While the current administration’s Making Home Affordable plans have received heavy scrutiny and criticism from all sides thanks to low rates of success with modifications and difficulty navigating expensive and circuitous routes to foreclosure alternatives, the administration has to get some credit for doggedly continuing to beat a horse considered by many to be long dead. One of the latest expansions on the plan is an initiative targeting second mortgage holders facing foreclosure on a primary mortgage but unable to sustain an existing second mortgage as well. The plan is designed to help these homeowners work with their lenders to continue to pay – in some form or fashion – both the first and the second mortgages[1].

The plan is designed to encourage lenders to allow refinancing on both primary and secondary mortgages at lower interest rates and will offer lump payments to help consolidate debt while retaining both loans. Also, homeowners in dire fiscal circumstances can qualify to make interest-only payments on their mortgages “until their fiscal situation improves” and lenders can also write off primary and secondary debts in part or whole for incentives. Previously, incentives were only offered to primary lien holders.

There are a number of contingencies in this plan and associated plans to help struggling homeowners through monies administered through the Hardest Hit Fund (HHF) handled through the U.S. Treasury. For example, borrowers now delinquent must have been able to afford their home before the loss of their jobs if they wish to qualify for unemployment-related mortgage assistance and they cannot, in most cases, own a second home[2]. Furthermore, they must demonstrate “reasonable likelihood” that they will be able to resume payments within two years.

On paper, these plans sound great. However, HAMP in its original form cost $75 billion. Do you think that this is a good use of taxpayer money? If not, how can it be (or can it be) improved?

[1] http://www.mortgage11.com/2011/02/obama-mortgage-assistance-program-to-provide-second-mortgage-refinance/

[2] http://www.opposingviews.com/i/obama-housing-plan-changes-made-in-hfa-and-hamp