YES! :lie:
Fannie and Freddie got greedy. I remember when they did not charge a premium for a 1st mortgage that had a piggyback up to 90%. Eventually they wanted these revenues to offset risk, and charged premiums for combos, ie: 75% first/ 15 seconds etc.; Statistics show that if someone starts to deteriorate financially, they may stop payments on the equity line first vs. the first mortgage.
Then with low HELOC rates in place, people wanted piggys in lieu of MI because 1)
MI WAS not tax deductible, 2) getting MI removed at a later point could prove to be difficult. Banks could ask that the LTV be 75% for removal vs. not being required to purchase it if you put 20% down. Further, quite a few LO's didn't utilize some of the MI programs that were available like refundable policies because they didn't grasp it. Instead they did straight monthly premiums with no initial outlay of cash.
People were betting their houses would appreciate significantly enough, and MI companies have caveats that you can not remove it for a certain time period regardless of LTV.
***Now more than ever MI is making a comeback and
finally going to be tax deductible up to 100K in earnings with it lessoning gradually to 0 deduction up to 110K income (insert it's about dang time smilie)
Homeowners will not be subject to payment swings vs. a HELOC.
http://www.privatemi.com/news/media/20070417.cfm