Interest Rate Increases
The Home Affordable Modification ProgramSM (HAMP®) approach to reducing homeowners’ mortgage payments typically includes adjusting the interest rate. Many HAMP interest rates start as low as two percent and increase gradually, but never go above the market rate in place at the time the homeowner received the modification. For the details on your particular modification, refer to your written agreement and watch for notices from your mortgage company. In general, here’s how most HAMP modifications work: After five years at the greatly reduced interest rate (for many as low as two percent), the interest rate increases one percent or less per year for three or four years, but will never exceed the market rate at the time of the homeowner's modification. After the first interest rate increase, the median monthly payment increase is about $95. After all of the interest rate increases, most homeowners will have a final interest rate at or below five percent, considerably better than their interest rate before HAMP. When you consider all of the increases, the total median increase is about $200 per month.
Changes in Escrow
All loans modified under HAMP must include an escrow account for payment of future property taxes and hazard insurance, unless prohibited by state law. This escrow account may require the collection of sufficient reserves to pay the taxes and insurance on or before they are next due. Your escrow payment will adjust if your taxes and insurance premiums change, so the amount of your monthly escrow payment will also adjust, possibly increasing your total monthly mortgage payment.If you have any questions about the terms of your modification, please call a housing counselor at 888-995-HOPE™ (4673).