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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Preserving Homeownership and Savings Education Strategy (PHASES) program

July 4, 2009

MMI

Money Management International (MMI), the nation’s largest nonprofit credit and debt counseling and education agency, today announced the official launch of their foreclosure prevention program, which has grown from a successful pilot program started in July 2007. With receipt of its second $1 million grant from HSBC-North America, MMI is able to expand its Preserving Homeownership and Savings Education Strategy (PHASES) program.

Utilizing the HSBC funds, the PHASES program provides grants for up to $7,500—an increase from from $5,000 during the pilot phase—to qualified homeowners who are striving to recover from a temporary financial setback. As part of the program, the PHASES team provides one-on-one financial counseling sessions to help keep families in their homes and effectively manage their personal finances.

During the pilot phase of the program, MMI and HSBC helped hundreds of homeowners become current on outstanding mortgage payments and have provided vital financial planning skills to keep consumers on the road to financial stability. The pilot program’s success is evidenced by its receipt of the NeighborWorks America’s 2008 Innovations in Homeownership Contest, for its innovative post-purchase strategy for consumers.

“HSBC is delighted to continue this partnership with MMI to provide the resources families need to keep their homes, and feel more confident about their future path, ” said Tom Detelich, president, Consumer and Mortgage Lending for HSBC Finance Corporation. “We are committed to working with MMI and other top national and local community organizations to provide practical tools to help families make an immediate difference and help plan for the future.”

MMI President and CEO Ivan Hand added, “In its pilot phase, the MMI PHASES program helped more than 200 consumers keep their homes and build stronger financial futures. With HSBC’s support, and the work of our housing counselors, the program was a great success and we’re glad to announce our expanded support for American homeowners.”


The PHASES program is currently available to homeowners in Arizona, California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, Ohio, Pennsylvania, Texas, and Virginia. To learn more about the MMI PHASES program, call 888-589-6959 or visit www.MMIPHASES.com.


About Money Management International

Money Management International (MMI) is a national HUD-approved housing counseling agency and nonprofit credit and debt counseling firm. MMI has been helping consumers trim their expenses, develop a spending plan, and repay debts since 1958. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish.



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