Loan Modification Plan Take Two
It’s nice to see that the Obama Administration is addressing the problems of its original foreclosure prevention program and making it more effective. One of the big problems with the original plan to stabilize the housing market, is that it did not address home-equity loans and other second mortgages and according to Credit Suisse Group, about half of seriously delinquent borrowers have a second mortgage.
So what is the new plan proposing? According to Ruth Simon of the Wall Street Journal, “Under the revised plan, mortgage-servicing companies that participate in the loan-modification program for second liens must automatically modify the second mortgage when the first mortgage is reworked. The government will share in the cost of reducing the interest rate on second mortgages for five years. As an alternative, it will pay holders of second mortgages to extinguish that debt.”
In addition, the government is offering a friendly gesture for the cooperation of the mortgage servicers: “Mortgage servicing companies that modify second mortgages will receive an upfront payment of $500 and additional payments of $250 a year for up to three years for successful modifications of home-equity loans and other second mortgages. Borrowers who remain current on the modified loan would receive payments of $250 a year for up to five years that would be used to pay down the balance of their first mortgage.” So basically the second mortgages are to be dealt with almost the same as with first mortgages. Makes sense. Why no one thought to involve second mortgages in the original program is beyond me, but like I said, it’s nice to see that the Obama Administration was able to recognize where they went wrong and make corrections. And according to administration officials, they estimate that by addressing second mortgages could help as many as 1.5 million homeowners.
By Andrew Brentan
May 4th, 2009 at 3:54 pm
After the last 8 years, its nice to see the government actually taking action to help its citizens. If they can help stem the flood of foreclosures, we might see the real estate market make a major comeback in the next 18 months.
Charles’s last blog post..Hope for Distressed Homeowners
May 4th, 2009 at 10:54 pm
I do hope that the darkest phase of the recession is behind us.
Jason’s last blog post..Litchfield Beach and Golf Resort
May 6th, 2009 at 2:40 am
Yeah this plan definitely better addresses the entire problem. Thanks for the resource link and details.
May 6th, 2009 at 6:30 am
As someone who typically votes conservative, I’m grateful for this administration’s efforts to get the housing crisis turned around. Couple the efforts in loan modification with the $8,000 tax credit, and we will no doubt see a modest turnaround by the end of the year or early spring ‘10.
Joe’s last blog post..1st Quarter Augusta GA Home Sales Summary
May 6th, 2009 at 7:56 pm
Its good they are taking into account 2nd mortgages. We have seen a few short sales fall apart because of the second mortgage. They often have very little inclination to negotiate
Jill’s last blog post..Home Sales increase from February, but down from March 2008
May 7th, 2009 at 11:16 am
I’ll actually take the opposite view of Charleston. I’m totally against the government becoming involved in the the financial markets or housing markets to this extent. They call it Socialism. It’s short term thinking and I guarantee in the long run it will not be beneficial. Let things fall where they may, we’ll be stronger down the road. Survival of the fittest!!!
May 7th, 2009 at 11:58 am
It was short term thinking that got us in this mess. And please, this is not Socialism. Survival of the fittest shouldn’t come in to play when a tiny percent of powerful companies and individuals are ultimately responsible (due to their irresponsibility) for our economic state. Something tells me you’d feel a whole lot differently about the government helping out if you lost your job and suddenly couldn’t make your mortgage payments. In this case, the Obama Adiministration has created a short term program to jump start a long term plan. Just as with the stimulus, the loan modification program is a tool to “stimulate” the markets so that the recession is not dragged out longer and deeper than it would be if nothing was done. According to the plans they’ve laid out, as soon as we have regained some stability in the markets, measures will be taken to minimize their involvement. It’s easy to shout survival of the fittest and proclaim your firm beliefs in the mighty unregulated capital markets when you have remained afloat and minimally affected by the recession. But you are in the minority, and the great number of people that need the government to help get them back on their feet deserve that help.
May 8th, 2009 at 12:28 am
Does anyone have the name of a reliable and successful loan modification real live person?
May 8th, 2009 at 12:31 pm
Have you tried this forum? http://www.loansafe.org/forum/loan-modification/ They seem to have a lot of people on there offering services. One thing to keep in mind is different states have different laws so be careful not to hand over money up front. In California a real estate agent is not allowed to collect any money up front.
Also, have you tried doing a loan modification yourself? It’s not difficult to do, you just need to be persistent and have patience.
May 11th, 2009 at 12:27 am
Yeah, thanks for exporting this mess all over the world, too!
May 16th, 2009 at 12:06 pm
Obama’s foreclosure prevention program may not be able to help all of them, but it goes a long way in at least addressing the problem and trying something. President Obama may not have all the answers, but federal programs like this may go a long way in helping America turn around and start heading in the right direction again.
Cheers,Harry,Panama property
May 19th, 2009 at 2:17 am
Boy, I hope you’re right about this plan. We definitely have many many many people in Phoenix that have seconds and sometimes thirds!
Steve Trang’s last blog post..Added Commercial Foreclosure List
May 20th, 2009 at 5:17 pm
Let’s hope that the Making Home Affordable Program (the name of Obama’s foreclosure prevention program) receives a little more publicity and that more homeowners try to achieve modifications through it. Obama was quoted as saying that he hopes to help 8-9 million homeowners in bad financial shape. Now if only the Lenders / Servicers wanted to help Americans as much as our President does….
Loan Modification’s last blog post..Loan Modification Requirements & Guidelines
June 23rd, 2009 at 10:51 am
At least the new administration is taking steps to help the home owner by paying incentives to the mortgage servicing companies. Sharing the cost of reducing the interest rate is a good step too. However, is it the mortage companies who helped to get us in this current mess?
mary’s last blog post..San Antonio Real Estate Stats for April
mary’s last blog post..San Antonio Real Estate Stats for April