Mortgage Payments Could Increase with HAMP

Written by CFB Blogger. Posted in Blog

If you received loan modifications under the federal government’s Home Affordable Modification Program (HAMP), prepare to likely see your monthly mortgage payments shoot up as the interest rates on home loans increase. According to the Chicago Tribune columnist Mary Ellen Podmolik, Illinois, Florida, New York and California will be the states most affected by the change. In her column, The Homefront, Podmolik writes, “The reckoning has already started for people who took out home equity lines of credit a decade ago, when homes were appreciating handsomely. What started as interest-only drawdown periods are now ending and borrowers must start paying off the loan’s principal and its interest.” As you may recall, HAMP began in March 2009 and was a salvation for homeowners in financial distress. When the borrower qualified for the government-backed program, monthly mortgage payments were reduced to equal 31% of the homeowner’s monthly gross income; mainly by cutting interest rates to as low as 2%. Currently, the reporter writes, interest rates have gradually increased by 1% annually “to the level that average primary interest rates were at the time of the modification…rates of some borrowers…will be pushed to just over the 5 percent mark, which is higher than the current average interest rates on 30-year, fixed-rate mortgages.” The Office of the Special Inspector General for the Troubled Asset Relief Program estimates that some 3,000 borrowers will see their first resets before the end of the year. The agency calculates that “the median monthly payment increase will be $200 at the end of the process [but] some borrowers will see their payments jump by more than $1,700 monthly.” In Illinois, the average interest rate paid by HAMP borrowers was 6.5% before the modification; the average monthly principal plus interest will probably increase by some $80 with the first rate increase. Time will tell if mortgage-holders will be able to work those increases into already tight budgets or if mortgages will, once again, go into default, adding to the difficulties of the struggling housing market. Nationwide, the economy is in better shape today than it was five years ago and other modification programs are available for some borrowers who cannot manage the higher mortgage payments. Becca Goldstein, director of innovations, evaluation and public policy at Neighborhood Housing Services of Chicago Inc., states in the article, “’… Our experience has shown that even a modest increase can really be devastating to some households.’” If you are contemplating filing Chapter 7 or Chapter 13 personal bankruptcy, call the Client First Bankruptcy experts. Our experienced bankruptcy attorneys are available for mini-phone consultations Monday through Friday from 8:30 a.m. to 6:00 p.m. (Central Time) to answer your financial debt questions. The skilled Client First Bankruptcy lawyers have years of experience in all aspects of Chapter 7 and Chapter 13 bankruptcy relief. We have helped thousands of clients eliminate their debt, including reducing principal balances on underwater second mortgages. With Client First Bankruptcy’s flexible payment plans, we will work within your budget. Log onto www.clientfirstbankruptcy.com for important bankruptcy info and call us toll-free at 800-383-6004. We’re on your side; let us show you how we can help.