Second Home Mortgage for 1%?
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Back in February, the Obama Administration revealed a foreclosure prevention plan, called Making Home Affordable. This plan is aimed at helping home owners avoid foreclosure through a combination of lower mortgage interest rates, refinancing and loan modification. Incentives for mortgage lenders and borrowers were revealed. However, the plan was mostly aimed at first home mortgages. Unfortunately, about half of the folks with at-risk first home mortgage also have second home mortgages. And nothing in the foreclosure prevention plan had much to do with this home equity loans.
So the government is introducing another plan, specifically aimed at helping reduce paymets on a second home mortgage.
A second home mortgage may have an interest rate as low as 1% under the latest foreclosure prevention measure.
Today, the Obama Administration unveiled another plan. This one is meant to help those with second home mortgages. The L.A. Times reports on the new government mortgage program:
Under the new program, the government would share lenders’ cost of reducing second-mortgage interest rates. For second-mortgage loans that amortize (those with monthly payments that include principal and interest) the loan rate would be cut to 1% for five years. For interest-only loans the rate would be cut to 2%.
The hope is that the new mortgage interest rates — resulting in lower payments — will keep home owners from defaulting on their second mortgages. This program is meant to be used alongside the Making Home Affordable program. Combined, these programs would make the overall payments owed by at-risk borrowers more affordable.
Of course, the program is voluntary, so mortgage lenders are being offered incentives to help out. One of the carrots being dangled in front of mortgage lenders, in addition to subsidies for reducing interest rates, is a one-time payment for lenders who forgive second home mortgages outright.
It’s an interesting thought, but what happens in five years when the low, low mortgage interest rates reset? While some may be in a better position to make second home (and first home) mortgage payments, many will be right back at this point.



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