Borrowers have a 1st and a 2nd.  The 2nd is with Citi and is a fixed rate HELOC with a 15-year balloon.  The 1st generously <in my opinion> offered 10% of the outstanding balance on the 2nd as payoff.  Citi has now come back and said, "Great!  We'll take the 10%. Plus the "Lien Insurer" is requiring that the Borrowers sign a $20,000 promissory note."

I went back to the original note and mortgage commitment on the 2nd, and it specifically stated the Borrowers were not required to carry mortgage insurance.  So I called Citi on this and said there must be some mistake.  The Negotiator then explained the difference:  Lien Insurance is something that the lender (in this case, Citi) acquires when they think there is risk in a loan.  This is not something that the Borrower agrees to -- or even knows about!

Has anybody else run into this?  If so, have you had any luck in reducing and/or eliminating the additional borrower contribution to get the transaction closed?