This next wave of debt-bombs are set to go off all over America. The wildly-popular "80/20" loans allowed the AAA-rated 80's to get sold off to CDO-land and to Fannie and Freddie to investors who thought the buyer was putting 20% down, and the higher interest no-collateral 20's got sold off too, but to who knows who.
And millions also took out "Seconds" in order to fund their over-spending these past few years. What happens to these loans now that the equity they were based on has disappeared? Man, ya gotta wonder if BofA knows the all the crap they just stepped into.
Here's a few juicy tidbits on Seconds:
The loan bomb
Other troubling arrangements are the 80-20 loans - a combination of a first and second mortgage to cover 100 percent of a home's price. The rate on the first mortgage may or may not be adjustable, but in almost all cases the rate on the second mortgage is set to shoot way up.
Straight Talk on the Mortgage Mess from an Insider
Sub-prime aren’t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure.
The ’second mortgage implosion’, ‘Pay-Option implosion’ and ‘Hybrid Intermediate-term ARM implosion’ are all happening simultaneously and about to heat up drastically. Second mortgage liens were done by nearly every large bank in the nation and really heated up in 2005, as first mortgage rates started rising and nobody could benefit from refinancing. This was a way to keep the mortgage money flowing.
Second mortgages to 100% of the homes value with no income or asset documentation were among the best sellers at CITI, Wells, WAMU, Chase, National City and Countrywide.