Help for HELOCs and Second Mortgages
- At May 1, 2009
- In Financing / Real Estate
On April 28, the Obama Administration announced additional details on the Second Lien Program, in an effort to provide help for homeowners with both a First and Second Mortgage on their property.  It is estimated that up to 50 percent of at-risk mortgages have second liens.  (Of the number of people who have contacted me for advice or assistance, the number with Second Liens is more like 98%).
The stated goals of the Second Lien Program is to provide relief for up to 1 to 1.5 million homeowners, to reduce second mortgage payments, provide pay-for-success incentives to servicers, investors and borrowers, and develop a payment schedule to extinguish second mortgages altogether.  The Second Lien Program provides that a second lien or mortgage will automatically be modified when a First Lien is modified.  For details, go directly to the Second Lien Program Fact Sheet.
For many homeowners, this will be welcome news, if the lenders cooperate.  The Obama Administration recognizes that even if the lender holding the First Mortgage works out a modification, many homeowners continue to face the prospect of foreclosure because they cannot keep up with the Second.  For qualifying loans, the Program proposes to
lower the interest rate on amortized loans down to 1 percent, and for interest-only loans, down to 2 percent, both for an interim period of five years.  Participating servicers will be required to forbear principal on the Second lien in the same proportion as any principal forbearance on the First lien.  There is an option for extinguishing principal under a published schedule.  Various incentives for lenders, servicers and investors are included.
 
Many individuals who initially contacted their lenders when the Hope for Homeowners (HFH) program was announced in 2008 and received less than satisfactory results will be pleased to know that the Obama Administration has also announced a new plan to include the HFH in the Making home Affordable program.  Even if you were turned down or otherwise dissatisfied with an initial attempt to modify your mortgage, you should be aware that the rules changed on March 4 when the Obama Administration released new Guidelines, and again on April 28 with the announcement of the Second Lien Program.
Connie Herbert
For many the Second Lien Program will help to provide welcome relief, but it is too late for others. I recently worked with a friend who tried to get help through the HFH program, but because of their second mortgage weren’t able to do anything. After seeking legal advice, they have filed bankruptcy and moved into a rental home, abandonning their home and the mortgages they owe. This was a case where lenders offered more and more to the borrowers, then an unexpected job change made it impossible for them to meet their obligations. They were left with no choice.
I pray that the Second Lien Program will be more user friendly that this couple found the HFH. We have not had as widespread problem here in southcentral Idaho as some areas or even Boise, but the problem does exist here too.