What is the difference between cross collateralization and cross default

If the lender wants the loans to be properly cross-collateralized, then specific provisions must be inserted into both mortgages stating that they secure both loans. Without such provisions, the lender may not be entitled to utilize the proceeds of sale of one property to reduce indebtedness owing by the common borrower on another property and the amount of available proceeds to reduce such indebtedness will be limited to the face amount of the mortgage.

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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Home Ownership Mortgage. What Is Cross Collateralization? The loans can be of the same type—a second mortgage is considered cross collateralization—but cross collateralization also includes using an asset, such as a vehicle, to secure another sort of financing, such as a credit card. Related Terms Prior Lien A prior lien is a lien that is recorded prior to any other claims.

What Are the 5 C's of Credit? The five C's of credit character, capacity, capital, collateral, and conditions is a system used by lenders to gauge borrowers' creditworthiness. Second Mortgage A second mortgage is a mortgage made while the original mortgage is still in effect. Learn the requirements for a second mortgage and how to apply. What Is a Debtor? A debtor is a company or individual who owes money to a lender and is also often referred to as a borrower. Read about laws that protect debtors.

Personal Property Personal property is a class of property that can include any type of asset other than real estate. Straw Buyer A straw buyer is a person who makes a purchase on behalf of another person or group, which might be done as part of a fraud scheme.

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