May 10, 2009
Authored by: Bryan Cave
On April 28, 2009, Treasury announced updates to the Making Home Affordable Program. As previously discussed, the Treasury’s Making Home Affordable program, which is aimed at helping 7 to 9 million homeowners, consists of two programs: The Home Affordable Refinance Program and the Home Affordable Modification Program. The newly announced updates address modifications to second mortgages where the first mortgage has been modified under the Home Affordable Modification Program.
The important thing for homeowners to recognize is that the modification to the second mortgage is automatic. That is, if the holder of the second mortgage is a participating servicer under the Making Home Affordable Program, then the holder must modify the second mortgage whenever a first mortgage is modified under the Program. The updates address both traditional, amortizing second mortgages and interest-only second mortgages.
These updates are aimed at helping 1 to 1.5 million homeowners with their second mortgages. Under the updated Program, an amortizing second mortgage’s interest rate will be reduced to 1% (and the term must be extended to match that of the first mortgage), and an interest-only second mortgage’s interest rate will be reduced to 2%. After five years, the interest rate will step up to the interest rate on the first mortgage. As the Treasury’s case examples make clear, modifications under the Program are designed to provide significant savings for homeowners. In addition to savings, there are pay-for-success incentives, up to $250 per year for five years, available to homeowners who continue to make payments under the modified second mortgage.
To determine if the holder of a second mortgage is participating in the Program, a homeowner should visit Making Home Affordable web page, which lists the participating servicers, available here. Homeowner can also help determine if they are eligible for the Program by answering a few questions here and can review the Frequently Asked Questions here. More information on the Making Home Affordable Program is available here.