Industry NewsMortgage

New loan mod program aimed at seconds

Changes also proposed for FHA refi program

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Saying that half of at-risk mortgages have second liens that complicate the process of modifying them to prevent foreclosure, the Obama administration today announced that the government will share in the cost of lowering payments on second mortgages and provide incentive payments to loan servicers who go along. The new Second Lien Program is designed to work in tandem with first-loan modifications made under the Making Home Affordable Program. Like Home Affordable first loan modifications, the government will share in the cost of reducing payments on a borrower's second mortgage, and pay loan servicers incentives for making successful modifications. On amortizing loans with monthly payments of interest and principal, for example, the government will share in the cost of reducing the interest rate on the second mortgage to 1 percent for five years. Servicers can be paid $500 up-front for a successful modification, and $250 per year for three years as long as the modified ...