Everywhere I look it’s Happening Again: The Second Mortgage is Making a Comeback
“Banks will be less likely to participate in the market, partly because of potential reputational risk, Penn said, “and the nonbanks like us should be able to fill the void there.”
Lenders Could Use Second Mortgages to Counteract Marketplace Entrants
The second mortgage is on its way back, and some lenders could have an advantage in the competition for the piggyback loan business.
Second mortgages fell out of favor in the wake of the financial crisis, but second liens have been making a comeback since at least 2014. As conditions for the loans have strengthened over the last year, with home prices increasing and negative home equity rates decreasing, originators that do both consumer and mortgage loans could have the upper hand in tapping that market.
“They’re used to dealing with a lot of rules about the dos and don’ts of originating,” said Larry Penn, chief executive of Ellington Financial, speaking Wednesday at an investor conference in New York. Originators can also have an advantage because of their relationships with homeowners, Penn said, and a lot of the consumer loan products that are hot right now, such as home improvement loans and debt consolidation, make sense for homeowners.