First, pursuant to the original documentation you signed - basically if there is a problem with the documentation you are responsible at the request of the lender to execute any documentation necessary to comply with the loan.
Second, in an 80/20 loan - the first loan is for 80% of the purchase price. The second loan, for 20% of the purchase price, works as a revolving line of credit usually for 15 year term and then must be paid in full over the course of the last 10 years of the loan term. The first loan prevents the borrowers from having to take out a private mortgage insurance
, which helps them save money. PMI is usually required when any mortgage covers more than 80% of the home value, because it is a risk for the bank. The insurance
works to protect the bank, but since the cost is passed on to the borrower, it makes it harder for the borrower to handle.
Third, if they don't have the 20 loan correctly documented nor filed - then it isn't a lien against the property but only an unsecured personal debt of yours IF you did execute the original loan document for it.
If you are not having financial problems I would just do as they request to expedite the refinance of the property.
If you are having financial problems then I would think about filing a bankruptcy and discharging the debt along with any other unsecured debt you owe.
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