Second Mortgages Are Now Part of Loan Modification Plan

Francine L. Huff
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

People with second mortgages can now be helped through the government's loan-modification plan. The Obama administration revised guidelines for the mortgage rescue program aimed at helping homeowners avoid foreclosure. Under the revised plan, about 1.5 million homeowners with second mortgages could be helped, according to the Wall Street Journal.

CreditSuisse Group estimates that about half of people who are seriously delinquent on their mortgage loans have a second mortgage. But the Obama administration's mortgage loan-modification program didn't previously include guidelines for how second mortgages should be handled.

Lower Mortgage Rates

Now, mortgage servicers will be able to automatically modify a second mortgage along with the first mortgage. Qualified borrowers would be able to have second mortgage rates cut to as low as 1% for the next five years. Lenders could also completely forgive a second lien in exchange for a one-time payment from the government. Among the guidelines is a measure that allows borrowers who stay current on their modified mortgage loan to receive $250 a year for up to five years that can be used to pay down the balance of the first mortgage.

The U.S. Department of the Treasury said that under the program, if a 30-year second mortgage with a balance of $44,000 had its interest rate lowered to 1% from 8.6%, the borrower's monthly payment would fall to $155 from $349 for the five-year period. Under this scenario a homeowner would save around $2,300 each year.

Determining Eligibility

Homeowners who still aren't sure if they can be helped through the program can visit the Making Home Affordable site to determine their eligibility. They can also speak with a counselor approved by the Department of Housing and Urban Development about their situation. The counseling is free so homeowners should avoid any individuals or companies who charge for their services.


About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

Editor's Selections: Additional Reading
Related Articles & Tools
Quick Survey

Your answer: 
Correct answer: 

Total votes: 

Mortgage Industry Update Keep up with the latest industry buzz.

Email this article

Please fill in a valid name.
Please fill in a valid e-mail.
Please fill in a recipient name.
Please fill in a valid recipient e-mail.
Email loading...