Help with Refinancing Second Mortgage

Help with Refinancing Second Mortgage

Article by Mortgage Guru

With the increasing unemployment and falling home values, many might have opted to go in for a second mortgage. A second mortgage would mean a home equity loan or a home equity line of credit. Many who had refinanced their mortgage through a home equity loan or line of credit before they were affected by the recent economic meltdown might find themselves saddled with a burden to pay off the second mortgage. Refinancing second mortgage might seem a good option. My good friend Eric lost his high paying job in a software company and found a lesser paying job. He had refinanced his mortgage by taking out a home equity loan to make modifications on his home and to fund his son’s college education. Now since the payments towards his debt were high, they became a burden on him as his income came down considerably. Even with life style changes that he had to make, paying the loan off seemed a herculean task and he might have lost his home to foreclosure.

Thankfully, he heard of the Second Lien Mortgage Program (2MP) which works in tandem with the Obama Home Affordable Mortgage Program (HAMP) for refinancing second mortgage. So, all was not lost. Eric had a way out. The Second Lien Modification Program (2MP) offers homeowners a way to lower payments on their second mortgage. 2MP offers homeowners, their mortgage servicers, and investors an incentive for modifying a second lien. Servicer providers and investors might also receive an incentive for forgiving all of the debt a homeowner owes on a second lien. Some important information one might require to know while considering refinance mortgage using the 2MP would be that the homeowners would need to provide consent to share their first lien mortgage modification information with their second lien mortgage service provider, in case the service providers differ. Since 2MP is meant to be complementary to the Home Affordable Modification Program (HAMP), a homeowner would need to get the first lien modified through HAMP before the second lien can be modified under 2MP. The benefits one might find under the 2MP would be that the service provider might reduce the interest rate to one percent for second liens where the lien amortizes i.e. both the principal and the interest get paid. In case of interest only liens, the rate of interest might be reduced to two percent. The tenure for repayment of the second lien might get extended to 40 years. In case the first lien service provider had deferred the principal, through forbearance, then the service provider would have to forbear the same proportion on the second lien as well and also if the principal was forgiven in the first lien, then the service provider would have to forgive the same proportion if not more or all of the second lien and would receive incentives for having done so.

While considering the Second Lien Modification program for one’s mortgage, some of the pre-requisites would have to be met to qualify for the 2MP. The pre-conditions to qualification for 2MP would be that the first lien has been modified under the HAMP and also that the service provider of the second lien would have to be a participating service provider. In case the service provider for the second lien is not participating, then the service provider might be approached for an in-house modification. The second lien does not have an unpaid principal balance of less than ,000 or a pre-modification scheduled monthly payment of less than 0 at the time of consideration for the modification. No previous 2MP modification was made on the second lien. the second lien service provider is in possession of a fully executed 2MP modification agreement or trial period plan by December 31, 2012; or the second lien is not insured, guaranteed, or held by a Federal government agency (e.g. FHA, HUD, VA, and Rural Development). It might be a great way to be able to make low payments on one’s second lien.

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