Post by jeffolie on Mar 5, 2007 15:18:51 GMT -6
Notice in these two articles how Countrywide prime lenders status is down graded by these piggyback loans.
Housing sector may be hit by "piggyback" loans
Many recent home buyers bought through 100 percent financing programs known as "piggyback" loans, which relied on one mortgage for 80 percent of purchase price and other financing for the remaining 20 percent.
Unlike the subprime sector of the home loan market, "piggyback" loans and HELOCs were popular up and down the credit scale, said Keith Leggett, an economist with the American Bankers Association.
"These 80-20 loans give the borrower the illusion of being able to afford more house than they really have the funds for."
From mid-2005 to mid-2006, 29 percent of new mortgages involved no deposit by the purchaser to create some equity in the property, according to the National Association of Realtors. Analysts are worried.
Home equity lines of credit, or HELOCs, grew from $151 billion to $559 billion from 2000 to 2005, according to the Federal Deposit Insurance Corp.
In a regulatory filing Thursday, Countrywide said 2.9 percent of its prime home-equity loans were at least 30 days late at the end of 2006, up from 1.6 percent a year earlier and 0.8 percent at the end of 2004.
Lenders including Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) Fremont General Corp. (FMT.N: Quote, Profile, Research) and IndyMac Bancorp Inc. (NDE.N: Quote, Profile, Research) have large volumes of "piggyback" financing, and all said it has proven problematic for many first-time homebuyers, Cannon said.
www.reuters.com/article/reutersEdge/idUSN0260840120070302?ref=patrick.net&pageNumber=3
Lehman Cuts Prime Mortgage Lenders on Default Risks (Update2)
By Will Edwards
March 5 (Bloomberg) -- Lehman Brothers Holdings Inc. reduced its investment rating on U.S. mortgage companies including Countrywide Financial Corp. because a surge in loan defaults is showing evidence of spreading beyond the riskiest credits.
www.bloomberg.com/apps/news?pid=20601103&sid=avwc6MDN.sZo&refer=news
Housing sector may be hit by "piggyback" loans
Many recent home buyers bought through 100 percent financing programs known as "piggyback" loans, which relied on one mortgage for 80 percent of purchase price and other financing for the remaining 20 percent.
Unlike the subprime sector of the home loan market, "piggyback" loans and HELOCs were popular up and down the credit scale, said Keith Leggett, an economist with the American Bankers Association.
"These 80-20 loans give the borrower the illusion of being able to afford more house than they really have the funds for."
From mid-2005 to mid-2006, 29 percent of new mortgages involved no deposit by the purchaser to create some equity in the property, according to the National Association of Realtors. Analysts are worried.
Home equity lines of credit, or HELOCs, grew from $151 billion to $559 billion from 2000 to 2005, according to the Federal Deposit Insurance Corp.
In a regulatory filing Thursday, Countrywide said 2.9 percent of its prime home-equity loans were at least 30 days late at the end of 2006, up from 1.6 percent a year earlier and 0.8 percent at the end of 2004.
Lenders including Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) Fremont General Corp. (FMT.N: Quote, Profile, Research) and IndyMac Bancorp Inc. (NDE.N: Quote, Profile, Research) have large volumes of "piggyback" financing, and all said it has proven problematic for many first-time homebuyers, Cannon said.
www.reuters.com/article/reutersEdge/idUSN0260840120070302?ref=patrick.net&pageNumber=3
Lehman Cuts Prime Mortgage Lenders on Default Risks (Update2)
By Will Edwards
March 5 (Bloomberg) -- Lehman Brothers Holdings Inc. reduced its investment rating on U.S. mortgage companies including Countrywide Financial Corp. because a surge in loan defaults is showing evidence of spreading beyond the riskiest credits.
www.bloomberg.com/apps/news?pid=20601103&sid=avwc6MDN.sZo&refer=news