The federal government created several mortgage loan solutions to help homeowners that were hurt by the housing crisis. People that could no longer afford to make their payments due to job loss, a reduction in hours, or their rate becoming variable were able to get help with both the HARP loan program and the HAMP loan program. Now, those same borrowers may be in danger of facing a second mortgage crisis.
The Home Affordable Modification Program (HAMP) made it easier for homeowners to afford to stay in their home by reducing their principal balance or lowering their interest rate. Some borrowers even got interest rates as low as 2 percent as an incentive to keep making payments, instead of entering the foreclosure cycle. The problem is that these loan modifications were only temporary. Most of them only lasted for five years and now that period is up. Within the next few months the first borrowers to enter the HAMP program will have reached the five year limit.
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A total of 33,000 borrowers will have their interest rates rise this year. Rates will rise by 1% a year with a high of 5.5%. According to a report by the Special Inspector General, the average family will see their mortgage payment increase by $200 per month. This can make a huge difference to families that are still struggling in a lackluster economy. For families in that situation, $200 could be food and gas money.
Alarmingly, out of borrowers that were able to receive a HAMP loan modification 28% have already re-defaulted. A rise in interest rates is projected to increase those numbers. SIGTARP reported that in places like California and New York some homeowners could see their mortgage payments rise by up to $1,700 per month!
Homeowners that needed the HAMP program to recover from economic hardship, but are now back on their feet, should consider refinancing into a traditional mortgage loan. Things like job loss can knock you off your feet, but once you are secure again controlling your mortgage destiny is likely in your best interest.
When attached to the HAMP program you are subject to the regulations that the government placed upon those loans, including interest rate increases. When you refinance into a fixed rate, traditional mortgage loan you know exactly what your payment will be every month for the next thirty years.
Your mortgage lender can review your current loan situation, discuss your financial goals, and offer mortgage loan solutions to help you achieve them. Interest rates have been holding steady, if not dropping, for the first part of 2014. Now is an excellent time to explore your mortgage options and to refinance with fifteen year interest rates as low as 3.34%. Your mortgage banker can give you comparison numbers for your current loan payment, what it will be if you stay on the HAMP program, and what it will be if you refinance. Now that the economy is showing signs of strengthening it is a good time to examine your long term mortgage solutions and gaining independence from the government offer loan solution.
