Loan Modification Should Not Affect Second Mortgages ? Government

Written by admin on April 24th, 2011

Loan Modification is the process of modifying the current terms of Loan or Mortgage so as to bring the interest rates down so as to save the American Homeowners from foreclosures. How ever according to some news reports it was feared that modified loans can greatly lower the credit scores, affecting the chances for taking out credit in the future.

To allay some of the homeowners concerns, U.S. regulators warned mortgage servicers last week that effects of loan modification on a second mortgage should not influence their decisions. In a joint statement released Thursday, the Federal Financial Institution Council—an umbrella group that includes the Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency, and the Federal Reserve—said that any interest in subordinate liens cannot be a factor in qualifying borrowers for mortgage assistance.

The group said that mortgages should be restructured in the interest of both owners and investors, regardless of their impact on other loans. Doing otherwise, they added, would be a breach of the servicers’ terms under the government’s loan modification plan.

The government urged mortgage servicers back in 2007 to take steps to stem foreclosures. But with foreclosures still mounting, officials modified the plan last week, encouraging lenders to expand their loan modification services to home equity loans and other second mortgages.

The Obama administration’s loan modification plan had gotten off to a slow start, with only 9% of eligible homeowners having reached the trial modification stage as of the latest count. Various housing groups have criticized the program and called on the government to step up their housing recovery efforts.

Many experts view Thursday’s announcement as part of the government’s attempt to boost its foreclosure prevention efforts.  The loan modification program had already been expanded in April, when the government started offering incentives to servicers who modify second mortgages. At the time of the change, the Treasury reported that about half of the mortgages at risk and many homes in foreclosure had second liens.

Some times such reports can create confusion among the mind of many homeowners whether to go for loan modification or how to go about the whole of the loan modification process. To help the homeowners many online help resources have been provided and many loan modification firms have also come up. These loan modification firms can help the homeowners choose the perfect loan modification program that suits their needs. It is advisable to consult a loan modification specialist in case any one has any confusion. To know more about the loan modification process visit the #1 help resource for loan modification:

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