Piggyback mortgages, involving two liens at origination, are rising among first-time and low-income borrowers for affordability reasons, according to a CoreLogic report. The share of piggybacked FHA home purchase loans increased by over seven percentage points from June 2022 to June 2024, reaching 18%. These loans are typically structured as 80-10-10, with the second lien having higher interest rates and potentially leaving borrowers underwater.
Homes purchased with piggybacked loans have lower values, with median values significantly less compared to non-piggybacked loans. In June 2024, the median property value for homes bought with piggybacked FHA loans was $255,000, much lower than the $319,000 for properties without a second lien. This trend is similar for conventional loans, indicating potential risks for borrowers.
#piggyback-mortgages #affordability-challenges #risk-assessment #borrower-equity #housing-market-trends
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