Wrap-Around Mortgages financial definition of Wrap-Around Mortgages
wraparound mortgage (redirected from Wrap-Around Mortgages)
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A second mortgage
that leaves the original mortgage in force. The wraparound mortgage is held by the lending
institution as security
for the total mortgage debt. The borrower
makes payments on both loans to the wraparound lender, which in turn makes payments on the original senior mortgage.
A largely extinct financing tool involving a seller leaving its first mortgage in place while selling the property to another and holding the financing. The new mortgage “wrapped around” the old mortgage, so that the buyer made payments to the seller, who then deducted enough to make payments to the original mortgage lender.The practice has been rendered obsolete by the widespread use of the due-on-sale clauses in mortgage loans, making the entire principal balance of the loan due when the property is sold,whether or not there has been a default.There are a few circumstances when a due-on-sale clause is not enforceable (see that entry for details), providing an opportunity for wraparound mortgages.
References in periodicals archive
He discusses creative financing techniques such as wrap-around mortgages
are another popular option for financing in tough markets.
are loans in which the lender assumes responsibility for a borrower's existing mortgage, while creating a new and additional loan for the borrower.
Realty ReFund Trust, a real estate investment trust headquartered in Cleveland, was formed in 1971 and is currently invested primarily in wrap-around mortgages