2. Junior and Senior Liens
• Distinguishing first and junior lien by date and
time of recording
• Junior financing by thrifts and commercial
banks
• Junior financing provides funds for land
developers to pay for offsite improvements
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3. Anatomy of a Second
Mortgage/Deed of Trust
• Second deed of trust is in junior position to an existing senior
loan
• Junior loan holder in higher-risk position
• In event of default, senior lender will usually give junior
lender a chance to make delinquent payments
• Clauses protect junior lien holder’s position against that of
senior lender
• Junior loan risks
• Junior loan interest rates and usury
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4. Home Equity Loans
• Offered by many lenders
• Interest is tax deductible, unlike interest on consumer debt,
which is not
• Attractive interest rates, sometimes for only short period of
term
• Face high default rates when economy slows
• Freddie Mac has program for purchase of secured home
improvement loans
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