Second Lien Production Plunged in 3Q

Lenders originated just $7.8 billion in second liens in the third quarter, a 56% decline from the same period last year, according to new figures compiled by National Mortgage News and the Alternative Products Quarterly Data Report. The weak showing for second lien production is in contrast to all residential originations which increased by 31% in the third quarter to $443 billion. Many non-depository mortgage banking firms have stopped originating seconds entirely while bank lenders have severely tightened underwriting standards on both closed- and open-ended lines. Also, many seconds were once part of 80-10-10 and similar loan structures, a product that is now near-extinct. Wells Fargo & Co., San Francisco, ranked first among all second lien lenders in third quarter with $1.9 billion in fundings. Its second lien originations fell 24% year-over-year. Every lender among the top 10 ranked funders showed a decline with drop-offs ranging from 24% (Wells) to 80% (Chase).