WASHINGTON (6/17/14)--Homeowners who received loan modifications on their mortgages to reduce their monthly payments after the housing bubble burst in 2008 will soon see those mortgage payments begin to climb (Bankrate.com June 13).
About 30,000 homeowners who modified their mortgages through the government-operated Home Affordable Modification Program (HAMP) will see their rates and payments begin to tick up this year as the initial five-year terms draw to an end.
Payments for more than 290,000 homeowners will follow suit next year.
When the loan modification program was being designed, many forecasters predicted a quicker recovery for the economy than what has occurred, so the terms, which in some cases knocked mortgage rates down to 2% annually, carried five-year terms.
Once the five-year term ends, rates can only rise 1% every year until they have returned to the average market rate at the time of the modification.
As part of the program, the Treasury requires mortgage lenders to send notice to borrowers that their rates are going to step up at least four months prior to the increases.
Second notices are also required 60 to 75 days before the rates reset, according to Bankrate.com.