Thanks to new efforts by the Obama Administration, now mortgage modifications can include second mortgages,not just first mortgages, and cash incentives are making short sale deals more desirable.
More information on Second mortgage modifications:
Loan modifications are designed to make the home loan more affordable, typically by reducing the interest rate, extending the term of the loan and, less often, by reducing the principal. They are not refinanced mortgages, which pay off the old mortgage with a new mortgage.
Under Making Home Affordable’s new second-lien program, borrowers whose first mortgages are modified will automatically have payments reduced on their second mortgages as well, provided the first and second-mortgage lender participates in the program.
Twelve mortgage servicers are currently doing this. Among them are large banks including, Bank of America, Wells Fargo, Countrywide, Citibank, Chase and a few others.
The stipulations for homeowners looking to modify their first mortgage are these: The homeowner must be an owner-occupant; have an unpaid principal balance that is no more than $729,750; have a loan that was originated on or before January 1, 2009; have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31 percent of their gross monthly income; and have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.
Under the new second mortgage program, in addition to lowering the payment, lenders can also choose to erase a borrower's second mortgage in exchange for a lump-sum payment from the government.
There are new short sale incentives also. These are:
Short sale incentives are a recent refinement to the Obama administration's housing rescue programs.
In a short sale, the lender closes the mortgage in return for whatever sale price the homeowner can net. However, the difference is sometimes considered income for which the selling homeowner may be taxed. That is why it is so important for the homeowner to have a discussion with a tax professional.
Under the new short sale incentive, lenders can receive a $1,000 payment from the U.S. Treasury for allowing the owner to sell the house for less than the amount owed on the mortgage and for accepting the proceeds as full repayment, rather than treat it as a short sale.
Lenders can also receive $1,000 for accepting a deed-in-lieu transaction, in which the deed is simply transferred to the lender instead of going through a costly foreclosure.
Homeowners who agree to short sales or deed-in-lieu deals can receive up to $1,500 in closing costs. To help stop second mortgages from blocking the deal, the Treasury will pay second lien holders up to $1,000 to relinquish their claims in such transactions.
There are constant changes to the home mortgage dilemma at this time so make sure you are working with a Realtor who knows the "ins and outs" of these transactions.
Realty Times
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