Mortgage Crisis Daily

Piggyback home loans, defined:

A piggyback is a second mortgage taken out at the same time as a first mortgage, as a way of borrowing a larger total amount. The first mortgage is for 80 percent of property value, and therefore does not require mortgage insurance, while the piggyback is for 5 percent, 10 percent, 15 percent or 20 percent of value. Instead of a mortgage insurance premium, the borrower pays a higher rate on the piggyback than on the first mortgage.

When mortgage and subprime difficulties became apparent in 2007, the default rate on piggybacks soared, and investors in second mortgages began paying a high price for their mistake. With home prices declining, there is no equity protecting many of these seconds, and it doesn’t pay the lender to foreclose.

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The Subprime Mortgage Crisis Before, During, and After

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