Tuesday, April 28, 2009

Administration set to announce plan for junior liens.

The Administration is set to announce the plan for the modification of second liens. The details aren't fully released yet but their will be an incentive ($500 a year plus $250 the next 3 years) for servicers to modify junior liens. There will also be a payment schedule for the junior lien investors to extinguish the liens. More from the WSJ:

Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.

Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.
The Administration is also announcing new incentives for getting homeowners into Hope for Homeowners in order to increase participation in the program. The silver lining of all this is that servicers should finally finish the triage they started months ago and start foreclosing en masse on those who don't qualify. Once the full plan is announced I will provide the details.

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