Second Mortgages, no problem

File this under a WTF.

Anybody else getting the feeling of being overwhelmed by the amount of crap coming out of Washington D. C.?

Buried deep in the pages of the current Obama Mortgage Modification Plan is this information.

paragraph vi. Second Liens: While eligibly loan modifications will not require any participation by second lien holders, the program will include additional incentives to extinguish second liens on loans modified under the program in order to reduce the overall indebtedness of the borrower and improve loan performance. Servicers will be eligible to receive compensation when they contact second lien holders and extinguish valid junior liens. Servicers will be reimbursed for the release according to the specified schedule, and will also receive an extra $250 for obtaining a release of a valid second lien.

I have always believed that there is plenty of blame to go around on both sides of this fiasco and it is basically a waste of time looking backwards at the causes. However, when it comes to second liens ... short of medical problems .... the only reason these were taken out were to utilize ones equity as an ATM machine. This is bullshit!
Why stop here ... how about all other kinds of debt? Why not just pay the bills for that big SUV? Credit cards? Student loans? Where does the insanity end?

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Second mortgages were also used

to avoid private mortgage insurance. Basically, to make the payments more affordable. Most of the second mortgages are worthless now with home values in the tank.

PMI is avoided only when...

the borrow achieves 20% equity in their loan.

Some seconds were taken out to put a down payment on a home purchase. After that though???

It has always been about class warfare.

This piggy back mortgage scheme was

a way for many mortgage brokers to push No Downpayment loans and avoid PMI.

First mortgage would be for 80% of value and second mortgage would be for the remaining 20%.

this is a dupe

I put this in the Instapopulist yesterday. Obama's Housing Plan Lets Home Equity Loans be Forgiven.

I guess ya all missed it.

I hate not getting an invite :o)

to the party.

It has always been about class warfare.

home equity loans

I went off on this also. It's one thing to do something about those retirees getting into predatory circumstances with 2nd mortgages and home equity loans, which has happened, did happen in masse, but it's a whole other ball game to force the U.S. taxpayer to pay for complete irresponsibility that went on in these home equity loans.

We all know they were used to prop up our great "consumer economy" with massive debt, prolonging a middle class lifestyle one could no longer afford....

and so this punishes people like us, those ultra tightwads, who bypassed the entire bubble because they could add up the reality one could not afford a half a million dollar home...
now, we're getting left out of the free money party!

Believe me, pisses me off too. I certainly could have gotten a mortgage and I did not because I knew it was a bubble and I also knew no way in hell could I afford a half a million dollar home or a 3/4 of a million dollar home...

so I'm not too happy about's rewarding the irresponsible and punishing the ones who were responsible..
at least so far in my reading of the details (in the original Instapopulist, a link to the details of the plan).

Home Equity...Gone