More Motivated Sellers, After All

Earlier in the year, I discussed the possibility that the excessive use of piggyback loans in recent years might have caused homeowner delinquency to be overstated:

The theory is that some homeowners are doubtless in default on both their primary mortgages and their piggybacks. Every such borrower might be served with two NODs [Notices of Default] — one for each mortgage. The number of NODs filed could thus be overstating the number of homeowners in trouble as compared to what we saw in the early 1990s, when piggyback mortgages weren’t as ubiquitous.

The conclusion at the time was that the piggyback lenders had little reason to undergo the expense of filing a default notice:

By now, in other words, issuers of piggyback mortgages may have realized that there is little chance of recovering any losses and stopped bothering to initiate foreclosure proceedings. If this is the case, then the period of double counting has already come and gone.

This was just a guess, as I stated at the time, but I’ve recently come across some data that allowed me to put our conclusion to the test.

read more at voiceofsandiego.org