A gaping hole in most of the mortgage assistance programs to date has been the problem of second mortgages. While the current programs deal with first mortgages in a number of ways none of them dealt specifically with second mortgages — particularly in cases when the homeowner is underwater/upside-down (owes more than the home is worth) or late on the mortgage already. The Obama administration announced the first attempted remedy of that problem today.
Here are some quotes from a WSJ blog on the announcement:
The Obama administration unveiled a fresh set of incentives Tuesday for mortgage servicers to help strapped U.S. homeowners.
Under a new program, the government will pay mortgage servicers $500 up front and $250 a year for three years for successfully modifying a second mortgage, such as a home equity loan.
Second mortgages have complicated government efforts to help borrowers avoid foreclosure. According to the U.S. Treasury Department, up to 50% of at-risk mortgages have second liens and many properties in foreclosure have more than one lien.