As first mortgages reset to higher rates people are losing their homes. Clearly there is a crisis in the mortgage industry. Remember the second mortgage? Finance companies like HSBC Finance, Beneficial, and HFC like to give customers second mortgages. One article explains the truth about these mortgages, and sometimes it is not a pretty picture. The loans are at a higher rate because of the risk, and that risk is called a subordinated position. A first mortgage always takes precedence. If a borrower walks away from a mortgage or is foreclosed upon, and once everthing is liquidated, there is often no money left for the second mortgage holder. The paper is worthless.
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