If you are having a hard time not only paying your mortgage but also paying your second lien mortgage, you may be eligible for an adjustment to both.
The FHA Second Lien Program is better known as the Second Lien Modification Program, or simply 2MP. 2MP is closely related to the Home Affordable Modification Program, or HAMP. Successful completion of HAMP is a prerequisite for participating in 2MP, so you will have to start by applying to HAMP in order to modify your second lien mortgage.
The purpose of HAMP is to modify your primary mortgage if you are behind on your payments or expect to be behind soon. HAMP does not exist to help payers who are current—for those borrowers HARP is the proper program to apply to (HARP is the Home Affordable Refinance Program).
If you do meet the requirements for HAMP, you will be given a modification to your primary mortgage which will probably take the form of an adjustment to your principal or your interest, and possibly an extension of the term of your loan. Your modification will first take the form of a trial period. During the trial period you will pay the adjusted amount and if after several months you’ve stayed current, your lender will approve the adjustment permanently.
Around this point you’ll be contacted automatically about the Second Lien Modification Program if it is applicable to you. This doesn’t mean you automatically qualify, but at this point your eligibility can be established.
Don’t forget that HUD and the FHA are very busy, and if you don’t hear from them about 2MP but you think you qualify, you should take the initiative to bring it up to them yourself.
If you are indeed eligible for 2MP, your second lien mortgage will be modified on a trial period just like your primary mortgage was under HAMP. The adjustment will be achieved in a similar manner, and if you successfully make your payments through the trial period, then your lender may permanently adjust your second lien mortgage as well.
Aside from completing a HAMP trial period, there are a few other eligibility requirements for 2MP. Your equity account, which you are using as a second lien mortgage, must not have originated after January 1, 2009. The principal balance on the home equity loan must be $5,000 or more, and you must be paying (or owe) $100 or more on the second lien mortgage payment every month.
If you can’t qualify for 2MP or HAMP, you can try to get into HARP. If you can’t get into HARP, you may qualify for HAUP (Home Affordable Unemployment Program) if your hardship is the result of losing your job in a layoff.
If none of these options work, you may try to short sell your home or acquire a deed-in-lieu or simply let the bank foreclose. If you do want to do a short sale or a deed-in-lieu, the Home Affordable Foreclosure Alternatives (HAFA) program can simplify the process for you.