
If you're struggling to make your second mortgage payments, there are options available to help you out. Some homeowners may be eligible for mortgage forgiveness programs.
The Home Affordable Modification Program (HAMP) is one such option, allowing homeowners to lower their monthly payments and potentially forgive a portion of their second mortgage debt. The program is designed for homeowners who are struggling to make their mortgage payments.
Another option is the Home Affordable Refinance Program (HARP), which can help homeowners refinance their second mortgage and potentially reduce their interest rate. This program is ideal for homeowners who are current on their payments but want to take advantage of lower interest rates.
In some cases, homeowners may be eligible for a second mortgage forgiveness program through their lender. These programs vary by lender, but some may offer to forgive a portion of the second mortgage debt in exchange for a lump sum payment or other concessions.
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Mortgage Forgiveness Options

You can eliminate your second mortgage through the Chapter 13 process, which converts the secondary lien to an unsecured debt obligation through lien stripping.
This process allows you to pay back the debt over a 36-60 month period, with any remaining balance eliminated through a court discharge at the end of the program.
The Chapter 13 plan works to reduce your debt-to-income ratio each month, as your payments are applied straight to the principal debt.
At the end of the 36-60 months, all remaining balances of unsecured debts, including the stripped second mortgage, are eliminated, improving your debt-to-income ratio and credit.
Some second mortgage programs, like the City of Austin "Standard" Down Payment Assistance Program, offer forgivable loans that provide up to $14,999 of assistance for eligible closing costs, prepaid expenses, and down payment.
These programs are zero-interest and have no required payments, and the loan is forgiven if you remain in your home for a certain period of time, such as three years.
If you sell, lease, or transfer title to your home, or refinance the loan within that time, the loan becomes repayable in full.
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Forgivable Mortgage Programs

Forgivable Mortgage Programs can be a game-changer for homeowners facing foreclosure or struggling with monthly mortgage payments. A forgivable second mortgage program is one type of assistance that can provide relief.
These programs often offer zero-interest loans or grants that can be used for down payment and closing costs, with the promise of forgiveness after a certain period. For example, the City of Austin's Standard Down Payment Assistance Program provides up to $14,999 in assistance, with payments deferred for five years, and the entire loan forgiven after that period.
Some programs, like the South Carolina Housing DPA Program, offer a 15-year loan with 0% interest and no monthly payments, with the loan being completely forgiven after the full term. Others, like the SC Palmetto Home Advantage DPA Program, offer a forgivable DPA of either 3% or 4% of the loan amount, depending on the loan size, with a 10-year loan term.
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Here's a breakdown of some common features of forgivable second mortgage programs:
Keep in mind that these programs often have specific requirements and conditions, such as staying in the home for a certain period or meeting income limits. It's essential to review the terms and conditions carefully before applying.
Program Details
Many down payment programs come in the form of a second mortgage, or subordinate lien, with varying payback provisions.
A second mortgage is usually funded by a federal, state or local government DPA program, or a nonprofit or an employer that offers down payment help in their market or service area.
Some second mortgage programs defer monthly payments, while others forgive portions or all of the down payment help over time or in the future.
The City of Austin “Standard” Down Payment Assistance Program provides up to $14,999 of assistance for eligible closing costs, prepaid expenses, and down payment.
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This program is a zero-interest, 5-year forgivable loan with payments deferred over that 5-year affordability period.
TSAHC offers assistance in the form of a grant or a 3-year forgivable second lien.
Your first mortgage must be a 30-year, fixed-rate conventional or government (FHA, VA, USDA) loan to be eligible for TSAHC's assistance.
Some programs, like the City of Austin program, forgive a percentage of the loan each year for a predefined number of years.
For example, 20 percent of the loan might be forgiven each year for five years, so after five years the entire original down payment loan is forgiven and the second lien removed.
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Frequently Asked Questions
What happens if you can't pay your 2nd mortgage?
If you can't pay your second mortgage, the lender may foreclose if your home's value exceeds the amount owed on the first mortgage. This is a critical situation that requires immediate attention to avoid potential financial consequences.
Sources
- https://acclaimlegalservices.com/debt-solutions/negative-home-equity-reduce-mortgage-debt/
- https://www.readynest.com/homebuyer-stories/3-common-types-of-down-payment-assistance-programs-explained
- https://downpaymentresource.com/homebuyer-resource/payment-assistance-program-features-explained-2/
- https://www.directmortgageloans.com/mortgage/south-carolina-first-time-homebuyer-assistance-programs/
- https://lonestarlending.com/Library/Files/down-payment-assistance-to-buy-home.shtml
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