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Earlier this week, the Making Home Affordable program was enhanced to include a second lien program.
The government has determined that even if you receive a loan modification on your first first mortgage, having an unaffordable second mortgage could still put your at risk of going into foreclosure.
Here’s how the second loans will be modified:
Interest Only Loans
Incentive Payments. In addition to the modification, borrowers can receive $250 incentive payments per year for 5 years, applied to the first mortgage.
Loan Forgiveness. Instead of a modification, lenders can also opt to extinguish the second loan all together for a larger incentive payment.
HELOCs. There is no mention of including second liens when there is a home equity line of credit instead of a loan. We’ll have to wait for more details to see if they specifically include them or exclude them.