New Federal plan hopes to encourage banks to modify second mortgages.
Many distressed homeowners are all too familiar with the difficulties involved in getting loan modifications for second mortgages, especially if these loans are HELOCs (home equity lines of credit). To ease this process a bit, the Feds have come up with new incentives for banks to adjust these second mortgages as well.
This new program states that the Feds will pay mortgage servicers $500 upfront and $250 a year for three years for successfully modifying a second mortgage, including HELOCs.
To receive their incentive payments, servicers must modify all second mortgages where the first mortgage has already been modified. The term of the second mortgage must be extended, and interest rate reduced to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.
Apparently Bank of America, Wells Fargo and Chase have already agreed to participate in this program, and others are expected to participate as well.
Only time will tell if this program actually helps homeowners to stay in their homes, or if it is just another program that has more hot air than substance. Most of the Federal programs introduced to date have excluded so many homeowners that they had little to no impact on keeping people in their homes.
About the author: Linda Slocum is a Santa Clarita Realtor, Certified Distressed Property Expert (CDPE), and the author of the Santa Clarita Real Estate Blog. She can be contacted via email, or call her at 661.670.0349.
21. May 2009 at 3:23 pm
I hope this helps some honest hard-working home owners out there. This real estate and bank home loan mess is ridiculous. Greed drove us here now we need to find a magic way out.