What is a Seller Carryback? Seller Second?

What is a Seller Carry Back?

Simply put it is a subordinate mortgage offered to the buyer by the seller. Seller carry backs must be disclosed to the primary lender prior to loan approval. Some lenders require the "seller second" to be recorded at the time of closing while others do not.

One major form of mortgage fraud on real estate transactions is the "invisible second" or "disappearing second".

The "invisible second" is the most dangerous to the lender because it is where the seller lends the down payment to the buyer and creates a lien against the property after closing without ever disclosing this to the lender. This scheme is easily discoverable by post closing auditors who pull title reports on the property weeks or months after the closing.

The "disappearing second" is where the seller never intends to collect on the second mortgage even though they had presented affidavits to the primary lender to the contrary. While this isn't dangerous to the lender it is a misrepresentation to the lender and is considered mortgage fraud.

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