Back in the day, homeowners were able to get a 2nd trust deed mortgage loan that actually covered up to 125% of the value of the property.

The cash out was convenient for home improvement, consolidating credit card date, or some other investment. Many of these loans were really helpful in getting cash out of the house to make some additional cash available for other expenses.

The rates were quite high and the interest rate was dependant on a borrower's credit score. At that time, loans were not priced according to credit scores as strongly as they are today.

The borrower had to qualify for these loans by showing their ability to repay the debt."? The back-end ratio might determine pricing. The back-end ratio on a loan is the percentage of a borrowers' debt which includes principal and interest on the first, property taxes, hazard insurance, and any long term debt payments.

Now-a-days your interest rate is determined by credit score, combined loan to value, and whether you are going with Stated Income or Full Doc financing.

I've thought about these 125% loans over the past two weeks as we have had to turn away so many borrowers who need to refinance. The turn downs were because the property was purchased in the past two years and property values have declined.

"?I'm not sure if these will be brought back or not. I am sure that if an investor believes that they can make money on them, they will reappear!

FNMA (Fannie Mae) is working on methods to help consumers refinance their loans should their interest rates become unmanageable for staying in the property. As yet, there are few public details available as to what FNMA has or will come up with.

Your knowledge, comments, suggestions are very welcome! Let's blog!