Almost 800,000 homeowners will see mortgage payments rise about $200 a month in the next few years as the benefits of their government loan modifications ease, a new government report says.
The first higher payments will hit more than 30,000 homeowners this year. They received the initial mortgage modifications in 2009 under the government’s Home Affordable Modification Program (HAMP), says the report from the office of the Special Inspector General of the Troubled Asset Relief Program (SIGTARP).
The modifications were intended to help homeowners avoid foreclosure as housing prices sank and unemployment soared. About 95% of HAMP modifications included cuts to interest rates, some to as low as 2%, SIGTARP says.
But the “permanent” modifications only last five years, after which interest rates can reset no more than 1 percentage point per year until they get back to the prevailing rate for a 30-year fixed rate loan at the time of the modification.
Between now and 2021, 782,748 HAMP homeowners will get increases, SIGTARP says, including almost 300,000 next year.
The increased costs “could be a problem for some people,” says Keith Gumbinger, mortgage expert with HSH.com.