davelj, your answer makes perfect sense to me. That’s why I don’t understand why the 2nd lien holder is not required to notify the 1st lien holder of the new loan; the vendor whose link I posted sells the information on CLTV to the MBS holders (or 1st lien holders)?
So it sounds like the 1st lien holder can’t do anything about it. Even if they know the guy got a HELOC, they cannot raise the interest rate or require his income or home value to be higher, since it’s too late for that. The 2nd lien holder makes the decision if the borrower qualifies, but the 2nd lien holder could have different underwriting guidelines, much looser…