Many mortgage industry experts believed the 125% Second Mortgage would never preform in the market. It been over 10 years since the advent of the 125% loan and as the real estate markets begin to decline, the 125% second mortgage may be destined for a comeback. The 125% loans are innovative second mortgages because they allow homeowners to borrow up to 125% of their homes' value.

In the mid to late 1990's, 125% Second Mortgage were all the rage. Dan Marino and Jim Palmer could be seen touting the benefits of the 125% home loan on television screens across the country. Out of nowhere 125% second mortgage giant, First Plus Financial folded as it was caught in a class action lawsuit. The suit was about over-time compensation for loan officers. I find it humorous to that loan officers who many were making well over 6 figures annually, could have the audacity to think they deserved overtime for a job that was based solely around commission.

The down fall of First Plus had an immense impact on the second mortgage market. Some how the 125% Second Mortgage emerged from the rubble. For many home equity lenders, the consensus was that these loan were to risky. Most lenders ceased offering second mortgages above 100% loan to value. Irwin Home Equity, Trust One Mortgage, and Homecomings Financial continued to offer the 125% second mortgage. Their underwriting guidelines were tightened, and higher credit scores with more residual income became required for loan qualification.

There are two reason why the fixed rate 125% second mortgage continues to be offered by home equity lenders nationwide. First, the default ratio has not exceeded what financial securities experts would deem dangerous. Second, the consumer demand for 125% second mortgages remains strong. Not all homeowners have a ton of equity in their home, so the 125% second mortgage makes sense for debt consolidation or making home improvements.

Barry Donavan is an experienced writer who focuses on home equity financing and debt consolidation. You can read more of his mortgage finance articles at http://www.bdnationwidemortgage.com and get more information about home equity loans and mortgage refinancing.

For a complete look at home equity loans please go to http://www.bdnationwidemortgage.com/125-second-mortgage.html