After realizing that even a modification on a first mortgage won’t help some people if their second mortgage is still too high, the government expanded the Making Home Affordable loan modification program last week. The program was updated to cover second mortgages and liens. I know this was something that a lot of people had questions about when I posted about the topic before:
- Do I Qualify For The Making Home Affordable Program?
- FAQ – Modification Program
- FAQ – Refinance Program
Reducing Payments On Second Mortgages
Here are the details on the second mortgage loan mod program from the government’s website:
For amortizing loans (loans with monthly payments of interest and principal), the government will share the cost of reducing the interest rate on the second mortgage to 1 percent. Participating servicers will be required to follow these steps to modify amortizing second liens:
- Reduce the interest rate to 1 percent
- Extend the term of the modified second mortgage to match the term of the modified first mortgage.
- Forbear principal in the same proportion as any principal forbearance on the first lien, with the option of extinguishing principal under the Extinguishment Schedule.
- After five years, the interest rate on the second lien will step up to the then current interest rate on the modified first mortgage, subject to the Interest Rate Cap on the first lien, set equal to the Freddie Mac Survey Rate.
For interest-only loans, the government will share the cost of reducing the interest rate on the second mortgage to 2 percent. Participating servicers will be required to follow these steps to modify interest-only second liens:
- Reduce the interest rate to 2 percent.
- Forbear principal in the same proportion as any principal forbearance on the first lien.
- After five years, the interest rate on the second lien will step up to the then current interest rate on the modified first mortgage, subject to the Interest Rate Cap on the first lien, set equal to the Freddie Mac Survey Rate.
- The second lien will amortize over the longer of the remaining term of the modified first lien or the originally scheduled amortization term, with amortization to begin at the time specified in the original contract.
Updated Incentives And Other Details
The Second Lien Program will have a pay-for-success structure similar to the first lien modification program. Borrowers can receive success payments of up to $250 per year for as many as five years. These payments will be applied to pay down principal on the first mortgage, helping to build the borrower’s equity in the home.
In addition to incentives for modifying second liens, lenders can also receive larger incentives to just extinguish the second lien altogether. The government has put out a fact sheet/table to give details on the amounts lenders can receive. Details can be found in the government’s fact sheet.
Links And Resources
Here is another resource talking about the updated program.
Thanks for the info. It’s nice that there is some help out there. And there is even help for people like me — not in trouble but would still like help for a sweet refi…
can anyone tell me if the 105 program covers investment properties. B
Great information. I have been researching websites for days and did not find this type of easy to follow and concise information. I am currently working with my lender on loan modification. I am little confused since I have one personal telling me that I have been accepted and gave me the amount to start paying in March 2010 and another person called a day later and said been accpted but that I would be receiving a package in 14 days to verify income, which I had already given to the first person.
I have read about these kinds of situations on the web from many home onwers seeking modification. I have learned from my research to to exactly as they all say else you run the risk of being denied even after the trial period is over.
is the second lien program available to those that are refinancing or just those who are doing the modification? i qualify for HARP but have a nasty second mortgage that i would like to fix too.
I have the exact same question Travis and can’t find an answer. Or the only answer is that because my loan to value isn’t where it needs to be, I can’t refinance and take advantage of these rates. And we’ve been current on payments and our home is found on the Fannie Mae website. We are trying to pay the second down, but it is going to take some time.
Mortgage companies can’t refinance the first because the second mortgage company will not submit to being in the second lien position.
Peter,
can you give us any update or suggestions on this?
Please let me know if you find anything out.
The Home Affordable Modification Program is an excellent program if you can get through the application! After taking days to read & understand how to fill out & quality for HAMP I was able to lower my interest rate to 2%. The application was so confusing because they want you to fail! Now that I understand how to qualify I was able to help my neighbors get approved usually in about 30 days!
Thanks Peter, I didn’t know that the HAMP program had been modified to include 2nd mortgages. I applied for the MHA program last year and was denied because my income was too high taking only the first mortgage, taxes, insurance and HOA dues into account. The second mortgage payment wasn’t considered. I’ll look into this again, hopefully I’ll qualify this time around!
I have some doubt with the makinghomeaffordable.gov. I’m not comfortable handing out cash and not 100% sure that it is going to help me. Anyone deal with this program?