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About 30,000 homeowners who received government-sponsored loan modifications through the Home Affordable Modification Program (HAMP) after the financial crisis might soon see an increase in their monthly house payments. The first wave of rate and payment increases will begin this year, first hitting homeowners who modified their mortgages in 2009 through HAMP. During the second wave more than 290,000 homeowners will see a reset in their rates. And eventually, those homeowners who received a HAMP refinance will pay more for their mortgages.

“Permanent” Means 5 Years for Loan Modification

When homeowners first entered the HAMP process they were told that the “permanent” modifications were only good for five years from the time the modifications were done. Their mortgage rates at that time were reduced to as low as 2% per year. But many individuals, even some that designed the modification program, didn’t foresee that the economy wouldn’t be fully recovered five years later, says director of housing finance and policy for the Center for American Progress, Julia Gordon. “I know there was this idea that in five years surely the recession would be long behind us and we would be roaring along,” she says. “But the recovery hasn’t looked like that. The recovery has been uneven – both the general economic recovery as well as the housing market.”

Homeowners Have Adjusted to What They Could Afford with Their Loan Modification

Though they knew it was temporary help, many of the homeowners have adjusted their budgets in order to be able to afford the monthly mortgage payments they have been making for the past five years. With the five years being over affordability may be an issue for many because of stagnant income levels.

Homeowners Will be Notified

The Treasury requires mortgage servicers to provide no less than four months advance notice of the rate increase to homeowners.  Servicers will be required to send a second notice about 60 to 75 days from the first reset. Once homeowners are notified of or realize their mortgage payments will increase, they should be proactive about the situation if they think they can’t afford the higher payments, says Eric Selk, executive director for Hope Now, an alliance of mortgage companies and other players in the mortgage industry.

For information and guidance on loan modification, you need the experts at RHM LAW LLP.

Source: Fox Business, Got HAMP? Mortgage Payments Will Go Up,  May 27, 2014

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