Second mortgages can be a major problem for homeowners seeking
mortgage relief through a loan modification or refinance.
Fortunately, help is available through the federal Making Home
Affordable program (MHA).
The MHA Second Lien Modification Program, known as 2MP, is
designed for homeowners who need to have their second mortgages
restructured to make them more affordable. It works in connection
with MHA's Home Affordable Modification Program (HAMP), which
provides loan modifications on primary mortgages.
Debt forgiveness possible
The 2MP program can help homeowners in a variety of ways. They
could get their interest rate reduced, have their mortgage payments
stretched out over a longer period of time, or even get part or all
of their debt forgiven.
The program can be used for any type of second mortgage lien - a
home equity loan, home equity line of credit (HELOC) or a
"piggyback" loan used in lieu of a down payment when the home was
Second liens, or mortgages, can be a thorny problem for
homeowners seeking to restructure their mortgages. Borrowers who
obtain a mortgage loan modification - the terms on their primary
mortgage are changed to make it more affordable - may still be
facing financial difficulty because of the added burden of one or
more second mortgages.
A mortgage refinance may also be thwarted when the second lien
holder refuses to resubordinate the lien to the new mortgage - that
is, agree to put it second in line behind the main mortgage for
getting paid in the event of a default (as is required under the
Home Affordable Refinance Program, HARP, for mortgages with little
or no equity).
Must have a HAMP loan modification first
To obtain a 2MP loan modification on a second mortgage, you
first have to have your primary mortgage modified through HAMP.
This is crucial - 2MP is only for homeowners with HAMP loan
modifications on their primary mortgage. So if you haven't done so
already, applying for a HAMP loan modification needs to be your
One thing to be aware of. Many lenders will offer private, or
proprietary, loan modifications to borrowers in financial trouble
instead of a HAMP loan modification. In fact, getting a proprietary
loan modification will prevent you from qualifying for a 2MP on a
You can only use 2MP to modify one second lien. If you have
multiple secondary liens, you can only modify your most senior
second mortgage lien. Liens for unpaid taxes or other non-mortgage
liens are not included.
Financial hardship must be shown
To obtain a HAMP loan modification, you need to be able to
demonstrate that you have a genuine financial hardship. Often, this
means that you will default on your mortgage without a loan
modification or that you are facing a circumstance like medical
expenses or reduced household income that makes it difficult for
you to keep up with your mortgage payments.
This requirement may be a problem for borrowers who were
thwarted from refinancing through HARP due to a second lien, since
refinance candidates typically have fairly sound finances. However,
if you are current on your payments and have good credit, but can
show you will eventually fall behind on unless you can reduce your
mortgage payments, you may be able to obtain a HAMP loan
Apply through mortgage servicer
To apply for a HAMP loan modification, you first have to apply
with your mortgage servicer, the company you send your mortgage
payments to for your primary mortgage. Once you are approved for
that and are making modified payments, you can begin to seek a 2MP
modification on your second mortgage. For that, you apply through
the lender you send your payments for your second lien to.
The good news is, lenders seem willing to approve modifications
of second liens under 2MP. According to recent Treasury Department
figures, about 63 percent of all borrowers with HAMP modifications
who were eligible to be considered for a 2MP modification had been
approved to have their second liens modified.
For more information, contact your mortgage servicer or visit
the Making Home Affordable web site at