Second Lien Home Loan Modifications For Distressed Homeowners–Why Second Mortgages Are Causing Affordability Problems

Homeowners who may have taken out a second mortgage have been reportedly finding themselves in a situation where their mortgage payment difficulties may be exacerbated by having done so as issues like negative equity are obviously more problematic in a case where a homeowner is having trouble meeting their mortgage payment, has seen their mortgage value decrease, and are now searching for ways to find an affordable overall monthly payment while they wait for their situation to improve. Yet, there are opportunities available through modification efforts that can help homeowners find more affordable payments on their home loans, particularly when a second mortgage is in place and may be causing problems as well.

Homeowners are well aware that the Second Lien Modification Program works in tandem with the federal home loan modification initiative and that homeowners who qualify for a primary modification on their home loan may be able to also get a modification on their second mortgages well, which could lower their mortgage payment and further. Yet, when it comes to negative equity, homeowners are seeing the severity of their situation worsen when a second mortgage has been acquired, but there are some homeowners who may be getting these second liens extinguished, according to Treasury Department reports.

Reports released in the earlier parts of July have tracked the data within the federal Making Home Affordable Program through May and have stated that there are currently 27,105 active second lien modifications in place, and homeowners who saw their second mortgage extinguished number at 1,524. Also, there are indications that some homeowners may have a percentage of their second lien dropped if they meet certain qualifications, but there are problems that still arise in the realm of negative equity that homeowners want addressed.

Even if a homeowner is able to get their second lien extinguished, there are still some cases where homeowners find themselves in an underwater situation, and even homeowners who may have only had a primary mortgage to deal with, modifications are not always a simple or affordable answer. While many major mortgage servicers do participate in second lien modification programs, these forms of foreclosure prevention assistance are not always enough to help homeowners find the affordability they need, and there also some problems that remain in terms of homeowners getting the principal forgiveness they may want when devaluation has been a problem.

However, officials are prompting homeowners with a second mortgage to explore the Second Lien Modification Program as it could potentially offer the affordability that a homeowner may be seeking, and in some cases, there are homeowners who have seen their second mortgage extinguished through these efforts, but it needs to be kept in mind that it will depend on a homeowner’s servicer and situation as to whether these options are helpful and available.