During the housing frenzy, many borrowers obtained second mortgages to allow them to put little or nothing down when buying a home. Up to half of at-risk borrowers have second liens, according to the administration.
These loans have complicated the modification process. For one thing, they add to troubled homeowners’ debt levels. Also, mortgage investors have balked at reducing payments on first mortgages when the second loan was left intact.
Under the administration’s new program, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.
Servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.
Investors can also receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers’ debt levels.
Servicers who join the new program must modify second loans when a borrower’s first mortgage is adjusted. It will likely take a month to implement, but it should not slow down the modifications of primary mortgages, the administration said.
“By bringing both the first lien and second lien program together, we can reduce monthly payments for borrowers and make it much more likely that they can stay in their homes,” a senior administration official said.
I read on calculatedrisk that the 2nd mortgages are going for about 2 cents on the dollar on average. Sounds like this is a can’t miss bailout of the 2nd mortgage holders.
I read on calculatedrisk that the 2nd mortgages are going for about 2 cents on the dollar on average. Sounds like this is a can’t miss bailout of the 2nd mortgage holders.
I read on calculatedrisk that the 2nd mortgages are going for about 2 cents on the dollar on average. Sounds like this is a can’t miss bailout of the 2nd mortgage holders.
I read on calculatedrisk that the 2nd mortgages are going for about 2 cents on the dollar on average. Sounds like this is a can’t miss bailout of the 2nd mortgage holders.
I read on calculatedrisk that the 2nd mortgages are going for about 2 cents on the dollar on average. Sounds like this is a can’t miss bailout of the 2nd mortgage holders.
