Obama Offers New Incentives For Mortgage Servicers

Obama Offers New Incentives For Mortgage Servicers

A senior member of the Obama administration said the President will show additional incentives later today for mortgage servicers to assist homeowners who are facing foreclosure. The new program will pay mortgage servicers an upfront fee of $500, in addition to $250 per year for three years for successfully modifying second mortgages.

In a separate strategy, the White House will release a schedule of incentives for existing borrowers of second mortgages. The incentives will be for voluntarily terminating their second mortgage liens.

Additionally, President Obama will publicize his intentions for providing further incentives for mortgage servicers and lenders who are actively contributing to the Bush administration’s Hope for Homeowners program, designed to assist struggling homeowners avoid foreclosure by refinancing them into a more cost-effective 30-year fixed-rate mortgage so their first payment will be the same as their 360th.

A meaningful number of borrowers who are in the midst of facing foreclosure proceedings have second mortgages leveraged against their homes. In most of these situations, the investor of the first mortgage is not the same investor for the second mortgage, making it increasingly difficult to modify their first mortgage.

Many of the most noticeable mortgage lenders in the United States, such as Wells Fargo, JPMorgan Chase and Bank of America have already agreed to the President’s newest initiative, and the rest of the mortgage industry will be strongly promoted to contribute, in addition.

The program entails servicers modifying second mortgages in situations in which the first mortgage has already been refinanced. Servicers of second mortgages must extend the length of second mortgages while reducing the interest rate to mirror the interest rate on the first mortgage.

Furthermore, benefiting borrowers will receive payments of up to $250 each year, up to five years, for staying current on their monthly mortgage payments. The $250 payments will be applied toward the principal balance of the new first mortgage.

While the legislation takes its bureaucratic course by Capitol Hill, the U.S. Department of Housing and Urban Development will establish a program to eliminate second mortgage liens.

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