HAMP loans about to reset at higher interest rates
...and will keep climbing
Freddie Mac is reminding mortgage servicers that interest rates on some HAMP rescues are about to start to tick higher.
After five years, the rate on HAMP loans began to tick up 1% until reaching its previous rate before modification.
So, if a 6% mortgage received a HAMP in 2009, when the program started under the Making Home Affordable Program created by the Financial Stability Act, then this year, the interest rate will tick up.
"If it was reset to 2%, it will go up 100 basis points this year to 3%, and to 4% next year," said Robert Kimble, senior director of mortgage servicing policy at Freddie Mac.
Kimble spoke to a crowd of mortgage servicers speaking at an ongoing mortgage servicing conference in Dallas.
"Hopefully the borrowers are aware of the reset," he added. "Though, the fear is there will be some recidivism."
In cases of default, an option could be to put the borrower into a standard Freddie Mac modification.