It's really not hard to answer and none of this should come as a surprise.
Many of these second mortgages or home equity loans were used as piggybacks to avoid paying mortgage insurance and to obtain 100% financing during the real estate boom.
For example, a borrower would take out a first mortgage at 80 percent loan-to-value (LTV), and a corresponding second mortgage for the remaining 20 percent. By doing so not only would they avoid mortgage insurance (PMI) costs but still be able to obtain 100% financing.
To make things even worse, when these were coupled with an option arm first mortgage and other adjustable-rate mortgages, homeowners quickly saw their home equity slip into the red as home prices plummeted.
Some borrowers may also have opened non-purchase money second mortgages as well to extract equity when home prices were flying high, as opposed to refinancing their first mortgage.
This should not come as a surprise to anyone since two mortgages are worse than one, especially when we're talking about home equity.
So what can homeowners with these second mortgages do to get out of these second mortgages and take back the equity in their homes?
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