AgentMortgage

Banks grapple with second-mortgage troubles

Delinquency rates causing mass foreclosures, billions in charge-offs

The pressure is all on second place. Whether one calls it a second mortgage, second lien or home equity loan, the lenders who occupy the subordinate position in the debt stack on your home mortgage are finding out that being No. 2, quite frankly, sucks big time.Back in the day, before 2007, when money was so cheap that even a grizzly bear wandering around the forest could get a mortgage for his cave, banks also were happy to extend home equity loans and lines of credit to single-family homeowners. "Hey, Mr. Grizzly Bear, want to fix up that cave and make it a crib? Well, here's some Benjamins."What's that old joke: You walk in one door of a bank empty-handed and out another with a toaster and home equity loan.Since credit flowed like water, banks were equally happy to do an 80-20 loan, which was basically a first mortgage for 80 percent of the value of a home plus a home equity or second mortgage for the remaining 20 percent. Whoopee, no money down for the borrower.Now it's t...