125% Second Mortgage Loan Still Survives
By Barry Donavan

Many mortgage industry experts believed the 125% Second Mortgage would never perform in the market. It been over 10 years since the advent of the 125% loan and as the real estate markets begin to decline, the 125% second mortgage may be destined for a comeback. The 125% loans are innovative second mortgages because they allow homeowners to borrow up to 125% of their homes' value.

In the mid to late 1990's, 125% Second Mortgage were all the rage. Dan Marino and Jim Palmer could be seen touting the benefits of the 125% home loan on television screens across the country. Out of nowhere 125% second mortgage giant, First Plus Financial folded as it was caught in a class action lawsuit. The suit was about over-time compensation for loan officers. I find it humorous to that loan officers who many were making well over 6 figures annually, could have the audacity to think they deserved overtime for a job that was based solely around commission.

The down fall of First Plus had an immense impact on the second mortgage market. Somehow the 125% Second Mortgage emerged from the rubble. For many home equity lenders, the consensus was that these loan were to risky. Most lenders ceased offering second mortgages above 100% loan to value. Irwin Home Equity, Trust One Mortgage, and Homecomings Financial continued to offer the 125% second mortgage. Their underwriting guidelines were tightened, and higher credit scores with more residual income became required for loan qualification.

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