HAMP 2nd Lien Modification Program (2MP)

June 16, 2010

 

***UPDATE:  Click HERE to view a 30-minute self-guided tutorial that provides an overview of the Second Lien Modification Program (2MP) for servicers of non-Government Sponsored Entities (GSE) loans.***

Note: If you are having a problem accessing the tutorial, email me at lauren@lossmitigationmasters.com

Many homeowners may be struggling to make their monthly mortgage payments because they have a second lien.  Even when a first mortgage payment is affordable, the addition of a second lien can sometimes increase monthly payments beyond affordable levels.  Second liens often complicate or prevent modification or refinancing of a first mortgage.

The 2nd Lien Modification Program (2MP) offers homeowners a way to lower payments on their second mortgage.  2MP offers homeowners, their mortgage servicers, and investors an incentive for modifying a second lien.  Servicers and investors may also receive an incentive for extinguishing a second lien, forgiving all of the debt a homeowner owes.

Homeowners must provide consent to share their first lien mortgage modification information with their second lien mortgage servicer, if they are different. Since 2MP is meant to be complementary to the Home Affordable Modification Program (HAMP), a homeowner must have their first lien modified through HAMP before the second lien can be modified under 2MP.

Under 2MP, with their investor’s guidance, a mortgage servicer may:

  • Reduce the interest rate to 1% for second liens that pay both principal and interest (amortizing)
  • Reduce the interest rate to 1% amortizing or 2% interest-only for interest-only second liens
  • Extend the term of the second lien to 40 years
  • If the principal was deferred (through forbearance) or forgiven on the first lien, a servicer must forbear the same proportion on the second lien; although a servicer may, in its discretion, forgive any portion or all of the second lien and receive incentives for doing so

A second lien is eligible for 2MP if:

  • the corresponding first lien has been modified under the Obama Administration’s HAMP and the second lien servicer is participating
  • it was originated on or before January 1, 2009
  • it does not have an unpaid principal balance (at consideration for the modification) of less than $5,000 or a pre-modification scheduled monthly payment of less than $100
  • it has not yet been modified under 2MP
  • it is not subordinate to a second lien or is not a home equity loan in first lien position
  • it is not a second lien on which no interest is charged and no payments are due until the first lien is paid in full
  • the second lien servicer is in possession of a fully executed 2MP modification agreement or trial period plan by December 31, 2012; or the second lien is not insured, guaranteed, or held by a Federal government agency (e.g. FHA, HUD, VA, and Rural Development)

Examples

Family A: Amortizing Second Mortgage

In 2006: Family A took out a 30-year closed-end second mortgage with a balance of $45,000 and an interest rate of 8.6%.

Today: Family A has an unpaid balance of almost $44,000 on their second mortgage.

Under the 2MP: The interest rate on Family A’s second mortgage will be reduced to 1% for 5 years. This will reduce their annual payments by over $2,300.

After those five years, Family A’s mortgage payment will rise again but to a more moderate level.

                                                 Existing Mortgage Loan Modification
Balance $43,942 $43,942
Remaining Years 27 27
Interest Rate 8.6% 1.0%
Monthly Payment $349.48 $154.81
Savings $195 per month, $2,336 per year for five years

Family B: Interest-Only Second Mortgage

In 2006: Family B took out an interest-only second mortgage with a balance of $60,000, an interest rate of 4.4%, and a term of 15 years.

Today: Family B has $60,000 remaining on their interest-only second mortgage because none of the principal was paid down.

Under the 2MP: The interest rate on Family B’s interest-only second mortgage will be reduced to 2% for 5 years. This will reduce their annual interest payments by $1,440.

After those five years, Family B’s mortgage payment will adjust back up and the mortgage will amortize over a term equal to the longer of (i) the remaining term of the family’s modified first mortgage (e.g. 27 years if the first mortgage had a 30 year term at origination and was three years old at the time of modification) or (ii) the originally scheduled amortization term of the second mortgage.

                                                Existing Mortgage Loan Modification
Balance $60,000 $60,000
Remaining Years 12 27 (term reset to the remaining term of the modified first loan)
Interest Rate 4.4% 2.0%
Monthly Interest Payments $220 $100
Savings $120 per month, $1,440 per year for five years

List of Participating Servicers

  • Bank of America (including Countrywide)
  • Citi Mortgage, Inc.
  • Chase (including EMC and WaMu)
  • Wells Fargo (including Wachovia)
  • BayView Loan Servicing, LLC
  • Servis One dba BSI Financial Services
  • iServe Servicing, Inc.

