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.

Second Loan Modifications

Here’s how the second loans will be modified:

Amortizing Loans

  • Reduce interest rate to 1% for 5 years, then step up to the rate on the first mortgage after modification.
  • Extend the term to match the term of the first mortgage after modification.
  • Provide principal forbearance in the same proportion as the first mortgage.

Interest Only Loans

  • Reduce interest rate to 2% for 5 years, then step up to the rate on the first mortgage after modification.
  • Adjust the amortization time period.
  • Provide principal forbearance in the same proportion as the first mortgage.

Second Lien Program Details

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.

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Comments to Making Home Affordable Second Lien Program

  1. This is another great article of yours. I’ve heard only of the Second Lien about a couple of weeks ago and I barely understood it, so I just ignored the update. You explained it really well, thanks.

    Imee


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