Question

why have second mortgages grown in popularity with finance company consuner lenders.

why have second mortgages grown in popularity with finance company consuner lenders.

Homework Answers

Answer #1

Second mortgagesbare reasonable well secured if the lender properly ascertains the value of the mortgagor's equity. Thus the mortgagor has more incentive to perform ( less incentive to default) than an unsecured or under secured borrower. Should the mortgagor default or take bankruptcy, the mortgage is in a better position than an unsecured creditor.

Moreover, higher net returns are available on larger longer maturity loans because costs of loan origination and collection are smaller relative to total finance charges.

Such loans are a popular way of leveraging what, for most households, is the most significant asset, the equity in the home.

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