Fannie Mae Second Lien Modification Program (2MP)

Posted on September 28th, 2010

Trying to prevent foreclosure on your first AND second mortgage? Great news: Fannie Mae has released guidance on its Second Lien Modification Program, or 2MP.

This program, which must be implemented by participating loan servicers by Jan 1, 2011…

Wait a minute. 2011? Is this what they mean by “streamlining?” Or is this fast-tracking?

Anyway, this program only applies to second liens originated before January 1, 2009, the balance must be greater than $5,000, and the lien must be charging interest. 

Here’s the great part: the terms of the first lien modification will be used for the second lien mod.

Isn’t that wonderful?

Answer: no, it’s not.

First of all, the HAMP mod terms suck.

Second, in an environment where fewer borrowers are qualifying for HAMP, this program’s not going to offer much to the homeowner trying to prevent foreclosure.

Third, you can already do better than this without the 2MP program.

In addition, the servicing waterfall doesn’t even include principal reduction, only principal forbearance- which is last in line for consideration.

Lastly, the investor on the second has to approve this. If they’re stubborn enough that they won’t gladly modify without this program, will they agree to this?

Hey- at least the federal government is consistent in offering hope, instead of real solutions.

Filed under 2MP, FNMA, Loan Modification, Prevent Foreclosure, fannie mae, modification, second lien modification | No Comments »

New $3bn Foreclosure Prevention Program

Posted on May 26th, 2010

Last week, the Senate passed the Restoring American Financial Stability Act.

It now includes a program that would allow unemployed homeowners to prevent foreclosure by borrowing up to $50,000 to stay afloat.

Yes, BORROW an ADDITIONAL $50,000.

So, like our federal government, which borrows (or prints) its way out of trouble, now our citizens will be able to do the same.

Dave Ramsey says it best: when you’re in financial trouble, the last thing you want to do is borrow more money.

This program is the brain-child of Rep. Chaka Fattah (D-Pennsylvania), a state legislator.

It would allocate $3B in TARP funds for this program.

I have not seen details on this plan, so I have no answers to the following quesitons that a smart homeowner should be asking about HEMAP:

“Does it matter if I’m upside down on your mortgage? ”

“Can I still qualify if I owe more than my home is worth?”

“How do they determine if I could “reasonably resume making payments again within two years?”

“If I can’t pay off the loan, will it be forgiven?”

“If I can pay my first mortgage but not the second, will they let me stay in my home?”

I briefly looked at some info regarding Pennsylvania’s program and while they have some nebulous criteria for how they determine your “creditworthiness,” they’re far from objective.

Also, from a HEMAP brochure, this interesting note:

You can slow down the foreclosure process

when you apply for HEMAP—even if you don’t

qualify for the program.

So, is this program REALLY designed to prevent foreclosure?

Or, is it another “kick the can down the road” vehicle?

Is it a back door way to dole out a principal reduction to unemployed homeowners?

One thing I’ve learned through years of working with homeowners in financial distress:

They’re not very good at predicting the future.

They’re often overly optimistic about their future income prospects, amongst other things.

They’ve often convinced themselves that if they just “save the home” and prevent the foreclosure, that everything else will fall into place.

That’s a dangerous assumption, and if the stats are any indication, it’s unfounded.

An attorney I spoke to said “Hey, take the money and file Chapter 7 on it later if it turns out to be a bad idea.” 

Sure, as long as it’s not non-dischargeable like certain IRS debts and student loans.

As always, everything in this business must be evaluated on a case-by-case basis…

if you want good results. 

Act accordingly.  

Filed under Foreclosure Prevention, HEMAP, Homeowners’ Emergency Mortgage Assistance, Prevent Foreclosure | No Comments »