The U.S. Treasury’s program to modify the second-lien mortgages of borrowers potentially facing foreclosure has processed 54,828 loans out of 115,762 eligible, a 47 percent rate of assistance, according to figures through November 2011.
The government’s Second Lien Modification Program (2MP) was launched a year ago after more than a year of delays in creating a system of notifications for borrowers whose first mortgage are being modified.
Under 2MP, participating mortgage servicers are notified when a match is found between one of their second liens and a first lien modification under the Treasury’s primary foreclosure prevention effort, Home Affordable Modification Program (HAMP).
Treasury reports that 308,341 HAMP modifications have been matched with a second lien. But many of these loans are found to be ineligible for a 2MP modification. The most common reasons are cancellation or failure of a trial or permanent first lien HAMP modification.
Treasury requires a servicer to offer a second-lien modification to any borrower in an active permanent modification on the first lien. The second must have an unpaid principal balance of at least $5,000 and a monthly payment of at least $100 before the modification can be initiated.
Of the more than 54,828 second-lien modifications, nearly 10,000 were fully extinguished. The median amount of extinguished second liens was $60,688.
Thirty-five percent of the 2MP modifications took place in California. Florida was second with 9 percent.
Only six of the top 10 HAMP servicers take part in the voluntary program, including Bank of America, Citigroup, Ally Financial, JPMorgan Chase and Wells of Fargo.
Treasury also reported this week that HAMP’s primary mortgage effort has initiated 909,953 permanent modifications through November 2011, but another 923,545 have been cancelled.
Second mortgages are usually the first to default. Bankruptcy court has been supporting the reduction of principle balances on second mortgages.
Alex Frias