When the federal government first introduced the Home Affordable Modification Program, the deal was that struggling homeowners could have their mortgage interest rates slashed to as low as 2 percent, but then begin to gradually adjust upward again.
The modifications were first granted starting in 2009, and each had a five-year life before again resetting. Nearly 1 million borrowers took the government up on its terms.
But now, our Miami foreclosure defense lawyers know that those reduced rates will begin expiring in September. Economic analysts fear that the end result is going to be a new wave of borrowers who are once again at risk of default on their loans.
In the face of this reality, some have wondered whether the program served only to postpone the inevitable. As the chief financial analyst for Bankrate.com was quoted as saying, HAMP was a means to “kick the can down the road.”
Others said that the loan modification program was intended to help us navigate a two-year housing crisis. However, the problem spanned five years, and we’re only just now beginning to see foreclosure rates dip in some areas of the country.
That may be a temporary reprieve.
The rate reduction was generally offered as one way for borrowers to have their mortgage payments reduced to match roughly a third of their gross monthly income. After the five-year clock runs out, the reduced rate is allowed to go up by a maximum of 1 percent each year until it reaches whatever the national average rate for a 30-year, fixed-rate loan at the time the loan modification was negotiated. So far, that means the rates on some of those loans could go up by as much as 5.4 percent.
In practical terms, some people could see their monthly mortgage payments go up an additional $1,725. That’s the highest at this point, whereas the median amount of increase is going to be somewhere around $200 monthly. Still, that could result in a financial crisis for families who had a tough time affording their mortgage to start, and their income level has remained stagnant – as most middle-class incomes have.
People have little to no breathing room, and any increase is going to put scores at risk of default. Florida is one of four states (including California, New York and Illinois) with a high concentration of HAMP borrowers.
Some borrowers may at this point have the equity in their home to refinance, but that is still going to mean they will get an interest rate at market level.
Those who are going to be the most at-risk will be those whose incomes are fixed or who have yet to fully recover from the recession. The program was supposed to expire at the end of last year, but officials secured an extension.
With this deadline fast-approaching, some are calling for either another extension, or a more permanent modification solution.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.
Rates Rising for Modified Loans, Feb. 20, 2014, By Lisa Prevost, The New York Times
More Blog Entries:
Report: 25 Percent of Florida Foreclosures Have Equity, April 29, 2014, Miami Foreclosure Defense Lawyer