NEW YORK – Wells Fargo & Co. has become the second bank to sign up for a government program to modify second mortgages.
The program is part of the Obama administration’s mortgage modification program that is aimed at reducing monthly payments to help customers stay in their homes.
The housing market began to collapse as home prices started to fall and a growing number of customers fell behind on payments. The housing collapse helped push the economy into recession in late 2007.
The government has been working to try and alleviate problems in the housing market. Economic reports in recent months have shown some signs of stability in the sector, but a rebound has been slow and bumpy.
The modification program offers lenders who made “piggyback” loans – second mortgages that allowed consumers to make a small or no down payment during the housing boom – incentives to lower payments or eliminate the loans entirely. During the market’s peak, even customers with spotty credit history were extended second mortgages.
The piggyback mortgage modification program could help relieve some drag in the housing market because lenders who extended second mortgages – fearing they won’t be repaid – can veto a borrower’s efforts to modify their primary mortgage.
By signing up for the program, all customers of Wells Fargo or Wachovia who have already modified their first mortgage through the modification program, known as the Home Affordable Modification Program or HAMP, can now also modify their second mortgage.
Wells Fargo, based in San Francisco, bought Wachovia in late 2008 during the peak of the credit crisis.
Wells Fargo said that as of the end of February, it has provided assistance to more than 180,000 second-mortgage borrowers and another 500,000 first mortgage borrowers through government programs and other loan adjustment options.
The bank said it currently has 139,065 mortgages that have either been modified or are in the trial period of the modification process under HAMP.
Bank of America Corp., based in Charlotte, N.C., was the first bank to sign up for the program. It did so in late January.