We’ve seen numerous homeowners struggle with mortgage payments over the past months, but in some instances we saw that a second mortgage may have been the problem, which would obviously offset benefits that may have been received when a primary mortgage was modified or a lower payment was offered, but servicers like Wells Fargo have continued to participate in the second lien modification program, which according to the most recent Treasury Department report released here in October, has seen improvements from this particular servicer. Obviously, not all homeowners have this particular situation in place where a modification on their second home loan will be required, but instances where homeowners are in need of help with their second lien payment, this program may be beneficial in their foreclosure prevention efforts.
Specifically for Wells Fargo homeowners though, there were increases seen between July and August as the number of modifications started increased from 7,882 to 8,196. Furthermore, homeowners who received a full extinguishment of their second lien as a result of this program increased to a total of 232, with active modifications that are currently in place that also have a partial extinguishment option that has been granted to the homeowner increased from 7,555 to 7,845.
Many homeowners are aware of how modifications work but there are instances where simple rate reductions, term extensions, or even opportunities for principal payment forbearance is simply not enough to help homeowners when one of the second home loans is in place. Understandably, some of the hindrances that homeowners may see not simply with Wells Fargo but with the program in general have come from getting an agreement passed between a primary mortgage holder and a secondary mortgage holder, as servers may have to convince investors that, for a homeowner to avoid foreclosure, terms may have to be rewritten so that a homeowner’s payment will be more affordable.
While many major banks like Wells Fargo continue to pursue these particular types of modifications for homeowners in need, they are by no means guaranteed for homeowners who received a primary mortgage modification nor are they going to necessarily guarantee a homeowner no longer sees mortgage payment troubles. Yet, advisers who are dealing with homeowners that have both a primary and secondary mortgage obligation in place have prompted homeowners to look at their overall affordability if they are granted a primary modification to see if this particular option may need to be pursued as well, as homeowners with major home loan servicers who have second mortgages in place may in some cases be able to easily meet their monthly payment with a simple primary modification, but again this option may also be necessary for others who are facing a substantial amount of financial distress.