Heloc Crisis: Second lien holders face greater risk of loss

While first mortgage holders have been through huge losses due to rising foreclosures and delinquency, second lien holders are not behind. Second mortgage holders especially those who've offered Helocs are now facing greater risk of loss. That's because they hold liens which are subordinate to that of the first mortgage and as such they won't be paid until and unless the first lien holder gets his dues.

Earlier, homeowners have taken out Helocs along with first mortgages simply to avoid down payment or renovate their homes, thereby thinking they would be able to pay off as the equity would keep rising. But it didn't happen. Moreover, housing prices declined and as such home values dropped, so how could the equity go up. So, when homeowners could at least pay down their first mortgages, getting rid of the second was quite difficult. So, lender suffered huge credit losses and the risk continues to remain…