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Second mortgages make a comeback

The Nation's Housing columnist Kenneth Harney writes that researchers at Equifax said total outstanding balances of second home mortgages at banks rose in the latest month for the first time in nearly five years.
By KENNETH R. HARNEY Published: October 13, 2012

In an interview, Equifax chief economist Amy Crews Cutts said increases in equity lending “are really a healthy sign” for the economy overall because in the years following the housing bust, many banks had little confidence that home prices were stable enough to lend against in second position.

Now when Cutts speaks with bankers, she finds them “pretty willing to do (second) loans when their customers need them — they're much more open” than they've been in years. Though underwriting standards are tougher than they once were, banks are lending again, and they are experiencing smaller losses. In the most recent study, Cutts said, second mortgage write-off rates fell to just 2.7 percent, the lowest they've been since February 2008.

Matt Potere, home equity executive for Bank of America, called second loans “an important element” in his company's “customer relationship strategy” and said “we expect growth to occur as market conditions continue to improve.”

James Chessen, chief economist for the American Bankers Association, agrees that “it's good news that finally there's some upward movement” in home equity lending but said he isn't yet convinced it's a long-term trend, in large part because of slow job growth and uncertainty about the economy. Also, notwithstanding Equifax's finding that bank equity loan write-offs are down, Chessen's own surveys indicate that delinquencies on home equity loans rose from 4 percent to 4.09 percent in the latest quarter.

Ken Harney's email address is