What is NOT considered a characteristic of a secondary mortgage loan?

• A. Higher than primary mortgage rates
• B. Involvement of a secondary lender
• C. Transfer of primary lien position
• D. Utilizing a promissory note

Answer: (C)

The characteristic that does not apply to a secondary mortgage loan is the transfer of primary lien position. In a secondary mortgage, the loan is secured by a lien that is subordinate to the primary mortgage. This means that in the event of foreclosure, the secondary lender is paid after the primary lender.

Secondary mortgage loans are typically used to access additional funds against the equity of a property while the primary mortgage, which has first lien position, remains in place. Therefore, the fundamental nature of secondary mortgages is that they do not change the prior priority of the existing mortgage.

Other aspects like involving a secondary lender, having higher rates compared to primary loans due to increased risk, and utilizing a promissory note for the agreement are all characteristic of secondary mortgage loans. These loans serve borrowers who seek additional financing but do so with the understanding that these loans are second in line regarding repayment priority.