The Obama administration announced on Tuesday, April 28 that they are offering incentives for mortgage servicers to modify second mortgages, including home equity loans.

The way the incentive works is like this: When the first mortgage has been modified, the second mortgage servicers must agree to modify their mortgage. The term of the second mortgage must be extended and the rate used will match the first mortgage rate. The government will then share the cost with the servicer of cutting the rate to 1 percent for amortizing loans and 2 percent for interest-only loans.

Under the program, the government will pay mortgage servicers $500 upfront and $250 a year for three years for the modifications. The incentive for borrowers to stay current is that they will receive payments of up to $250 a year for five years. However, they must stay current on payments.

For those holders of second liens, the government will have a shcedule of incentives for those who drop their claims altogether.

The Department of Housing and Urban Development and Treasury will make the announcement jointly.

Lenders who have agreed to participate in this program include Bank of America, Wells Fargo, and JPMorgan Chase.

A separate announcement will include changes to the Hope for Homeowners program. The Hope for Homeowners program helps homeowners refinance into more affordable government-backed loans. To get this program moving, the administration is announcing a $2,500 upfront payment to servicers. Lenders will receive $1,000 a year for three years if the loan stays current.