Square Feet points out that rates on home equity lines of credit have nearly doubled over the past two years (now 8.2% on average). And the LA Times runs Kenneth Harney’s piece about a likely increase in “piggyback” mortgage rates and availability. (Piggyback mortgages are second liens that borrowers with less than 20% down payments employ in order to avoid having to pay mortgage insurance premiums.)

The reason for the change, according to Standard & Poor’s credit analyst Kyle Beauchamp, is that an exhaustive study of the performance of piggyback loans found them anywhere from 43 percent to 50 percent more likely to go into default than comparable stand-alone first-lien purchase transactions.
According to a study by SMR Research Corp., piggybacks quadrupled their market share between 2001 and 2004. In a sample of loans in California markets, according to the SMR study, the percentage of piggybacks exceeded 60 percent in some cases.

Think San Francisco might be one of those markets?
Rates on home equity lines soar [Square Feet]
Default rate of ‘piggyback’ loans spurs Wall Street to action [latimes.com]

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