Treasury officials are revising the President's loan modification plan to deal with second mortgages and give servicers the option of paying off second lien holders.Treasury would use TARP funds to fund the partial payoffs that would be based on a formula originally designed for the FHA 'Hope for Homeowners' program. In exchange for a lump sum payment, the second lien would be extinguished. Second lien holders can make it very difficult to modify a first mortgage even when the first mortgage is underwater and there is no equity under the second lien.
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