For homeowners who received a modification through the government's Home Affordable Modification Program (HAMP) and are facing higher monthly payments due to a reset, Freddie Mac is offering assistance, according to a post on Freddie Mac's blog on Thursday.
Borrowers who can't afford their monthly payments due to the increase or for those who have fallen behind and are at risk of re-defaulting may be eligible to have their loans re-modified under Freddie Mac's guidelines. Those borrowers should contact their servicers to find out what options are available, according to Freddie Mac.
The Department of Treasury launched HAMP in February 2009 during the worst period of the housing crisis as a way for homeowners facing foreclosure to stay in their homes and lower their monthly mortgage payments. Those borrowers who received HAMP modifications in 2009 and 2010 are now facing higher interest rates after resetting due to the expiration of their five-year modification. Under the terms of HAMP, the interest rates gradually increase at a rate of 1 percentage point per year until it reaches the market rate that was in effect at the time of the modification.
Mark McArdle, Chief of the Homeownership Preservation Office in the Office of Financial Stability at Treasury, said the median increase for the first step-up after the five-year HAMP mod expires is about $95 per month nationwide, varying sometimes greatly from state to state. The median increase for the second step-up could be as much as $200, he said, although more than 90 percent of HAMP borrowers will still have an interest rate below 5 percent after three step-ups and therefore still have a lower monthly payment than they had before they received the HAMP mod.
According to Treasury's Making Home Affordable Program Performance Report for Q1 2015, approximately 2.3 million homeowners had started HAMP trial modifications in the six-year existence of the program. About 1.48 million of those homeowners received permanent HAMP modifications, and as of the end of Q1 2015, about 974,000 of those modifications were still active in HAMP.
HAMP began in 2009 and was originally set to expire at the end of 2012 but has been extended twice and is now set to expire at the end of 2016.