keep-your-home-californiaI recently came across a piece of information that Dodd-Frank legislation offers an opportunity for homeowners to have their Junior (2nd or 3rd) liens fully extinguished under certain circumstances.  So, I wanted to investigate it and document it for our readers in this blog.

According to our research, if your 1st loan has been modified using the Home Affordable Modification Program (HAMP); then you might be able to modify the 2nd loan under 2MP program without the cooperation of the lender!!  If you qualify for th 2MP program then the lender will get a lump sum payment from US Treasury in exchange for fully  discharging your loan.  This 2nd in a sense goes away since it’s written off by the bank without creating any income tax obligations for the home owners.

But to qualify for the program, you need to obtain Dodd-Frank Certification which states that :

  • Your 1st mortgage was modified using HAMP.
  • You have never been convicted within the last 10 years of felony larceny, theft, fraud, or forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
  • You have not missed 3 consecutive monthly payments on your HAMP modification

This is great news for San Jose home owners who have underwater mortgages and their only options was a Short Sale or foreclosure. The reason this is not one of those insane government programs is it’s a good payoff for the second lien holder since there are only 3 options for the homeowners:

1) Bankruptcy:  If the owner declares bankruptcy, then the second lien holder will get nothing.

2) Short Sale:  If the owner sells the home as Short Sale, then the 2nd will not get more than $3,000 if they are lucky.

Either way, the program is worth exploring, so contact your Trusty Real Estate agent and discuss your loan options with him/her.


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