HUDs new FHA Loss Mitigation Concept

[Ibrahim Hughes]

Anyone understand how HUDs new loss mitigation concept supposed to reduce mortgage payments? I'm not getting it. Particularly this paragraph here. I just don't see how the extra 2nd mortgage is supposed to (temporarily) lower existing payments. Anyone (you may have to register for a free account to read the whole article)?

"The struggle is that in the rising rate environment, if you want to recast a mortgage, someone might go from maybe around 3%, to a rate of 6% or more, and they really wouldn't see any reduction in their monthly payment," said Peter Idziak, senior associate, Polunsky Beitel Green.

The draft concept appears to provide a mechanism through which the mortgage can stay at its original rate and the payment can be supplemented by a second lien loan that's applied to monthly principal for three to five years, after it absorbs any arrearages.

This would allow borrowers with reduced incomes to pay reduced amounts during the three-to-five year period, according to the FHA, which is an arm of the Department of Housing and Urban Development. The payment returns to normal afterwards, potentially with an ease-in period."

https://www.nationalmortgagenews.com/news/fha-releases-draft-of-new-foreclosure-prevention-option