The Second Mortgage Challenge

In order to do a short sale the second lien holder must also agree to the terms of the sale. This is even more challenging than with the first lien holder, since there usually isn’t much left to gain for the second in line. Obama’s administration has tried to encourage second lien holders into the incentive program, but at this point it doesn’t look good.  I previously mentioned this topic on December 17, 2009 when I wrote “Homeowners with subordinate liens are still likely to face some challenges to reach approvals. It is common for subordinate liens to seek 10% of the balance owed to release the lien. Which may become more difficult than the current market since the participating primary lien holders will now be capped in what they can contribute to the subordinate lien holder. This will be the fly in the ointment and sellers should expect high demands from subordinate liens.”  You can read even more about this ongoing problem in the Atlantic’s January 8^th 2010 article entitled The Difficulty of Modifying Second Mortgages.

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