Bank of America Commits to 2MP

March 5, 2010

The government is good at inventing acronyms and there is a new one consumers need to be aware exists. Referred to as 2MP, the acronym stands for Second Lien Modification Program. The program is another loan modification program backed by the government that is intended to help consumers stay in their homes.

The first home modification program is called the Home Affordable Modification Program or HAMP. The program was intended to help consumers stay in their homes by preventing foreclosure. The program works by enabling consumers to restructure their mortgages in a way that payments can be reduced. That is the “affordable” component of the program.

Unfortunately the program has not worked as planned and many consumers remain in limbo wondering if they are going to lose their homes. Despite thousands of applications only a small percentage of homeowners have actually been able to permanently adjust their mortgages. Some people are still in a temporary status while others have simply seen their applications stuck in a backlog of mortgage company paperwork.

Now Bank of America has committed to the 2MP program in an effort to reassure consumers the lender wants to help people stay in their homes. The 2MP program actually adjusts second mortgages or equity lines of credit…thus the 2 in 2MP.

During the boom years before the recession lenders pushed consumers to accept equity loans that resulted in a house being 100% mortgaged. In some cases the equity loan led to the owner owing more than the house was worth. When the market crashed, homeowners found themselves with two mortgages and falling house prices.

The 2MP program offered by Bank of America modifies the second mortgage in conjunction with the HAMP program. Qualifying homeowners must complete the modification of their first mortgage and can then modify the second. The goal, of course, is to lower both payments so that together the amount is affordable.

Bank of America has been under fire from consumers for not processing loan modification applications in a timely manner. Some consumers have actually made claims of deceptive practices claiming that Bank of America ends up costing the homeowner money by failing to process applications in a timely manner while charging additional interest and fees.

That is one reason why Bank of America is publicly committing to both HAMP and 2MP. The bank is trying to improve public relations during a time when banking giants are under a lot of criticism for taking taxpayer funded bailouts and then not assisting homeowners facing foreclosure.

In some cases, reducing the first and second mortgages is still not going to be enough to enable a homeowner to avoid foreclosure. The two mortgages together must be affordable and it remains to be seen if that is possible. Many people in homes purchased before the recession bought homes they technically could not afford. Easy mortgages led to millions of consumers buying houses that were too expensive for their income. In those cases, there is not a mortgage modification program in the world that can help short of the government handing them money to pay down the mortgage balance.

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