Bank of America says it has systems in place to begin implementing the administration’s Second Lien Modification Program as soon as the Treasury releases final program policies and guidelines. Known as 2MP, the program was introduced last April but no lender has been willing to officially adopt it until now.
Addressing the modification of second mortgages is tackling perhaps the real obstacle to finding a lasting resolution to the housing crisis–striking a balance between borrowers’ ability to find a manageable combined housing payment and the risk of “catastrophic” losses for the nation’s four largest banks. I’ve been saying for some time now that homeowners affected by the downturn in the economy won’t be able to make the combined payments with first lien modifications only and the vast majority will quickly fall into default again.
“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America Home Loans.
The crux to the 2MP piece of the administration’s multi-pronged mortgage relief program will require modifications that reduce the monthly payments on qualifying home equity loans and lines of credit when a HAMP modification on the first mortgage is carried out. Through its participation in 2MP, BofA says it will modify eligible second liens regardless of whether the first lien is serviced by Bank of America or another participating servicer.
The Treasury has estimated that up to 50 percent of at-risk mortgages have second liens. Using non-government programs, Bank of America says it modified more than 57,000 second liens to assist financially strapped homeowners over the last two years.
