Risk to Lender

• A second mortgage provider takes on more risk when it extends funds to you compared with a first mortgage provider. This is because when you can't make your payments and go into foreclosure, the sale proceeds go toward paying off the entire balance of your first mortgage and the remainder then go toward your second mortgage provider. As a result, second mortgage providers recoup little or none of their money in foreclosures, especially when the property has declined in value.
  
  

Problem

• Because a second mortgage provider faces more risks, it is usually reluctant to modify the loan terms to make it even less profitable. If you can't afford your regular mortgage payments, you need to negotiate each mortgage separately. Often, a failure to get a second mortgage modification complicates your attempts in trying to modify the first mortgage as well. This makes it difficult for homeowners in financial distress to avoid foreclosure.
  
  

Second Lien Modification Program

• The government introduced a set of programs to help homeowners who can't afford their mortgages in 2009. One program that can help you modify your second mortgage is the Second Lien Modification Program (2MP). Under this program, your second mortgage lender changes the terms of your second mortgage if your first mortgage qualifies for the Home Affordable Modification Program (HAMP). Depending on your particular case, your lenders may reduce your interest rates, extend your loan terms and reduce your outstanding loan amounts.
  
  

Eligibility

• To qualify for HAMP and 2MP, you need to meet several eligibility criteria. You need to live in the property on which you have the two mortgages and the property has to be a one-unit to four-unit home. Your unpaid balance has to be equal to or less than a set maximum amount. You must have taken out your mortgage on or before January 1, 2009, and your monthly mortgage payment must be at least 31 percent of your monthly income.