How are 2nd mortgages priced?

[Andrew Nesbitt]

For example.  Lets say you have a $100k house with a $90k first and a $10k 2nd mortgage.  Borrower has an 800 FICO.  The 2nd is at 10% interest only, balloon in 5 years.   How much would a fresh note like that be worth?   How much with 1 year seasoning?

I'm just trying to get a rough idea of how these things are priced.

[Steve Hodgdon]

Balloons often pop. During the crash I could buy an unsecured defaulted 2nd for 5 cents. Now its 75%. Doesn't take a giant correction to be out of the money. I'd have to like the house and be able to service the 1st.