Second Lien Program to Help Homeowners Achieve Greater Affordability in Loan Mods
You can view the Fact Sheet and Case Examples here.
The Obama Administration is making new efforts to help bring relief to responsible homeowners under the Making Home Affordable Program, including an effort to achieve greater affordability for homeowners by lowering payments on their second mortgages.
“With these latest program details, we’re offering even more opportunities for borrowers to make their homes more affordable under the Administration’s housing plan,” said Treasury Secretary Tim Geithner. “Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall. Every step we take forward is done with that imperative in mind.”
The Second Lien Program will work in tandem with first lien modifications offered under the Home Affordable Modification Program to deliver a comprehensive affordability solution for struggling borrowers. Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified. Up to 50% of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien. Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate.
Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18. The three part program includes aggressive measures to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac; a Home Affordable Refinance Program, which will provide new access to refinancing for up to 4 to 5 million homeowners; and a Home Affordable Modification Program, which will reduce monthly payments on existing first lien mortgages for up to 3 to 4 million at-risk homeowners. Two weeks later, the Administration published detailed guidelines for the Home Affordable Modification Program and authorized servicers to begin modifications under the plan immediately. Twelve servicers, including the five largest, have now signed contracts and begun modifications under the program. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75% of all loans in the country are now covered by the Making Home Affordable Program.
Continuing to bolster its outreach around the program, the Administration also announced today a new effort to engage directly with homeowners via MakingHomeAffordable.gov. Starting today, homeowners will have the ability to submit individual questions through the website to the Administration’s housing team. Members of the Treasury and HUD staffs will periodically select commonly asked questions and post responses on MakingHomeAffordable.gov. To submit a question, homeowners can visit www.MakingHomeAffordable.gov/feedback.html. Selected questions from homeowners across the country and responses from the Administration will be available at www.MakingHomeAffordable.gov/asked-and-answered.html.
For additional details on the program announced today, please see the Program Update Fact Sheet.
REPORTS
Participating Lenders
So who’s participating in this program? No one knows for sure yet. Just like with the original Home Affordable Modification program, it will take awhile to flesh the details out and for servicers to develop programs and train their people.
What can you do in the mean time?
1. Sign up for updates to our site
2. Keep an eye on the Making Home Affordable website…especially the Mortgage Servicer List.
May 18th, 2009 at 12:41 pm
Thanks for your info. I have a question.
What about when your interest drops automatically on your first. Does this apply, can I then go to my second lien holder for an adjustment?
Todd Reply:
May 18th, 2009 at 12:43 pm
Thanks for asking!
The only time the program for second mortgages is available is once your first mortgage has been modified through the Home Affordability Program.
So to answer your question directly, no, you can’t.
May 20th, 2009 at 7:16 am
Todd – thanks so much for your site. I’ve been here often.
This Second Lien program is great as this has been a huge problem, thus far. I haven’t had time to go hunting, but you referred to a “pre-set protocol”. Is this defined?
I write hardship letters for folks applying for loan modifications and short sales, and this could be a god send for a lot of folks… of course, assuming the holder of their second participates.
Thanks,
Becky