So now homeowners that are having trouble paying their second mortgage can be eligible for possible modification. I was a little unsure of this initially, thinking about all the people who are struggling with paying their first mortgage. I was wondering, “Why are we worried about those with two?” But it makes sense. Homeowners who are trying to get modifications on their first mortgages that have two mortgages are the ones having the most trouble. Many lenders won’t do modifications or take losses on the loans of their first mortgage unless the second lien-holder does, too. And because second mortgages usually are for a much smaller loan amount, homeowners are able to keep up with those payments. And that’s where this plan coms into play.
Here’s what the Obama administration is introducing. It’s called 2MP. Currently it’s only available to those whose second loan originated on or before January 1, 2009. Anything originated after that is not currently eligible. And the first mortgage needs to be modified under the Federal program. If the lender or lien-holder on the second mortgage is also participating in that program, they have to offer to modify the second mortgage. They’re required to defer the payment of the same proportion of the principal that was deferred on the first loan.
Right now the program is expected to help about 1.5 million homeowners. So far Bank of America, Wells Fargo, Citigroup, and JP Morgan Chase participate. Bank of America recently started sending letters to home equity customers introducing this possible modification.
My concern is that it’s still too difficult to work out. I understand and appreciate what the government is trying to do. The banks are taking their sweet time approving these modifications, making it extremely difficult for customers to get them done on their own. With the amount of time it takes to connect to someone, fill out paperwork, and hear back, it’s almost like a part-time job. I’ve had clients say they’ve had to submit paperwork multiple times to their lender and still haven’t heard back. It’s worth it to lower payments if you have the time and perseverance to wait. It also may be worth it to you to talk to a company that offers to assist with loan modifications on your behalf.