where extremely short term balloon payments or maturity dates come due. As you and now apparently the property sellers and holders of this 2nd lien are discovering; They often do not get paid when due....I counsel with Property sellers ALL the time about creating "safe" paper where the buyer / borrower has ample time to build equity and refinance. Short term balloon payments are a constant problem.With your credit cirumstances, you need to make sure that you are CLEARLY and CONCLUSIVELY documenting ALL payments paid on both the 1st lien as well as the 2nd lien. Any lender in the future that will consider extending you financing will want to have some assurance and proof that you have been performing on your 1st lien & 2nd lien obligations....
As for the "default" interest rate of 18% apparently you are now face with paying since you have gone past the maturity date, I would suggest you seek to work out a FORMAL modification and extension agreement with the existing 2nd lien holders... After all, if you did pay them off in full, WHAT are they going to do with that Cash? - the chances are they will stick in the bank where it will earn far less than what they are collecting from you.
By getting a FORMAL agreement put together you can hopefully find some common ground that both you and the 2nd lien Note holders can accept.
Best of luck.
Michael Morrongiello