FHFA: Mortgage Lenders Should Avoid Homeowners With Second Liens

If mortgage lenders want to avoid defaults home borrowers who might default, they may wish to carefully consider homeowners with a second lien on their house.

A new working paper from the Federal Housing Finance Agency points to a correlation between first-lien outcomes, home mortgages without a second home equity line lien, for instance, have a significant higher chance of success than do homeowners with a second lien on their house.

Mortgages: First-lien vs second liens originations

In a simple direct comparison of first-lien outcomes, the study written by Andrew Leventis, a Principal Economist at the FHFA, draws the conclusion that piggyback second liens, such as home...