Industry NewsMortgage

Piggyback loans threaten PMI industry

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Newlyweds Michelle and Samuel Riccobono knew that without a 20 percent down payment for a house they'd face the added expense of private mortgage insurance. They weren't sure they could afford that. A mortgage broker, however, showed the Philadelphia couple how they could avoid the cost of private mortgage insurance and cut their monthly payments: a piggyback loan. Instead of going with a 100 percent mortgage as they'd originally planned, they opted for an 80 percent first mortgage with a second mortgage for the remaining 20 percent "piggybacked" on. That decision saved them about $250 a month because of the lower interest rate they got on the primary mortgage, Michelle Riccobono said. "We'd never heard of piggyback loans until our broker explained them," she said. The concept of piggyback loans might be new to consumers like the Riccobonos, but the private mortgage insurance industry is sitting up and taking notice. Under a piggyback loan structure, borrowers obtain a second mortgag...