The Difficuly in Getting a Second Mortgage or a Modified One

People take out second mortgages sometimes to help pay off the cost of their home. Usually, a lender will modify the terms of the first mortgage so that the homeowner can have reduced monthly payments and have an easier time paying back what they owe on their homes. The other common method is taking out a second mortgage, which millions of homeowners take out when the housing bubble happened.

Second mortgages can also be taken to finance big home improvement projects if the homeowner does not have the necessary funds to pay for it. A common type of second mortgage is called an 80/20 mortgage, which has the first part covered by an adjustable-rate mortgage while the second will come with a high interest rate.

Lately, there have been problems with mortgage servicers putting homeowners, who are either current on their payments or paying reduced ones, through foreclosure. These homeowners are usually falsely accused. Last January, federal regulators proclaimed there was an $8.5 billion dollar settlement between these two factions.

In February 2012, the five largest mortgage providers – Bank of America, JP Morgan Chase, Wells Fargo, Citibank and Ally Financial – had to reach a $25 billion dollar settlement with the government and many attorneys as well as promise to reduce the prevalence of foreclosure.

However, the mortgage servicers haven’t been doing as much as they should regarding helping homeowners avoid foreclosure. Banks have been slow in their efforts to get primary mortgages modified to fit homeowners’ needs.

A portion of the principal hasn’t been removed, either, like it is supposed to be when a house is underwater due to the homeowner being unable to pay off the mortgage. Second mortgages also are sources of debt in this country because lenders will modify secondary loans while largely ignoring primary ones.