More servicers will be added in the near future as they join the program.

For more information, contact your mortgage servicer.

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Home Affordable Refinance FAQs

June 5, 2009

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I’m current on my mortgage. Will the Home Affordable Refinance help me?

Eligible borrowers who are current on their mortgages but have been unable to take advantage of today’s lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through the Home Affordable Refinance Program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.

How do I know if the refinance will improve the long term affordability or stability of my loan?

Your lender will give you a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, refinancing may not be right for you. Also consider that refinancing from an adjustable rate to a fixed rate loan or eliminating higher risk loan terms such as interest only payments or balloon payments may also provide long term stability.

I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?

Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify. The current value of your property will be determined after you apply to refinance.

I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

Will refinancing lower my payments?

The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage, the opportunity to get into a mortgage with payments that are affordable today and sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.

Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate and payment. However, these borrowers could save a great deal over the life of the loan by avoiding future mortgage payment increases. When you submit a loan application, your lender will give you a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

What are the interest rate and other terms of this refinance offer?

The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon payments.

Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Home Affordable Refinance is to help borrowers get into more affordable loans. Refinancing will not reduce the principal amount you owe to the first mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you pay over the life of the loan.

Can I get cash out to pay other debts?

No. However, borrowers whose loans are owned or securitized by Fannie Mae may be eligible to finance all closing costs and obtain a small amount of cash (2% of the mortgage amount not to exceed $2,000) through the refinance if there is sufficient equity. For borrowers whose loans are owned or securitized by Freddie Mac, transaction costs (not to exceed $2,500) such as the cost of an appraisal or title report, may be included in the refinanced amount.

I am delinquent on my mortgage. Will I qualify for a Home Affordable Refinance?

No. Borrowers who are currently delinquent or have been 30 days overdue more than once during the past 12 months will not qualify. You should contact your servicer to see if a Home Affordable Modification is an option for you.

Will I need mortgage insurance?

If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for the refinanced loan. If your existing loan does not have private mortgage insurance it will not be required as part of the Home Affordable Refinance.

How long will the Home Affordable Refinance be available?

The program expires on June 10, 2010. Your refinance transaction must be closed and funded on or before that date.


Making Home Affordable Plan

May 23, 2009

MHA_Logo

The Obama Administration has introduced a plan to try to stabilize the housing market called the Making Home Affordable (MHA) Plan. Through this plan, up to an estimated 7 – 9 million American families may be eligible to refinance or modify their loans to a payment that is affordable now and into the future.

Under this plan, there are two programs:

  • Home Affordable Refinance Program
  • Home Affordable Modification Program

Home Affordable Refinance Program

The Home Affordable Refinance Program gives up to an estimated 4 – 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. 

Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home. A Home Affordable Refinance will help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage.

Will the Home Affordable Refinance Program help me?

Eligible borrowers who are current on their mortgages but have been unable to take advantage of today’s lower interest rates because their homes have decreased in value may now have the opportunity to refinance. Through the Home Affordable Refinance Program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.

How do I know if I am eligible?

You may be eligible if:

  • You are the owner occupant of a 1 – 4 unit home
  • The loan on the property is owned or securitized by Fannie Mae or Freddie Mac (If you don’t know, click here)
  • At the time you apply, you are current on your mortgage payments (current means that you haven’t been more than 30 days late on your mortgage payment in the last 12 months or if you have had the loans for less than 12 months, you have never missed a payment)
  • You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house (You may be eligible if your first mortgage does not exceed 105% of the current market value of your home. For example, if your property is worth $200,000 but you owe $210,000 or less on your first mortgage, you may be eligible. The current value of your property will be determined after you apply to refinance)
  • You have income sufficient to support the new mortgage payments, and
  • The refinance improves the long term affordability or stability of your loan

You may also take the Eligibility Test to determine if you qualify.

How do I apply for a Home Affordable Refinance?

You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process. The number is on your monthly mortgage bill or coupon book.

Note: Please be patient. Lenders and servicers are implementing the program now and there might be a slight delay before they are ready to process all applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.

