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Bank of America Signs Contract for Second Mortgage Modifications

Bank of America announced on January 26 that it is the first mortgage servicer to sign an agreement committing them to participation in the next phase of the U.S. government’s Home Affordable Modification Program (HAMP) which is aimed at resolving problems with struggling homeowners who have more than one mortgage on their home.  A continuing issue with HAMP loan modifications and other non-government attempts to help homeowners modify their loans so they can afford to remain in their home has been the prevalence of homeowners with two liens against the property.  The HAMP loan modifications are very important for borrowers that don’t qualify for a second mortgage refinance through the Home Affordable Refinance Program.

At the height of the housing boom, many homeowners opted for an “80-10-10″ or “80-15-5″ loan which allowed them to buy a home with a down payment of just 5% or 10%, borrowing the rest in two loans in order to avoid paying private mortgage insurance (PMI). PMI is typically required when a lender is making a loan for more than 80% of the value of the property.  As homeowners have watched the value in their homes diminish, making them ineligible for a traditional refinance, and have also experienced either a job loss or reduced income, they have been struggling to meet their mortgage obligations. The federal government stepped in with the HAMP program, but found that in most circumstances the second mortgage holder was unwilling to make a loan modification even when the first lender would modify that loan.

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The Second Mortgage Modification Program (2MP) guidelines are expected soon from the federal government. Bank of America will begin implementing the program as soon as the guidelines are in place.  The second mortgage program will require loan modifications to reduce the monthly payments on qualifying home equity loans and lines of credit under specific conditions, including a HAMP modification on the first lien.  “For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” says Barbara Desoer, president of Bank of America Home Loans.   Financially strapped homeowners may have to wait a little longer for this program to resolve the issues between first and second lien holders. But in some cases, both loans are held by the same lender, which should make modification of both loans easier.  Article was written by Michele Lerner.

Posted in 2nd Mortgage Tips, Foreclosure Prevention, Mortgage Relief, Second Mortgage Modification. Tagged with , , .

3 Responses

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  1. Thank for this great article on second mortgages and the failure for banks to change their guidelines prior to the subprime meltdown. I like where you are going with the 2nd mortgage relief. Banks need to modify HELOCs and equity loans when borrowers are underwater!
    Thanks- Thomas Tealer

  2. Great mortgage article! These are scary times for the mortgage industry, but if we stick together, I believe we can weather the storm. Loan programs should rebound soon as lender start to loosen the home financing guidelines.
    Thank you so much for emailing me the monthly newsletter!

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  1. Second Mortgage | Mozilist linked to this post on May 11, 2010

    [...] Bank of America Signs Contract for <b>Second Mortgage</b> Modifications <b>…<… [...]

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