The Obama administration has come up with new guidelines for the foreclosure prevention program. It concentrates mainly on how to deal with borrowers who have home-equity loans or other second mortgages.
Most of the borrowers who are delinquent on their mortgage payments also have a second mortgage. However, when the Government announced the $75 billion program to stabilize the housing market, it didn't concentrate on the question of second mortgages. Thus, the Government has come up with the revised plan which makes it necessary for the lenders to modify the second mortgage when the first mortgage is reworked. The lender's benefit is that the government will share in the cost of reducing the interest rate on second mortgages for 5 years or it will pay the borrowers to extinguish that debt.
Lenders who will modify 2nd mortgages will receive an upfront payment of $500 and additional payments of $250 a year for up to three years for successful modifications for second mortgages. Apart from this, the borrowers who will be current on the modified loan would receive payments of $250 a year for up to five years. This would be used to pay down the balance of their 1st mortgage.
It should be noted here that 12 mortgage servicers, who covered around 75% of mortgages, have signed contracts to participate in the first-mortgage program. The best part is that most of them have expressed their support for the second-lien program. However, according to the new program, mortgage servicers should also determine whether a borrower is eligible for the Hope for Homeowners program. They should encourage these refinances.
As most of the borrowers have second mortgages on their property, it will now be easier for them to modify their loans. Lots of people have posted questions regarding second mortgage modification in the MortgageFit Forums. If these guidelines are accepted by the lenders, it would be easier to resolve the mortgage problems.