SunTrust Sheds Piggyback Program

SunTrust Banks(STI Quote) has become the latest financial institution that is shuttering aspects of its once-hot mortgage lender platform as the U.S. faces an unprecedented housing and capital markets downturn.

The Atlanta-based regional bank, which was downgraded on Thursday by Oppenheimer & Co., has opted to eliminate indefinitely its combo loan program, according to mortgage brokers that TheStreet.com has contacted.

Combo loans -- otherwise known as piggyback loans -- are a package of first and second mortgages offered to borrowers unwilling or unable to come up with at least a 20% down payment to purchase a home. Piggyback loans became popular during the housing boom in 2005, and may have fostered a wave of speculating in major housing markets because it allowed, in some cases, a borrower to put zero money down on a home and flip it in the near term, when housing prices escalated. ...