A friend is concerned that the start-up where her husband works may not make it, and they have two loans on their house..the original first mortgage that is adjusting soon, and a second that they added to do some recent remodeling.
Maybe, just in time, the Obama administration announced yesterday additional efforts to stem foreclosures by offering lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion. The U.S. Treasury Dept. also wants lenders and their customer-service agents to agree to modify both first and second mortgages as part of a comprehensive solution.
Details of the foreclosure prevention plan include: Decreasing second-mortgage interest rates to as low as 1 percent for five years for some borrowers; and reviving a FHA effort to persuade lenders to reduce loan balances enough so that borrowers will have equity again in their homes.
Funding from the program will come from a previously authorized $50-billion allocation from the $700-billion Treasury Dept. rescue fund established by Congress last year. The plan would provide cash incentives to both loan officers and borrowers for successful second-mortgage modifications. A loan officer would receive $500 upfront, plus $250 annually for up to three years as long as the loan remains current. Borrowers who make payments on time will receive $250 a year for up to five years.
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