Help - Borrower wants to exchange his stock collateral and have us secure it with a 3rd Mtg. He has a 3rd Mtg. at another bank and will pay it off and then it will be assigned to our bank.

Rarely do we make consumer loans. What is needed for this transaction as far as disclosures? Thank you for you input.

Do you really want to trade your collateral position for something less? Remember to forecluse on the 3rd you will assume balances the 1st and the 2nd. When you consider those balances and all the time and expense that would be required to collect your money via foreclosure, are you prepared to do so.

IMO it is not ecomomicic or purdent to take a lesser position. I would also take a hard look at borrower financial condition. 3 mortgages leaves what kind of a equity in the property? They have pledged another liquid assest in form of stock. Do they want the stock released so they pledge it on another loan somewhere else? Collateral isn't the only thing to consider as the borrower must show the ability to pay off the loan without looking to liquidate collateral.

I agree with the second anon. How much equity is in the 3rd mortgage? Usually very little if any especially after you apply an advance rate. Although it depends on what kind of stock it is. If it's an airline stock it may be an even trade....j/k.

I appreciate your input. It is bank stock and they need it as the bank it is on is making some changes to their stock issuance. The collateral is many more times in value than the loan is. I was just asking what documents are required. From the credit standpoint, it is sound.