APPLICATION CHECKLIST:

  • Information about your mortgage such as your monthly mortgage statement and
  • Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources
  • Your most recent income tax return
  • Information about any second mortgage or home equity line of credit on the house
  • Account balances and monthly payments on all your other debts such as student loans, car loans, personal loans, etc.

Home Affordable Modification Program

The Home Affordable Modification Program will reduce monthly payments on existing first lien mortgages for up to an estimated 3 – 4 million at-risk homeowners.

Many homeowners are struggling to make their monthly mortgage payments perhaps because their interest rate has increased or they have less income. A Home Affordable Modification will provide them with mortgage payments they can afford.

Will the Home Affordable Modification Program help me?

If you can no longer afford to make your monthly payments, you may qualify for a loan modification to make your monthly payments more affordable. Millions of borrowers who are current, but having difficulty making their payments and borrowers who have missed 1 or more payments may be eligible.

How do I know if I am eligible?

You may be eligible if:

  •  Your home must be an owner-occupied primary residence (verified with tax return, credit report, and other documentation such as a utility bill)
  • Your home must be a single-family 1 -4 unit property (including condominiums, cooperatives, and manufactured homes affixed to a foundation and treated as real property under state law)
  • Your home must not be vacant or condemned
  • First lien loans must have an unpaid principal balance (prior to capitalization of arrearages) that is equal to or less than:
  • 1 unit properties = $729,750
  • 2 unit properties = $934,200
  • 3 unit properties = $1,129,250
  • 4 unit properties = $1,403,400
  • Your mortgage must have originated on or before January 1, 2009
  • Have a mortgage payment (including taxes, insurance, home owner’s association dues) that is more than 31% of your gross monthly income (If you are uncertain, click here)
  • Have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses

You may also take the Eligibility Test  to determine if you qualify.

Note: Eligibility requirements are simply government guidelines. Guidelines may change, and lenders make exceptions, if it is in their best interest to do so.  In other words, homeowners should not count themselves out.  If they are having trouble making their house payment, they should explore the loan modification option.  Sometimes, the only way to determine whether you qualify is to apply.

How do I apply for a Home Affordable Modification?

You should call your mortgage servicer or lender and ask about the Home Affordable Modification application process. The number is on your monthly mortgage bill or coupon book.

Note: Please be patient. Lenders and servicers are implementing the program now and there might be a slight delay before they are ready to process all applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.

APPLICATION CHECKLIST:

  • Information about your gross monthly  (before taxes) income, including recent pay stubs, if you receive them or documentation of income you receive from other sources
  • Your most recent income tax return
  • Information about your savings and other assets
  • Information about your first mortgage, such as your monthly mortgage statement
  • Information about any second mortgage or home equity line of credit on your house
  • Account balances and minimum monthly payments due on all of your credit cards
  • Account balances and monthly payments on all your other debts such as student loans, car loans, personal loans, etc.
  • A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable

Note: Many lenders have made a committment to delay foreclosure on all loans that meet the minimum eligibility criteria for a home affordable modification

Free Counseling Help

There are two options for free counseling help:

  • Contact me via email freezeforeclosure@gmail and we’ll set up a time to talk.
  • If you don’t feel comfortable talking to me then another free resource is to contact a HUD-approved housing counselor. They provide the same advice I do. The only difference is who you feel more comfortable working with.

What to expect?

Either the housing counselor or I will talk to you about your situation and help you decide what mortgage options are best for you. We will explain what documents you will need to provide to your mortgage company. We can also help you make a budget so that you can meet your monthly mortgage payment and other expenses. There is no charge to work with either one of us.

Before you call 

Gather the following documents:

  • Information about your gross monthly  (before taxes) income, including recent pay stubs, if you receive them or documentation of income you receive from other sources
  • Your most recent income tax return
  • Information about your savings and other assets
  • Information about your first mortgage, such as your monthly mortgage statement
  • Information about any second mortgage or home equity line of credit on your house
  • Account balances and minimum monthly payments due on all of your credit cards
  • Account balances and monthly payments on all your other debts such as student loans, car loans, personal loans, etc.
  • A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable

Immediate Assistance

If you are delinquent on your loan payments and need immediate assistance, call myself at 571-249-4357 or 888-995-HOPE (4673)


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