Obama Administration extends housing aid to second mortgages

Since one of the major issues blocking loan modifications has been the fact that under-water homeowners have both first and second (or piggyback) loans on their properties, the Obama Administration is expanding its incentive program to second mortgages. From an L.A. Times story:

The Obama administration, stepping up efforts to stem foreclosures, will offer lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion.

The new measures announced Tuesday would especially help many distressed homeowners who have both first and second mortgages -- and can't afford either. The Treasury Department now wants lenders and their customer-service agents to agree to modify both loans as part of a comprehensive solution...

The program would slash second-mortgage interest rates to as low as 1% for five years for some borrowers. It also seeks to revive a Federal Housing Administration effort to persuade lenders to cut loan balances enough so that borrowers again have equity in their homes.

Money for the plan would come from a previously authorized $50-billion allocation from the $700-billion Treasury Department bailout fund that Congress established last year. The $50 billion already has been used to create incentives for modifying first mortgages...