What is the Second Lien Program?

May 5, 2009

The Home Affordable program, also known as the Obama Mortgage, has offered homeowner relief to millions of people in danger of foreclosure or default on their mortgage. Home Affordable provided a homeowner bailout program for those in trouble on their first mortgage, but what about families who had second liens or second mortgages? Was there an Obama Mortgage plan for them? As many as half of all the at-risk home loans today have second mortgages or second liens. Many foreclosure cases feature a second lien, so it's clear that the Obama Mortgage needed a modification to include addressing this issue.

The Obama Mortgage has a new update to include homeowner relief for those with second liens. This Obama mortgage update is simply called the Second Lien Program. According to the Department of Housing and Urban Development, the Second Lien Program is designed to work side by side with the Home Affordable program to offer a more complete relief package for homeowners in trouble.

Under the new rules of Home Affordable, when borrowers apply for a Home Affordable loan modification (as opposed to refinancing) lenders participating in the Second Lien Program must automatically reduce payments on second liens. Loan officers also have the option to eliminate the second mortgage or lien entirely in return for a lump sum payment. All of this is done according to protocols set by the Obama Mortgage program. (When applying for loan modification under the Home Affordable program, make sure your bank is a participating lender in the Second Lien program before committing to loan modification.)

OTHER CHANGES TO THE OBAMA MORTGAGE

Another change to the Home Affordable program comes when the lender is evaluating a borrower's eligibility for loan modification. Under the newly updated Obama Mortgage rules, the lender can't simply evaluate a borrower for loan modification. The new rules state the borrower must also be evaluated for refinancing under the FHA Hope For Homeowners program.
FHA loans under the Hope For Homeowners program are fixed-rate, low-interest loans with predictable payments. The new Obama mortgage rules require lenders to offer FHA Hope For Homeowners refinancing to borrowers if they are eligible.

This gives distressed borrowers in need of homeowner relief additional options for avoiding default and foreclosure. The bank cannot "by omission" keep you from a low interest rate, fixed payment FHA Hope For Homeowners loan if you qualify. Participating lenders are required to review your circumstances to see if you qualify for the FHA's Hope For Homeowners bailout program.

These alterations to the Obama Mortgage make homeowner relief more accessible than ever. If you need assistance with your existing mortgage, whether you want FHA refinancing, an Obama mortgage to assist you on your first or second lien or need loan modification, ask your loan officer about the Home Affordable Program and the FHA Hope For Homeowners program. The new rules are designed to help you keep your home and your investment safe.