The number of second lien modifications that were made available to homeowners as of August increased within the Making Home Affordable Program, according to reports that were released here in October by the Treasury Department. This issue of second liens has been a concern for some due to the fact that a primary home loan modification has not been enough to always reduce a homeowner’s mortgage payments to a point that is affordable when this second mortgage obligation is also in place and unmodified. Understandably, homeowners are not always guaranteed this particular type of modification, but because major servicers within HAMP offer this particular type of plan, there have been not only modification benefits but extinguishment that have helped homeowners as well.
In fact, the number of second lien modifications that were started increased between July and August from 37,466 to 40,654, with the number of active second lien modifications increasing by almost 3,000. Furthermore, over 100 homeowners were offered a second lien modification that involved the full extinguishment of their lien between July and August as well, which can potentially do a great deal in terms of helping homeowners avoid the loss of their home when a second mortgage payment is the main trouble after a primary modification is offered.
While there are some homeowners who are also seeing partial extinguishment on these modifications, it should be remembered that homeowners will have to qualify for a primary home loan modification and meet certain requirements, but this does not necessarily mean that a homeowner’s second lien will be forgiven or even partial forgiveness may be offered, as this has varied from one case to another. Yet, this particular program has been used to help homeowners avoid slipping back into an area where they miss payments on their mortgage or redefault entirely, which is a problem that servicers and HAMP officials want to avoid.
However, when it comes to taking advantage of these modified mortgage payments homeowners may need to either seek outside assistance or begin to more carefully budget due to the fact that we have not seen any guarantees when it comes to homeowners avoiding further problems after modifications have been offered. There are some counseling agencies that may help homeowners better organize their finances if the financial distress is the reason behind their need for these modifications, but when problems like unemployment are in place homeowners may need to consult with their mortgage servicer to see if opportunities like a mortgage payment forbearance from the federal Unemployment Program may be better than simply pursuing a modification.
While homeowners who are unemployed and do not have an income will unlikely be able to qualify for a modification, homeowners do need to make sure that they have carefully outlined their reasons for hardship when speaking with their servicer, as it may be the case that only one homeowner is unemployed and the other is unable to carry the weight of their financial responsibilities alone. Assistance for homeowners through various programs is ongoing and continuing to report different results and potential changes, but in this specific area of home loan assistance need, it has been viewed as a good sign that we are still seeing increases in some areas of mortgage assistance where homeowners may otherwise have lost their home.