Which mortgage is used for owner financing and is originated by a second lender combining equity and money owed into a second mortgage?

• A. Wrap Around Mortgage
• B. Package Mortgage
• C. Blanket Mortgage
• D. Direct Endorsement Mortgage

Answer: (A)

A wrap-around mortgage is a financing method used in owner financing where a second lender originates a new loan that “wraps around” the existing first mortgage. This new note covers the current balance of the first loan plus additional funds for the purchase, effectively combining the seller’s equity and the existing debt into one larger loan. The wrap lender collects payments from the buyer and uses part of that to continue paying the underlying first mortgage, while keeping the difference as interest. This structure lets the buyer obtain financing from the wrap lender while the original loan remains in place.

The other options describe different concepts: a package mortgage includes personal property in the loan; a blanket mortgage covers multiple properties; a direct endorsement mortgage refers to FHA underwriting authority, not the owner-financing wrap structure.