I find it extraordinary how much government intervention there has been into the housing market and helping homeowners. If only this would happen for those of us with crushing student loan debt at a 6.8 percent interest rate…
But I digress…
The Obama administration announced today assistance for homeowners who have second or other additional liens (mortgages) on their homes. In some cases, these second mortgages are making it harder for homeowners to remain in their homes.
This part of the Making Home Affordable program should help 1 million to 1.5 million homeowners, according to government estimates. The government cites 5.1 million lost jobs in the past 14 months and mortgage payments creeping up to 40 to 50 percent of incomes as reasons to help.
The government assistance varies depending upon the type of second mortgage.
For amortizing loans, where you pay interest and principal, interest rates should be lowered to 1 percent.
For interest-only loans, interest rates should be lowered to 2 percent.
After five years, the interest rate will rise to match that of the primary mortgage.
Second loan modification will occur at the same time that the primary mortgage gets modified.
And the government announced incentives for both loan servicers and borrowers:
Servicers will get $500 for each loan modification with $250 a year for each year that the loan stays current
Borrowers will get $250 a year for up to five years so long as the loan stays current; this $250 will be applied to toward the first mortgage’s principal
The government really wants you to stay in your home. If you’re having trouble making payments and haven’t contacted your lender yet, it’s not too late. And now, you’ll be paid for your trouble.
April 24, 2009