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Making Home Affordable Second Lien Program

Posted By Madison On In Debt | Comments Disabled

Earlier this week, the Making Home Affordable [1] program was enhanced to include a second lien program.

The government has determined that even if you receive a loan modification [2] 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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