New Plan to Help Modify Second Mortgages
President Obama’s Administration announced details of a new plan to help lower payments on second mortgages, or piggy back loans.
This new program will work together with first mortgage modifications offered under the Home Affordable Modification Program. The goal is to provide a more comprehensive solution for struggling homeowners. It is estimated that at least 4 million homeowners will face foreclosure this year, and about half of these homeowners have second mortgages.
Under the new plan, mortgage lenders that sign up for the program will agree to an automatic formula for reducing payments on the second mortgage for any customers who have modified their first mortgage. To encourage lenders to participate, the Treasury Department will share the lenders’ cost of reducing the monthly payments and provide lenders with a $500 cash incentive for each second loan they modify, and an additional $250 each year for three years if the borrower stays current. This new plan will be paid for with the $50 billion set aside in March from the Troubled Asset Relief Program for homeowner bailouts.
Homeowners can now submit individual questions to Obama’s housing team by visiting www.MakingHomeAffordable.gov/feedback.html. Selected questions and responses will be available at www.MakingHomeAffordable.gov/asked-and-answered.html.