How about modifying your second mortgage?
The Obama Administration has come up with yet another plan to help distressed homeowners – this time it’s all about modifying second mortgages on your homes.
How does second loan modification work?
Under the second mortgage modification program, troubled homeowners can get their second mortgages modified by loan servicers, whom the government will pay $500 upfront and $250 a year for 3 years. The administration expects a good number of big banks to be a part of this Federal program.
Once the banks and lenders sign necessary contracts, they’ll be legally obligated to offer loan modification on second loans when they have already modified first mortgages. The banks and lenders modifying second liens will be receiving additional incentives to wipe out second liens voluntarily.
Under the program, loan servicers will be modifying second mortgages wherever the first mortgage loan on the same property has already been modified. The servicers will mostly extend the term of the loans and reduce the interest rate so as to help you pay off both the modified loans comfortably.
What are the incentives for servicers/lenders?
The Administration will share the cost of bringing down the mortgage rate by 1% for amortized loans and 2% for interest-only mortgages.
What are the incentives for borrowers?
Borrowers are likely to receive compensation up to $250 annually for 5 years provided they’re able to stay current on their loans. The amount provided should be used to pay down the principal on the first loan.
Which banks have agreed to participate?
Bank of America, Wells Fargo and JPMorgan Chase have so far agreed to participate in the second mortgage loan modification program. The Administration has taken the initiative to make others participate as well.
In addition, the administration has declared new incentives for banks and mortgage companies participating in the Hope for Homeowners program (which encourages lenders to write down loan principal). The Administration also intends to integrate the Hope for Homeowners program into its loan modification plan. This can be done by first finding out if the borrower is eligible for a Hope for Homeowners refinancing program. Then as per the situation, the Administration can allow for loan modification instead of refinancing to the concerned borrower.
May 18th, 2009 at 10:19 pm
Make sure to know the state of your finances before contacting your lender. Determine how much income you’re bringing in each month, how much you’re paying in bills and where you can cut costs. Just a tip!
September 22nd, 2009 at 11:39 pm
does your first mortgage modifcation have to be final (not in trial 3 months) to get chase to modify your second under HAMP program.