With interest rates starting to reset for the Federal Housing Finance Agency’s Home Affordable Modification Program, Freddie Mac is learning from its past experiments to better prepare thousands of homeowners.
Back in April 2014, Freddie Mac reminded mortgage servicers that interest rates on some HAMP rescues were about to tick higher.
After five years, the rate on HAMP loans begin to tick up 1% until it reaches 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 the interest rate started to tick up in 2014.
However, in order to make sure borrowers are ready for the rate adjustment, Freddie decided to copy the same format it had about ten years ago to reach borrowers.
At the time, Freddie began an aggressive experiment to reach delinquent homeowners who were not responding to loan servicer efforts to work with them, which helped prevent 350,000 additional foreclosures from happening.
As a result, Freddie is giving lists of HAMP and post-modification borrowers to Consumer Credit Counseling Services of San Francisco and ClearPoint Counseling Solutions in Atlanta. They then use their expertise to contact, engage, and prepare the homeowner for the scheduled interest rate increase.
And as an added bonus, it's also proven to be a very cost-effective approach. “We estimate that for every dollar we spent, Freddie Mac and taxpayers received $10 or more in benefits,” Freddie said.