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25 May 10 No 2nd Mortgage Modifications for Obama Loan Relief Efforts

According to the Huffington Post, 11 million homeowners owe more on their home loan than their house is worth, putting them “underwater.”  Obama’s 2nd mortgage modification program has failed miserably because after one year and millions of 2nd loan candidates they have not modified even one second mortgage loan. This mortgage relief plan was supposed to reward mortgage servicers to coordinate principal reductions on second mortgage loans when the first mortgage is modified under the administration’s Home Affordable Modification Program.

In today’s upside-down market, homeowners who are stuck with under-water mortgages are seeking principal reductions.  Many second mortgage lenders are actually lowering the principal for these borrowers because in many cases it is a better option than taking over the property from a foreclosure or surrender.  Loan modification that simply lower the interest rate are often not enough for homeowners residing in these heavily depreciated regions like Southern California, Las Vegas and Phoenix, Arizona.  According to Citi’s regulatory filings, about 28% of its first mortgages are now worth more than the underlying assets, along with about 42% of their second mortgages.

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